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
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
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.
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
The options presented by the IT Department are difficult to reconcile
with the business plan in terms of timeframes, cost, and risk. Decisions
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
- 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
- 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
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:-
Mercenaries - Manage your consultants or... they will manage you"
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