IT Portfolio Management

It sounds really complicated but in actuality it is really not. IT Portfolio Management is an application of systematic management to classes of items that manage organizational IT capabilities; these items are normally very large.

Some examples of IT Portfolios are things such as planned initiatives, projects, and ongoing information technology services like application support. IT Portfolio Management can be relied upon for the quantification of subsequently puzzling IT efforts; this enables measurement and objective evaluation of investment circumstances.

IT Portfolio Management History

The first proposed portfolio advance to IT assets and investments was considered to be the McFarlan. Later on Weill and Broadbent are said to have made contributions to this approach, followed by a number of other contributors such as Aitken, Kaplan, Benson, Bugnitz, and finally Walton.

Various vendors have contributions that are overtly acknowledged as IT Portfolio Management Solutions. The first attempt to standardize the IT Portfolio Management principles is believed to have been made by the ValIT framework from ISACA.

Some research even suggests that IT Portfolios statistically behave more like biological populations rather then financial portfolios.

The IT Portfolio Management idea started out with humble beginnings, it actually started with no more then a project-centric bias. Even so IT Portfolio Management like many other information technology models and structures is evolving.

IT Portfolio Management however is evolving to include steady-state portfolio entries, this can be application maintenance or even application support, both of which consume a large part of IT funds.

The challenge associated with including application maintenance and application support in these portfolios lies in the fact that IT budgets have a habit of not tracking these efforts at an adequate level of granularity for efficient financial tracking.

Efficient Financial Tracking

It is a bit simpler then one might think at first. The actual concept is one that is analogous to financial portfolio management, yet there are still significant differences. Information Technology investments are solid, unlike stocks and bonds which are considered liquid; these IT investments are measured using not only financial yard sticks but also non-financial yard sticks, like a balanced scorecard approach. Therefore a strictly financial view would be insufficient.

Typically the assets of a financial portfolio have consistent measurement information which allows for accurate and objective comparisons. This information is at the base of the “concepts” usefulness in its application to information technology.

Even so, creating such universality of measurements takes a considerable effort from the information technology industry. The management of IT Portfolios is distinct from that of IT financial managements in that it has an explicit directive, which is a strategic goal in determining what to continue investing IT funds into versus what to divest from.

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IT Portfolio Classification

IT Portfolio Management is not accomplished through a single portfolio, which would be a daunting if not impossible task; the truth is that it is actually accomplished through the creation of three separate portfolios that work together to achieve the desired outcome. These portfolios are:

1. An Application Portfolio – The management of this portfolio focuses on comparing the spending on established systems; this is based upon their relative value to the organization. The comparison itself can be based upon the level of contribution in terms of the IT investment’s profitability.

In addition to this, the comparison is also able to be based on the non-tangible factors; this can include the organization’s level of experience with a specific technology, the users’ familiarity with the applications as well as the infrastructure, and the external forces like emergence of new technologies, or even obsolesce of the older ones.

2. A Project Portfolio – With this type of portfolio management the issues with expenditure on the development of ground-breaking capabilities in terms of prospective ROI and dropping investment overlaps in situations where reformation or acquirement occurs is addressed.

The issues of management with this second type of portfolio management can be judged in terms of data purity, the investments on maintenance, the appropriateness of resulting solutions, and the comparative value of the new investments needed to replace these projects.

3. Resource Portfolio Management – This is also known as RPM, RPM involves the analysis and forecasting of the capacity that organizations need to carry out their business strategies, in a manner that is proactive rather then reactive, this is a very significant strategic activity, it enables the organization to recognize, build up, and carry on the workforce skills that it needs to productively achieve its strategic goal, all the while harmonizing the career and lifestyle goals of the organization’s employees.

Resource Portfolio Management will also aid in controlling labor costs, in addition is can assess talent needs, make informed business related decisions, and even assess talent market risks as part of an overall enterprise risk management.

RPM is aimed at aiding organizations in making sure that they do have the right people in the right departments at the right time and for the right price. RPM also helps these organizations gain valuable insight into what people the organization could best make use of, as well as what people will be able to meet the specific needs of the organization as a whole.

Having learned what we have thus far it should be plain to see that the Information Technology portfolio management system is really a methodical regulation that is more applicable to greater sized IT organizations, yet in the smaller organizations it can have concerns that might be widespread into IT planning and even governance as a whole.

IT Portfolio Management Benefits

When scouring the internet for information related to the benefits of using IT Portfolio Management you might find several benefits listed. These benefits are related to applying the IT Portfolio Management approach for IT investments.

Some argue that the dexterity of portfolio management is its greatest and most remarkable advantage over more contemporary investment approaches and methods. Some of the other benefits include the fundamental over sight of the organization’s budget, as well as its risk management, strategic configuration of IT investments, and its demand and investment management along with the consistency of investment procedures, rules, and plans.

Along with information pertaining to benefits you may also find information that is centered on implementing the portfolio management approach. A number of issues and positive factors have been pointed out that CIOs may face when attempting to implement the IT Portfolio Management approach, it is also suggested that simple methods like those proposed by Pisello be used to over come such issues.

There are other implementation methods as well; this can include risk profile analysis, deciding on the diversification of projects, infrastructure, and technologies, continuous configuration with organizational goals, and continuous improvement.

What I have learned through my research is that there is no single way to go about the implementation of the IT Portfolio Management approach, and that a variety of approached can and should be applied. It is obvious that the methods are not set in stone and will need some amount of alteration, the amount of alteration it will need depends solely on the intent, and the needs of the organization.