Why It Pays to Manage IT as a Portfolio

Portfolio management takes a holistic view of a company’s IT portfolio. It compares technology investments in terms of risk and payoff to the business and then helps you prioritize investments accordingly. Survey results show that CIOs who practice IT portfolio management get a higher value from their IT dollars. A recent study conducted by PRTM, the InterUnity Group and CIO found that leading companies use portfolio management. These market leaders deploy IT more selectively and are better able to focus their IT spending on technologies and projects that support the company’s business strategy. (For more on this, see “Portfolio Management: How to Do It Right,” Page 56.)

Two-thirds of CIOs manage IT as a portfolio.

The other third still haven’t gotten the message.

65% Manage I.T. projects as a portfolio or suite of I.T. investments

35% Manage each project separately

Source: CIO’s “The State of the CIO 2003” survey

Best Practices

Trim the fat. Define application strategy top-down and by how it supports business goals. Prioritize the portfolio of potential projects in accordance with business priorities. Cancel low-value projects and direct those resources to higher priority initiatives to achieve greater returns. Many companies overload the pipeline with the belief that more projects will result in greater output. In fact, the opposite is often true?overloaded pipelines can lead to longer project cycle times and increased waste.

Know where to invest. Emphasize technology that helps your organization make better decisions. Market leaders invest more heavily in tools like decision-support applications. The study shows that some companies have a lack of automation in some areas and are overinvested in others.

Plan ahead. Maintain a rolling three-year road map for key process and system platforms. Update your plan throughout the year rather than creating a last-minute portfolio 60 days to 90 days before the budget forecast is due.

Companies that are market leaders spend the same amount on IT as other companies, but they are focused on fewer, more strategic projects. Align yourself with these companies.

Market leaders were selected on their overall business performance (revenue growth and profitability) as well as their business performance within their respective industries (revenue, net income, gross margin, operating expenses and market share).

Source: “Optimizing Business Performance: Using I.T. for Competitive Advantage,” a joint study sponsored by PRTM and the InterUnity Group, in conjunction with CIO, August 2002. Results are based on 58 responses.