IT portfolio management 101

Proving the business value of technology assets

This article is excerpted from IT Portfolio Management Step-by-Step: Unlocking the Business Value of Technology, by Bryan Maizlish and Robert Handler. Used with permission of the publisher John Wiley & Sons Inc.

There are elements of IT portfolio management that exist in all companies. They have very similar goals and objectives: maximizing value (tangible and intangible) while managing risks and costs. Most companies utilize simple and straightforward financial models to make investment decisions. For these companies, the IT portfolio management framework is incomplete; it is missing key criteria, is not conducted uniformly, and is not applied across the entire organization nor over the entire life cycle of an IT investment. The framework contains information about each portfolio and the investments that comprise each portfolio, highlighting both the positive and negative aspects of these investments. Analysis of the IT portfolio identifies specific areas in need of improvement, holes in the requirements and architecture, misalignment to the strategic intent, areas that are being overserved and underserved, and so on. There are three primary areas of IT portfolio management:

1. Processes and a framework to plan, create, assess, balance, and communicate the execution of the IT portfolio. For best-practice companies, these processes are standardized, consistent, and visible across the enterprise.

2. Tools that analyze information and data, such as value, costs, risks, benefits, requirements, architecture, and alignment to business and strategic objectives. Information and data are derived from the strategic intent, strategic plan, and business and strategic objectives. Information and data are fluid. Weighting and scoring are applied against information and data in order to prioritize and rank investments. What-if analysis can be performed, which will impact and alter the ranking and prioritization of IT investments.

3. A common business taxonomy and governance that communicates and defines the principles, policies, guidelines, criteria, accountability, range of decision-making authority, and control mechanisms. (Note: Adapted from "Assessing Risks and Returns: A Guide for Evaluating Federal Agencies' IT Investment Decision-Making," United States General Account Office, February 1997, http://www.gao.gov/special.pubs/ai10113.pdf.)

The IT portfolio management step-by-step methodology presented in detail in Chapter 5 is a proven process for applying IT portfolio management and has eight stages. These stages are not intended to be applied in a waterfall manner (i.e., serially). They serve as a framework that should be adjusted based on the reader’s objectives. In today’s fast-paced world, waterfall approaches to delivering anything are proving less and less effective. Nonetheless, the eight basic stages are:

1. Developing an IT portfolio management game plan

2. Planning the IT portfolio

3. Creating the IT portfolio

4. Assessing the IT portfolio

5. Balancing the IT portfolio

6. Communicating the IT portfolio

7. Developing and evolving IT portfolio governance and organization

8. Assessing IT portfolio management process execution

The first stage, the game plan, determines the objectives for IT portfolio management and assesses the main points to establish the most practical areas to address. It encourages users of IT portfolio management to avoid analysis paralysis and begin to make decisions.

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