Project Portfolio Management as a Way to Manage IT Costs

“Difficult times give rise to the strongest companies in the long run.”

-James Fallows, national correspondent, The Atlantic Monthly

Interesting things are going on among CIOs and their business partners, and CIOs and their suppliers. Top management is putting the squeeze on IT executives to spend less on new projects, and CIOs are dusting off their value metrics and methodologies?and their persuasion skills?to justify the large sums they want to spend on IT. At the same time, CIOs are fighting for control with business-unit execs who have basically spent as much as they wanted for the past few years. These folks are not happy at having their pet IT projects stacked up against other groups’ projects. They definitely do not support more controlled, rational and centralized IT spending. CIOs, meanwhile, are caught in the middle.

There are plenty of tools for measuring value and prioritizing projects?return on investment, economic value added, balanced scorecard, real-options theory. These are good, depending on your goals?but some are complex and costly to roll out.

One tool that’s been around the business world for years and that’s relatively easy and inexpensive to get going is project portfolio management (PPM). The fundamental idea is to look at, evaluate and prioritize all your IT projects together, managing them as you would any business portfolio. In PPM, you measure projects against their contribution to the business?factoring in their risk and potential payoff?rather than against each other. Then you assign them to certain types of investments and within those categories prioritize based on the size of the investment, risk factors, payoff and such, and make your decisions from there. For Scott Berinato’s five easy steps to project portfolio management, see “Do the Math,” Page 52.

If CIOs face a lot of internal pressure these days, you can at least vent some of your frustration on your vendors. In this down economy, IT buyers have an upper hand that you’d be foolish not to take advantage of. Why would you even give an audience to a salesperson who didn’t want to know about the challenges you’re facing and be able to convincingly explain how their particular product is going to help you out? And isn’t it time to push back on some of the pricing policies and packages vendors are trying to shove down your throats?

I propose that these are mostly good developments for IT. It’s good to avoid spending money that may put your business at undo risk and that won’t bring a reasonable return. It’s good for vendors to understand your business problems and not just the great capabilities of their own products. It’s good, but it’s sure not easy. And the companies that can manage their way through it are the ones that will make it in the long run.