CIOs who are looking to make a difference at their company need look no further than IT portfolio management. Using a portfolio management methodology enables businesses to be more agile and respond to changing market needs by giving the organization an understanding of where every dollar is spent, how it is spent, why it is spent, and what it returns.
What began as IT project management decades ago has evolved into a more formal discipline that enables organizations to better manage shrinking IT budgets while meeting increasingly challenging business demands on IT.
Not every company will benefit from IT portfolio management. But most will. By some accounts, IT portfolio management is appropriate for any company with more than U.S. $25 million in total revenue that allocates between five-and-six percent of that total for IT.
That includes a lot of companies according to a 2004 Gartner survey revealing that most software companies invest between three-and-10 percent of their total revenue in IT.
Needless to say, that’s a significant amount of money—and it should be managed professionally. The bottom line? Balancing and managing the IT portfolio is really about strategic governance.
IT portfolio management refers to the collection of IT projects and initiatives that have been evaluated and analyzed against a business priority as well as a set of ROI metrics and a project management methodology.
A balanced portfolio of initiatives is selected to work on throughout the year to ensure that IT is devoting its efforts on the projects that provide the greatest value for the company as rapidly as possible.
Just as consumers manage their own individual retirement accounts by diversifying their portfolios—keeping a certain percentage of equity exposure in long-term investments, another portion in short-term, still others in foreign equities—companies must carefully select their areas of investment.
After all, investing in only a handful of high-risk projects is as counterproductive as investing in countless small, low-value projects.
IT portfolio management typically includes five categories of projects. At the bottom is the largest expense: keeping the lights on. This category includes all the IT costs and resources required just to keep the basics of the company going—things like network connectivity, financial systems, HR systems, payroll, and so on.
The next IT portfolio management categories are infrastructure, transactional, informational, and strategic. Some projects cross more than one category. M&A transactions, for example, involve infrastructure in that they are an investment in software, hardware, and other IT assets, but, ultimately, M&A transactions are strategic to the future of the business.
Accurate categorization of projects helps ensure that resources are allocated appropriately.
The current trend is to see informational projects grow. Informational activities such as data warehousing, reporting, and analytics projects are focused on gathering, leveraging, and protecting data while making it available to the right people at the right time.
The financial services industry, for example, is collaborating closely with its IT staff as they tackle a variety of projects aimed at meeting any of a range of industry and government regulatory requirements.
So, what can companies expect to see as they maintain a more balanced IT portfolio? Some experts say it is not uncommon to see a 10-to-15 percent productivity gain as organizations are able to achieve more with existing resources and without increasing IT costs.
Many IT departments are leveraging IT portfolio management to keep their IT costs flat while producing more for the company by being able to support additional headcount, additional sites, and additional processing needs just by making better use of their resources, their physical infrastructure, and their people.
Of course, just as an individual investor would not tweak his or her 401(k) every week or month, organizations are advised to update their annual IT portfolio quarterly at best. Business leaders should meet, go through the portfolio, and make adjustments. This might require a re-prioritization of projects, the addition of resources, or the acceleration of a project.
By managing a balanced IT portfolio, CIOs can help their organizations stay ahead of their infrastructure growth, focus more closely on priority investments, and deliver on the needs of the business as it grows.
David Thompson is CIO of IT security vendor Symantec. Prior to joining Symantec, Thompson was senior vice president and CIO for Oracle and oversaw the Global Information Technology group.