It Investment Portfolio: Maximizing Tech Spending

An IT investment portfolio is a systematic approach to planning and organizing a company's IT projects, activities, and investments. It involves evaluating and managing these initiatives to ensure growth, cost reduction, and business continuity. By adopting this strategy, companies can make better-informed decisions, enhance their focus on business objectives, and ensure timely project delivery. The process typically includes evaluating projects and activities, creating a business strategy, and analyzing and managing the portfolio to make essential investment decisions.

Steady-state project entries

The concept of steady-state project entries addresses a shortcoming in IT budgets, which often lack the necessary granularity to effectively track infrastructure and application maintenance efforts. By incorporating these steady-state elements, IT portfolio management offers a more comprehensive view of IT investments.

Additionally, steady-state project entries facilitate the management of application maintenance. This includes activities such as application support and addressing technical issues, ensuring the smooth functioning of software applications that are vital for business operations.

The inclusion of steady-state project entries in IT investment portfolios enhances the ability to make informed decisions, optimise resource allocation, and improve cost efficiency. By considering both dynamic projects and steady-state elements, organisations can better align their IT strategies with their broader business objectives.

In summary, steady-state project entries in IT investment portfolios refer to the inclusion of infrastructure and application maintenance as ongoing, steady components. This evolution in IT portfolio management provides a more holistic perspective on IT investments, enabling better decision-making and strategic alignment within organisations.

Application management

Application Portfolio Management (APM) is a practice that has emerged in mid to large-size IT organisations since the mid-1990s. It attempts to apply the lessons of financial portfolio management to IT applications, to justify and measure the financial benefits of each application in comparison to the costs of the application's maintenance and operations.

APM is a way to gain control over IT investments and ensure they are aligned with business objectives. It is a way to bring transparency to IT spending and ensure that applications are contributing to the organisation's technology goals.

How to Manage an Application Portfolio:

Create a Full Inventory

The first step is to create a comprehensive list of all applications used or owned by the company. This includes applications currently in use, those used in the past, and those proposed for future projects. This will help identify which applications are performing which business functions and where there may be duplication.

Eliminate Redundant Applications

Once the inventory is complete, it will be clear which applications are performing similar functions. This is an opportunity to eliminate redundant applications, which may result in significant cost savings for the IT department.

Identify the Business Value of Each Application

After eliminating redundant applications, the remaining applications can be assessed for their business value. This is done by scoring each application on six criteria: strategic alignment, business process impact, architecture, direct payback, risk, and customer/revenue.

Map Applications in a TIME Chart

Gartner's Portfolio Triage process suggests four categories for applications:

• Tolerate: Applications that deliver business value but are not built on modern platforms or well-integrated with the company's infrastructure.
• Invest/Innovate/Integrate: Applications that show promise in delivering significant business value but will require investment in the company's infrastructure.
• Migrate/Modernize/Remediate: Applications that are no longer supported or rely on a small group of human resources with specialised knowledge.
• Eliminate: Applications with little to no business value, or where operating costs far outweigh results.

Optimize Resources

Finally, with a clear overview of the costs and resources involved in operating each application, efficiency can be maximised by ensuring the effective deployment and management of the human supply chain. A portfolio resource management platform can be used to monitor and track inefficiencies and implement transparent work process systems.

IT portfolio management vs balanced scorecard

IT portfolio management is the application of systematic management to the investments, projects, and activities of enterprise IT departments. It involves creating and managing portfolios of planned initiatives, projects, and ongoing IT services. The goal is to quantify previously informal IT efforts to enable the measurement and objective evaluation of investment scenarios. This allows organizations to adjust their investments based on feedback.

On the other hand, the balanced scorecard is a strategic performance management tool that helps managers keep track of the execution of activities and monitor the consequences arising from these actions. It provides a record of strategic initiatives and projects that are aligned with the organization's strategic objectives. The balanced scorecard takes a long-term view, typically 3-5 years, and breaks it down into themes, objectives, and targeted metrics, including financial and non-financial measures.

Both IT portfolio management and the balanced scorecard play a crucial role in aligning IT investments with business strategy. However, they differ in their approach and focus.

IT portfolio management focuses on the dynamic management of IT investments, projects, and activities. It involves creating different types of portfolios, such as application, infrastructure, and project portfolios, to effectively manage IT resources and align them with the organization's strategic goals. The biggest advantage of IT portfolio management is its agility in allowing investment adjustments based on feedback.

The balanced scorecard, on the other hand, provides a strategic framework for organizations to translate their vision, mission, and strategic objectives into measurable goals and initiatives. It helps bridge the gap between strategic planning and project execution by providing a clear roadmap for initiatives to be translated into projects and programs. The balanced scorecard ensures that projects are aligned with the organization's strategic objectives and provides a long-term perspective to guide short-term decision-making.

In conclusion, IT portfolio management and the balanced scorecard are complementary tools that can be used together to effectively manage IT investments and ensure alignment with business strategy. While IT portfolio management provides the agility to adjust investments, the balanced scorecard offers a longer-term strategic perspective to guide decision-making. By combining these approaches, organizations can make more informed and strategic IT investment decisions, leading to improved business performance and competitiveness in the market.

IT governance and leadership

• Aligning IT strategy with business strategy: IT capabilities must be aligned with the current and future needs of the organisation to enable it to achieve its objectives.
• Enabling new capabilities: Implementing new technologies allows the organisation to explore new avenues and achieve what was previously impossible.
• Enhancing customer and partner satisfaction: Improved efficiencies through IT should result in increased satisfaction and loyalty from customers and partners.
• Prudent resource utilisation: IT-related services should be delivered in the most cost-effective and efficient manner, maximising value.
• Managing risks and securing resources: The team should identify and manage IT-related risks while ensuring the security of IT resources.

Effective IT governance requires strong communication and collaboration between business and IT leaders. This includes prioritising IT governance, using measurable metrics to align IT with business strategy, and adopting a unified information architecture to avoid impulsive technology purchases. Additionally, IT professionals should develop business acumen to understand how their decisions impact the organisation's ability to meet its goals.

Senior IT leaders play a significant role in driving top-level change and influencing the future success of the business. This includes the Chief Information Officer (CIO), who is responsible for guiding the business, influencing its strategy, and ensuring alignment between IT and business priorities. The CIO, as the leader of IT governance, champions IT's perception, promotes professionalism, and safeguards process integration, data integrity, and system security.

IT portfolio management best practices

IT portfolio management is a complex and demanding endeavour. Below are some best practices to help you succeed:

• Create and monitor a Project Management Office (PMO) – Establish a PMO to support the needs of your various portfolios. Designate a department solely to your IT portfolios to ensure that the proper care is given to these projects.
• Standardise your risk management strategy – Standardise your risk management strategy across your portfolio and include a timeline for reassessing risk over the course of a venture.
• Choose prioritisation criteria carefully – Determine the potential of a project to add value to the business. Organisations without a well-thought-out portfolio prioritisation methodology may find themselves investing in less promising ventures.
• Be flexible – Adapt the timing of new projects to ensure that your IT teams have the resources they need and are not overburdened.
• Use available software – Streamline processes by using IT portfolio management software to create reports and dashboards. Make sure to find software that works with your company’s processes rather than altering your processes to fit the software.

IT portfolio management is the application of systematic management to the investments, projects, and activities of enterprise IT departments. It focuses on the IT department's projects and teams, assessing them for growth potential, adherence to company values, and cost reduction.

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. It is also different from project portfolio management, which focuses on the success and timelines of specific projects.

The goals of IT portfolio management are to avoid overleveraging an IT department and to maintain a well-managed portfolio. Successful portfolio management should emphasise visibility, maximise the value of investments, and facilitate decision-making.

• Organise projects and key performance indicators (KPIs) within your portfolio – Create a list of current and potential projects, as well as various KPIs for each. Organise this information for reference during the prioritisation step.
• Identify the company mission – Use your company's mission to inform portfolio goals and establish a framework for portfolio management.
• Prioritise projects and allocate resources – Prioritise your list of projects based on strategy, urgency, and importance. Allocate resources to projects with the best potential for results.
• Review and monitor progress – Establish a timeline to revisit this list. As projects reach completion, the portfolio landscape may change and need to be adjusted.

Frequently asked questions