IT (Information Technology) Portfolio Management Step-by-Step

Unlocking the Business Value of Technology

Bryan Maizlish, Robert Handler

• Publisher: Wiley
• Year: 2010
• Print ISBN:
  9780471649847
• Edition: 1
• eBook ISBN:
  9781118005057
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Praise for IT Portfolio Management Step-by-Step

"Bryan Maizlish and Robert Handler bring their deep experience in IT 'value realization' to one of the most absent of all IT management practices--portfolio management. They capture the essence of universally proven investment practices and apply them to the most difficult of challenges--returning high strategic and dollar payoffs from an enterprise's IT department. The reader will find many new and rewarding insights to making their IT investments finally return market leading results."
--John C. Reece, Chairman and CEO, John C. Reece & Associates, LLC Former deputy commissioner for modernization and CIO of the IRS

"IT Portfolio Management describes in great detail the critical aspects, know-how, practical examples, key insights, and best practices to improve operational efficiency, corporate agility, and business competitiveness. It eloquently illustrates the methods of building and integrating a portfolio of IT investments to ensure the realization of maximum value and benefit, and to fully leverage the value of all IT assets. Whether you are getting started or building on your initial success in IT portfolio management, this book will provide you information on how to build and implement an effective IT portfolio management strategy."
--David Mitchell, President and CEO, webMethods, Inc.

"I found IT Portfolio Management very easy to read, and it highlights many of the seminal aspects and best practices from financial portfolio management. It is an important book for executive, business, and IT managers."
--Michael J. Montgomery, President, Montgomery & Co.

"IT Portfolio Management details a comprehensive framework and process showing how to align business and IT for superior value. Maizlish and Handler have the depth of experience, knowledge, and insight needed to tackle the challenges and opportunities companies face in optimizing their IT investment portfolios. This is an exceptionally important book for executive leadership and IT business managers, especially those wanting to build a process-managed enterprise."
--Peter Fingar, Executive Partner Greystone Group, coauthor of The Real-Time Enterprise and Business Process Management (BPM): The Third Wave

"A must-read for the non-IT manager who needs to understand the complexity and challenges of managing an IT portfolio. The portfolio management techniques, analysis tools, and planning can be applied to any project or function."
--Richard "Max" Maksimoski, Senior Director R&D, The Scotts Company

"This book provides an excellent framework and real-world based approach for implementing IT portfolio management. It is a must-read for every CIO staff considering how to strategically and operationally impact their company's bottom line."
--Donavan R. Hardenbrook, New Product Development Professional, Intel Corporation

Chapter 1
IT Portfolio Management: An Overview

CHA CHA CHANGES IN THE CURRENT ENVIRONMENT

The unabated growth in information technology (IT) spending, a primary means of economic expansion before 2000 due to large-scale enterprise resource planning (ERP) implementations, Y2K, and the hypergrowth attributed to dot.com and e-business, is, for the time being, over. In today’s turbulent environment, companies face new hurdles from:

• Greater uncertainty
• Increased commoditization
• Nontraditional entrants with competitive offerings
• Shorter half-life of information (moving strategic enablers to commodity)
• Tighter spending
• New technologies
• Changing customer demands and higher levels of personalized preferences
• Multiple pricing, service, and utility models
• Government regulations, legal compliance, and safety standards
• Increased transparency of information due to the blurring between customers, competitors, and suppliers

While many of these challenges are externally driven, the internal challenges faced by many companies include:

• Clearly defined and clearly communicated business and strategic objectives, and consensus building around these objectives
• Complexity associated with introducing and infusing change and innovation
• Identifying and managing investments across multiple divisions and business units
• Product versus service focus
• Value chain partners
• Sourcing relationships
• Cost reductions
• Responsiveness improvements
• Efficiency enhancements

Although change will continue to accelerate and have more impact, many companies continue to either reduce or maintain current levels of IT spending. CIOs and other IT management leaders are now being called upon to justify the business value of IT. Critical capabilities to supporting the business value of IT include:

• Prioritization and alignment with the corporate vision
• Balanced investments across business units
• Pragmatic cost and risk-control mechanisms
• Rational decision-making processes
• Flexibility to reassess and rebalance priorities in the face of a fluid environment
• Adherence to mandated compliance and regulatory requirements

Achieving growth and business value in today’s challenging economy has driven many companies to focus on their core competencies: the unique and differentiated knowledge contained within their processes, technologies, relationships and extended enterprises, skills, and culture that provide a leveragable competitive advantage. Focusing on core competencies also means developing a closer alignment between business and IT, as IT represents a sizable percentage of the budget spending for companies and is quickly developing into a valuable strategic asset. In fact, according to recent research, IT spending as a percentage of gross revenues is currently 1.5% to 7.0% and represents greater than 70% of capital spending for most companies.

FOCUS ON IT INVESTMENTS

IT can have a significant impact on the quality of services and solutions and the performance of a company. Efficiently and effectively managed IT investments that meet business and mission needs can create new value-revenue generation, build important competitive advantages and barriers to entry, improve productivity and performance, and decrease costs. Similarly, poorly aligned and unmanaged IT investments can sink a company.

IT investments represent a profound hole within companies. There are no other investments within a company that occupy such a large and growing expenditure yet lack disciplined management, processes, and performance measurements. However, a majority of companies are aggressively scrutinizing the amount of investment allocated to IT in an effort to cut costs, achieve economies of scale, and drive shareholder value to get more and do more for less. The primary focus on IT investments is on short-term projects and priorities with near-term benefits, delaying and in many cases eliminating long-term strategic investments.

Concurrent to cutbacks in IT spending and a short-term focus, management within companies is demanding an increase in IT productivity, expanding IT’s role from internally focused to customer facing and making IT more relevant to the business strategy as resources are scaled back. Customers are demanding more rapid, real-time, customized, total solutions, while competitors are forcing companies to frequently innovate to maintain their market position. Additionally, regulators are requiring new levels of accountability and traceability of corporate behavior (e.g., the Sarbanes-Oxley Act), prompting increasing levels of compliance. The information systems department is not immune to compliance requirements mandating microscopic examinations of areas such as careless project overruns.

Besides deploying Six Sigma practices and cutting costs by freezing projects, laying off employees and contractors, or renegotiating supplier contracts, many companies are utilizing supply-side self-funding IT activities to get through turbulent times, including:

• Simplifying, migrating, retiring, and/or consolidating legacy systems to decrease operations and maintenance costs and increase flexibility and agility
• Standardizing, reengineering, and utilizing commercial off-the-shelf technologies and open standards for new product development to speed time to market and avoid the expensive use of proprietary technologies
• Externalizing processes through outsourcing and establishing value-network partner ecosystems and shared services, resulting in lower costs and focus on core competencies

IT portfolio management is a tool that supports companies during times of both robust growth and economic downturn. IT portfolio management supports disciplined improvement and thrives on consistency, repeatability, and accountability. However, a key challenge for companies during periods of boom or bust is aligning to the corporate strategic intent and developing a framework for measuring, balancing, prioritizing, selecting, and flexibly changing the composition of IT investments and assets. Many companies are hemorrhaging in IT spending due to:

• A prevalence of pet projects
• A reluctance to kill projects and/or retire assets
• Too many active projects and a huge backlog of projects
• A myopic focus on exotic and cool technologies
• A lack of a detailed cataloged, organized, and aggregated view of critical versus immaterial assets
• Inconsistent and incomplete criteria to assess IT investments
• Underestimation of the total cost of ownership
• Inadequate governance
• Ad hoc program management processes

This situation is reflected in the following survey results that highlight the shortfalls of the majority of companies in attaining optimal value at acceptable risk levels for their IT investments:

• 84% of companies either do not do business cases for their IT projects or do them on a select few key projects.
• 83% of companies are unable to adjust and align their budgets with business needs more than once or twice a year.
• 67% of IT organizations are not market ready. Benchmarking is done less frequently than once a year.
• 89% of companies are flying blind, with virtually no metrics in place except for finance.
• 57% of companies perceive they are balancing the pressures of cost cutting and IT effectiveness.

Most companies maintain a list of more IT projects than their budgets can support. Ironically, many business and IT managers are unaware of:

• The types of ideas and concepts being worked on within research and development
• How many IT projects are in the development cycle and their alignment with the future strategic direction
• The amount of resources allocated to, or the risks associated with, each IT investment
• The reason why IT investments were initiated or the criteria used to approve IT investments

In addition, information r...

Table of contents

• Cover
• Table of Contents
• Title
• Copyright
• Acknowledgments
• Foreword
• Overview of the Book
• Introduction
• Chapter 1: IT Portfolio Management: An Overview
• Chapter 2: Planning for IT Portfolio Management: Ready, Aim, THEN Fire
• Chapter 3: People and Governance: The Most Important Success Factors of IT Portfolio Management
• Chapter 4: IT Portfolios and Their Content in Context
• Chapter 5: Building the IT Portfolio
• Chapter 6: The IT Portfolio Management Market and Industry Provider Assessment Methodology
• Chapter 7: Final Thoughts
• Case Studies
• Cisco Systems, Inc.
• In-Q-Tel
• Xcel Energy
• Sarbanes-Oxley
• Index
• End User License Agreement