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IT Portfolio Management and Planning - a simple 5 step process.

The challenge for business managers and executives

Making the right investment in IT at the right time to match your business needs is a delicate balance between maximising the return on your investment, and avoiding risk.

On the one hand, you do not want to invest too early with a long payback but on the other hand, delaying investment can sometimes result in increased risk as a result of being forced to undertake large, high risk projects.

Overlaying this tradeoff is the impact of new, emerging technologies which can disrupt the best laid plans.

The key is to make the necessary decisions at the right time. To do this, you need to be able to identify the triggers for making these decisions.

A review of existing solutions

The traditional planning approach used by IT Departments for IT portfolio management planing is the IT Strategy and Architecture review. This process interprets the business strategy and plan and develops a plan for IT based on the current IT environment, and emerging trends.

This approach is sometimes complemented by a Lifecycle Management process which values IT assets based on age, currency of technology platform, business purpose fit, and operating and maintenance costs. The level of investment in a particular system is gated by forecasted growth or decline in asset value or life cycle stage of the asset.

Both of these processes are important and essential tools for the IT Department. However, they look at IT investment through an IT lens rather than a business lens.

For example

Scenario A: A large financial institution finds itself making a multi-million dollar investment in front-end customer systems on a tight timescale, without a business case, and solely on the premise that it is essential to survival.

The business need had been identified well in advance in the IT Strategic Plan. In addition, it was well understood that the Branch platform was an aging platform in need of replacement.

In spite of this the decision to invest was deferred until there was no choice and any potential competitive advantage has now been lost. Added to this is the risk of implementation under a tight “no choice” timeframe.

Scenario B: A multi-division business accessing IT services on a shared service basis requires each business to develop an IT Portfolio Management Plan and fund new development from divisional budgets.

The business has a good feel for the level of investment that it can sustain in IT over a period, but does not have a clear idea of where to make the investment or what return they will get on that investment.

The options presented by the IT Department are difficult to reconcile with the business plan in terms of timeframes, cost, and risk. Decisions are postponed.

Scenario C: A major international airline was reported in the Australian Financial Review on 2nd September, 2005 (pp. 70) as

“facing a technology cost crunch as it works to replace ageing software systems….The dilemma has left the airline searching for ways to defray the massive cost…at more than $100million…the airline had already tried three times in the past decade to build a business case for upgrading the engineering and maintenance software, but was yet to find a viable model. However the airline is fast running out of time to find a solution.”


Five steps to create an effective IT portfolio management plan

Here is a simple five step process for IT investment planning, that Doman Vaughan Consulting has developed for business managers and executives:

  • First identify the milestones in the business plan that will trigger demand for new or different IT capability and/or capacity. The IT Strategic Plan and portfolio management process should provide this information. Plot these on a milestone plan.
  • Second, obtain from IT an estimate of investment required and time to deliver. Plot the decision points on your milestone plan so as to ensure timely delivery.
  • Third, evaluate the risk to the business of deferred investment and highlight the trigger points for low, medium, and high risk on your milestone plan.
  • Fourth, adjust the business and IT investment plans, if feasible, to spread investment, obtain progressive returns, or mitigate potential risk.
  • Fifth at each decision point, reforecast the plan based on the decision taken.


The ability to align IT plans with long range business plans is a critical lever for business managers and executives to avoid large, costly, and high risk IT investments and/or introducing significant operational risk into their business. This responsibility cannot be delegated to the IT Department.

This article outlines a five step process to investment planning to produce a robust IT investment portfolio. This enables the business to apply a business lens to IT and to make well informed and timely decisions. This is the essence of effective IT Portfolio Management and Planning.

For further information on the ideas outlined in this article please contact us for an obligation free discussion.

Donna Vaughan and Desne Doman are the authors of the e-book:-
"Corporate Mercenaries - Manage your consultants or... they will manage you"
=> http://www.domanvaughan.com.au/

** Attention Ezine editors/Site Owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include a resource box as listed above. It would be nice to get a note from you telling me where you are publishing it. Many thanks. Donna and Desne

IT Portfolio Management and Planning (PDF)


“Australia’s banks have started overhauling up to $US8 billion (AUS$10.4 billion) worth of outdated computer equipment amid warnings from leading executives that the industry is facing a major systems crisis unless it upgrades key software….
…This comes as major companies in Australia’s $20.8 billion insurance industry work on upgrading dated software systems that underpin key operational functions.”
Australian Financial Review 16 August 2005 pp. 29


“Fortunately, the key issues in IT aren’t technical, but managerial. Making good IT decisions is something that all executives can do, provided they use a sound evaluation methodology and take the trouble to develop their business and IT judgement.”
The McKinsey Quarterly 1998 Number1


It Portfolio Management

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