“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 (such as application support). The promise of IT portfolio management is the quantification of previously mysterious IT efforts, enabling measurement and objective evaluation of investment scenarios.” (Wikipedial)
IT portfolio management is a way of categorizing IT investments and analyzing them to ensure sound IT investment decisions. IT portfolios are frequently evaluated in terms of their return, risk, alignment to strategy, technical merit, and diversification.
Why do we need IT portfolio management—why not just assess each project/investment on its own merit?
The added value of developing and evaluating IT portfolios is that you can ensure the diversification of your investments across applications and infrastructure; new systems/major enhancement to existing systems and operations and maintenance; new R&D, proof of concepts, prototypes, and pilots; between strategic, tactical, and operational needs, and across business functions.
ComputerWorld Magazine, 7 April 2008, reports that Hess Corp., a leading global independent energy company, developed creative IT portfolios based on three types of initiatives:
- Bs—“business applications or business process improvement effort that’s aimed at increasing revenue or generating cost savings.”
- Es—“enablers” or projects to support business applications such as business intelligence, analytical systems, master data management, systems integration.
- Ps—“process improvement within the IT organization itself” such as standardizing the approach to applications development (systems development life cycle), project management, performance management, IT governance, and so on.
From an enterprise architecture perspective, we develop the target architecture and transition plan and assess IT investments against that. Again, rather than develop targets and plans and conduct assessments based solely on individual investment alone, EA should look at the aggregate investments by IT portfolios to ensure that the EA plan and subsequent investments are properly diversified. An EA plan that is overweighted or underweighted in particular IT investment categories can have a negative to disastrous effect on the organization.
IT investments represent significant expenditures to organizations and IT is a strategic enabler to mission, so messing up the IT plan with poor investment targets and decisions is costly to the enterprise.