IT portfolio management
From Wikipedia, the free encyclopedia
IT portfolio management is the application of systematic management to large classes of items managed by enterprise information technology (IT) capabilities. Examples of IT portfolios would be planned initiatives, projects, and ongoing IT services (e.g. application support). The promise of IT portfolio management is the quantification of previously mysterious IT efforts, enabling measurement and objective evaluation of investment scenarios.
IT portfolio management started with a project-centric bias, but is evolving to include steady-state portfolio entries such as application maintenance and support, which consume the bulk of IT spending. The challenge for including application maintenance and support in portfolios is that IT budgets tend not to track these efforts at a sufficient level of granularity for effective financial tracking.
The concept is analogous to financial portfolio management, but there are significant differences. IT investments are not liquid like stocks and bonds and are measured using both financial and non-financial yardsticks (e.g. a balanced scorecard approach); a purely financial view is not sufficient.
Financial portfolio assets typically have consistent measurement information (enabling accurate and objective comparisons), and this is at the base of the concept’s usefulness in application to IT. However, achieving such universality of measurement is going to take considerable effort in the IT industry. (See Val IT.)
At its most mature, IT Portfolio management is accomplished through the creation of two portfolios:
- Application Portfolio - Management of this portfolio focuses on the spending against established systems in relation to their value. These systems may be assessed as to their contribution to corporate profitability, and also on non-financial criteria such as stability, usability, and technical obsolescence.
- Project Portfolio - Management of this portfolio focuses on the spending on two types of projects: projects to develop innovative new capabilities (which are assessed on criteria such as potential ROI) and projects to reduce the overlap that occurs during corporate acquisition or reorganization (which are assessed on criteria such as maintenance savings, data cleanliness, and suitability of resulting solution for meeting future requirements).
IT Portfolio management is distinct from IT financial management in that it has an explicitly directive, strategic goal in determining what to continue investing in versus what to divest from.
Information Technology portfolio management as a systematic discipline is more applicable to larger IT organizations; in smaller organizations its concerns might be generalized into IT planning and governance as a whole.
IT portfolio management was first proposed by McFarlan.[1] Significant authors contributing to the discipline of IT portfolio management include Aitken,[2] Weill and Broadbent [3], Maizlish and Handler[4], Kaplan[5], and Benson, Bugnitz, and Walton.[6] The ITIL Business Perspective[7] and Application Management[8] volumes also cover it in depth. Various vendors have offerings explicitly branded as "IT Portfolio Management" solutions.
ISACA's Val IT framework is perhaps the first attempt at standardization of IT portfolio management principles.
In peer-reviewed research, Christopher Verhoef has found that IT portfolios statistically behave more akin to biological populations than financial portfolios.[9]
Contents |
[edit] McFarlan's IT Portfolio Matrix
High
^
|---------------------------------------------------------------|
|strategic | Turnaround |
Impact |---------------------------------------------------------------|
of IS/IT |Critical to achieving |May be critical to |
applications |future business strategy. |achieving future |
on future | (Developer) |business success |
industry | | (Entrepreneur) |
competitiveness |Central Planning | |
| |Leading Edge/Free Market |
|---------------------------------------------------------------|
|Critical to existing business |Valuable but not critical |
|operations |to success |
| (Controller) | (Caretaker) |
| | |
|Monopoly |Scarce Resource |
|_______________________________|_______________________________|
|Factory | Support |
|--------------------------------------------------------------->High
Low
Value to the business of existing applications.
[edit] Relationship to other IT disciplines
IT portfolio management is an enabling technique for the objectives of IT Governance. It is related to both IT Service Management and Enterprise Architecture, and might even be seen as a bridge between the two.
[edit] References
- ^ McFarlan, F. W. (1981). “Portfolio approach to information systems.” Harvard Business Review (September-October 1981): 142-150
- ^ Aitken, I. (2003). Value-driven IT management. D. Remenyi, Computer Weekly Professional Series. Oxford, Butterworth Heinemann.
- ^ Weill, P. and Broadbent, M. (1998). Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology. Cambridge, Massachusetts, Harvard Business School Press.
- ^ Maizlish, B. and R. Handler (2005). IT Portfolio Management Step-By-Step: Unlocking the Business Value of Technology. Hoboken, New Jersey, John Wiley & Sons.
- ^ Kaplan, J. D. (2005). Strategic IT portfolio management : governing enterprise transformation. United States, Pittiglio Rabin Todd & McGrath Inc.
- ^ Benson, R. J., T. L. Bugnitz, et al. (2004). From business strategy to IT action : right decisions for a better bottom line. Hoboken, N.J., Wiley
- ^ Office of Government Commerce (2004). Business Perspective: The IS View on Delivering Services to the Business. OGC, ITIL© Managing IT Services (IT Infrastructure Library). London, The Stationery Office.
- ^ Office of Government Commerce (2002). Application management. OGC, ITIL© Managing IT Services (IT Infrastructure Library). London, The Stationery Office.
- ^ Verhoef, Christoper, "Quantitative IT portfolio management," Science of Computer Programming Volume 45 , Issue 1 (October 2002), Pages: 1 - 96
