Portfolio Management: How to Prioritize and Manage Projects for Maximum Value

In a do-more-with-less environment, CIOs are put in the position of saying no to new spending ideas. That makes it vital to actively engage the business side in IT planning. You could consider it sharing responsibility for making hard choices; or you could think of it as building a common view of the organization’s priorities.

One way to immerse the business feet first is through portfolio management. Using this process, technology and business leaders identify the goals of the business, and then use objective criteria to prioritize and manage projects to achieve the highest value from the IT portfolio. All projects are viewed in relation to one another, not on a standalone basis. High-risk projects are balanced with low risk, and short term with long term. It follows the same principles as those employed in managing a financial portfolio. (For a guide, see "Portfolio Management: How to Do It Right" at www.cio.com/printlinks.)

For example, you might look at your portfolio and realize that most of the IT projects are in sales and none in manufacturing. That might be due less to real needs and more to the fact that the president of the sales division is a master at scoring IT investment dollars. A portfolio management approach attempts to take the politics out of investment decisions by taking a bird’s-eye view of the enterprise.

Chuck Tucker, a Gartner vice president and executive programs research director, says there are two big differences between the traditional way of choosing IT projects and portfolio management.

The first is a life-cycle view of a project. "In the past, once you got approval, no one looked at the project again. You got a blank check. Under portfolio management, every time you review the portfolio—typically quarterly—you look at every project and say, Does this still make sense?" If it doesn’t, you kill it, Tucker says.

The second is that looking at all projects together allows you to spot imbalances—too many high-risk projects or, vice versa, too many safe investments. Using portfolio management, you continually rebalance the portfolio to ensure maximum value.

The big benefit is greater alignment. Businesspeople need to be involved up front to make sure the business strategy drives the criteria for choosing projects. The prioritization process reflects whatever the organization’s focus might be—market share, cost reduction or ROI.

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