by Richard Pastore

The Business Case for IT Portfolio Management

May 01, 20032 mins
IT Leadership

Seventy-five percent of companies do not possess clear, ongoing oversight of their IT project portfolios, according to an AMR Research study. In this economy, where people continue to lose their jobs and capital funding is severely rationed, this lack of oversight seems criminal. Most CIOs continue to steer project funding ad hoc, project by project, with little thought for the entire investment picture. Perhaps they just don’t realize how powerful a tool portfolio management is and what a great payoff it provides for such little investment. Using the information in “Portfolio Management: How to Do It Right” (Page 56), I’ve sketched out a little business plan that I hope will make the case for portfolio management.

Benefits to the Organization

1. Fairer decisions about funding. Both initial project approval and ongoing management are based on a holistic view of total investments prioritized by relative benefit to the enterprise?not on a project sponsor’s political muscle.

2. Optimal mix of investment risk and reward. Portfolio management facilitates the balance of riskier, higher-reward projects versus safer, lower-reward ones because it categorizes, prioritizes and monitors new and ongoing investments.

3. Better communication between IS and business leaders. Portfolio management gives IT and business leaders a common language and platform for communication because it is a financial model.

4. Greater understanding and cooperation over funding allocation. Everybody sees where the dollars are flowing and why.

5. Greater business accountability for investments. Portfolio management can be used to assign responsibility to appropriate leaders.

6. Strengthened alignment between IS and the business. Portfolio management dictates that technology investments map to corporate strategic objectives. Misaligned projects surface quickly.

7. More efficient use of human resources. The number of IT staff and managers allocated to various projects becomes more visible and comparable.

8. Fewer redundant and overlapping projects. The portfolio view exposes redundancy.

Costs in Time and Resources

1. The time necessary to take inventory of all ongoing and proposed projects, sort them into categories and populate the portfolio.

2. Cost to develop or purchase a portfolio management tool.

Hopefully this brief business case will wake up a few people at those 75 percent of companies that are missing out on this very powerful tool. But I have my doubts; another study by Meta Group showed that only 16 percent of companies bother with business cases for their IT projects.

It figures.