Using Project Portfolio Management to Demonstrate IT Value

By Scott Berinato
Mon, October 01, 2001

CIO — At Schlumberger, it started by accident, as these things often do. One curious IT staffer asked his peers what projects they were working on and amassed the answers in a spreadsheet. When Jane Walton, then an IT analyst for the Austin, Texas, IT services company, saw that spreadsheet, she felt the blinding rush of an epiphany. The spreadsheet included just a small sample of the company’s IT projects?120 in all?but it revealed that 80 percent of the projects overlapped. There were 14 separate projects trying to accomplish the same thing with customer-facing websites, for example.

That was late in the booming ’90s, when managing IT value?even defining it?was already a mounting struggle. Then again, because it was the booming ’90s, the struggle hadn’t yet reached life-and-death proportions. Even if you couldn’t define IT’s value explicitly or manage it precisely, few seriously doubted its worth.

But Walton’s epiphany was that corporate executives everywhere soon would be questioning the value of IT. Sure enough, on the back end of the mad rush to the Internet, CEOs began to turn the screws. They asked, "What are we spending all this money on and why?" It was much like what happened in manufacturing in the ’60s, Walton realized: After a long boom, a slumping economy was causing long-held assumptions about value to be called into question. The result, she knew, was that IT would soon have to prove it or lose it.

So Walton proposed that her IT department do the same thing manufacturers did back in the 1960s: project portfolio management. The spreadsheet ought to be turned into a database that would catalog all IT projects. It would quantify risk and return, prioritize and align IT projects with the business. It was a grand plan, and it met with blank stares. "I probably took the wrong approach," Walton says in retrospect. "I probably should have approached this incrementally, but I was so passionate."

Eventually the economic crash came, and Walton’s analogy to 1960s manufacturing was complete. And that brings us to today. In this indolent economy (see "Your Budget Playbook," CIO, Sept. 1, 2001), demonstrating and managing IT value is becoming the sine qua non of getting new projects off the ground and keeping old ones running. For some CIOs, IT project portfolio management is doing the trick. At Walton’s company, the blank stares have disappeared. And her new title is portfolio manager.

A Centralized View

Project portfolio management is pretty much just what it sounds like. You collect and control your entire suite of IT investments as one set of interrelated activities in one place?a portfolio. In addition to providing a centralized overview of all IT projects, a good portfolio will make it easy for CIOs to make sure their IT investments are well-balanced in terms of size, risk and projected payoff. Used wisely, it will actually increase IT’s value by exposing projects that are redundant or too risky, while revealing how to shift funds from low-value investments to high-value, strategic ones.

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