Order from Chaos: The Building Blocks of Value Driven IT Portfolio Management

Most executives are familiar with the situation of having more proposed IT project investments than can be funded or staffed in a given budget cycle.

Attempting to execute too many simultaneous projects spreads people and funding much too thinly across the initiatives, resulting in slow progress, project overlap, conflict, and ultimately a wholly unsatisfactory outcome for the business – especially given the level of investment that was initially made.

To address this common problem, organizations have begun implementing stronger IT portfolio management as a means of bringing clarity, objectivity, and focus to their project investment choices, as well as to add oversight to their current in-flight projects.

Previously a ‘nice to have’ or luxury item within the technology function, IT portfolio management has evolved to become a foundational element for large organizations.  If you don’t currently have it in place — you need to.

IT portfolio management will almost always include the following elements:  an executive decision making body; portfolio management software; prioritization frameworks for categorizing and scoring proposed project investments; and standardized project execution methodologies.  Let’s look at best practices in each of these a little more closely:

 

Executive decision making body
IT investment decision making and oversight should be incorporated into an existing executive committee, preferably comprised of both IT and non-IT executives.  Instead of creating a special “IT investment steering committee” the organization can take advantage of existing meeting schedules and logistics, minutes, and follow-up tracking — essentially addressing IT decisions as agenda topics of an existing executive committee.

Large organizations that have too many IT investments to be handled by a single executive committee may consider delegating IT decision making rights to next-level executive teams with the right expertise, perspective and accountability. For example, the Sales & Marketing executive leadership team that makes decisions about new product introductions, advertising and marketing spend, distribution agreements, and sales compensation would be responsible for prioritization and oversight of IT investments in commercial systems.  Likewise, the Supply Chain leadership team that makes decisions about capital investment in plants, third-party manufacturing, and direct procurement would take on prioritization and oversight of IT investments in supply chain systems.

Creating new decision making bodies that only address IT spend disrupts the main chain of command, and these committees tend to fall into disuse – due to competing claims on scarce executive time and the conflict caused by a parallel decision making authority that is different than what is used for other strategic decisions in the business.

Portfolio management software
Large organizations simply have too many proposed and in-flight project investments to be managed manually on spreadsheets.  Portfolio management software improves the efficiency of the team maintaining the information and, more importantly, improves the information available for executive decision making.

Consider products such as Planview, Planisware, Microsoft Project Server, or Instantis that let the enterprise maintain a database of projects containing critical information needed for investment prioritization.  This may include required resources, capital and expense estimates, alignment with corporate strategic initiatives, benefit estimates, business process being changed, or interdependencies with other projects.  These tools also enable status tracking of in-flight projects, supporting oversight and proactive issue resolution.

Prioritization frameworks for categorizing and scoring proposed project investments
Organizations are well served by adapting the decision-making criteria and frameworks used for other large, strategic investments.  These typically involve scoring and weighting criteria such as business benefit, P&L impact, strategic impact, and compliance impact.

Adapting criteria used for product development portfolio is one common approach, because the types of tradeoff decisions are very similar.  Executives who are used to balancing investment in new products for one division vs. another see the parallels in deciding among proposed IT investments for Sales vs. Supply Chain.  Executives who are used to deciding the right funding level of costly, risky product development aimed at a wholly new market segment vs. minor product improvements or packaging enhancements for current core products, are well equipped to decide the right balance among leading edge IT projects in areas such as big data or Internet of Things vs. enhancements to a pricing analytics system, or to a system that connects with key suppliers.

One gap that we consistently observe, however, is the relative lack of rigor used in the business cases and charters prepared to prioritize IT investments, compared to what is expected from product development.  Solving this problem is an urgent need for companies that want to obtain the greatest value from their IT investment.

Standardized project execution methodologies
A common project execution methodology is invaluable to establishing an “apples-to-apples” comparison of proposed project investments and to improving the quality of cost and resource estimates. The right methodology will require project proposals to incorporate a common set of project phases, with defined deliverables outlined for each phase.

The use of common phases and deliverables for projects simplifies and routinizes the process for estimating timeline, budget, and resource needs.  As a result, the estimates are more accurate, more consistent across projects, and can be created in less time.

Without this in place, proposed investments can appear unduly favorable or unfavorable, depending on whether they include such items as ongoing system maintenance costs, the expense of back-filling staff assigned to the project, or the cost of decommissioning and archiving the system that is being replaced.

 

If your organization isn’t operating with mature practices in these critical areas, you can be fairly confident that you are realizing sub-optimized results from your annual investment in IT-related projects.  If this does describe how your organization currently manages its IT portfolio, congratulations – but there is always room for improvement.  Consider initiating an assessment of your current system and investment decision making process, with a strong focus on identifying specific, actionable enhancements.

A robust IT portfolio management process, particularly one that explicitly helps non-IT executives adapt their finely honed decision making judgment to IT investments, will result in a portfolio of IT investments aligned with company strategy and clear executive understanding and buy-in.

 

Chas Hartwig  |  Strategic Account Executive  |  TayganPoint Consulting Group  |  chartwig@tayganpoint.com

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