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We live in a demanding world that requires public- and private-sector executives to deliver value to meet ever-rising client expectations. When expectations aren't met, customers want to know why the future they got wasn't the future they wanted.
The ancient Greeks were similarly obsessed with ensuring that present investments generated the desired future results. They attempted to manage future risk via the Oracle at Delphi, and people came from around the globe to have questions about the future answered. The Oracle's responses were usually cryptic and subject to multiple interpretations. Despite this ambiguity, Delphi became a focal point for intellectual inquiry as well as an occasional meeting place where rivals could negotiate.
For this month's CIO Habitat research report, we gathered data and held discussions with 250 IT thought leaders and practitioners. The central finding is that IT portfolio management appears to be emerging as the Delphi of the contemporary high-performance organization.
Defining Portfolio Management
Portfolio management is a highly flexible concept. While it can be used to plan distant futures, it has practical near-term application as well. There are three dimensions to portfolio analysis:
- What data elements are collected and analyzed?
- Who makes decisions based on the collected data?
- What kinds of decisions are being made?
"We define IT portfolio management as planning, designing and executing multiple IT projects during a 12-month period," explains Mike Hugos, the bottom-line-focused CIO at Network Services Co., a Chicago-area distribution supply firm. "These projects range from upgrading IT infrastructure to enhancing existing systems and building entirely new systems. Each project has an ROI that is calculated by the finance department, and the steering committee picks a group of proposed projects for funding each year."
Portfolio management ranges from record-keeping to sophisticated risk reduction and from cost control to new value creation. Some form of portfolio management is practiced by both behind-the-curve CIOs (who are merely trying to stay on top of major initiatives) to those IT executives striving to transform business culture and create sustaining new value from IT. The majority of our survey respondents (67%) employ homegrown rather than purchased software tools for portfolio management tracking, and 66% describe those tools as "very basic," which means they mainly use Excel spreadsheets (see Figures 4 and 5 below).
Still others on the leading edge use portfolio management to create a "new language" for discussing IT and business investment and even to "economically re-platform the entire industry." So organizations employ a broad range of portfolio management behaviors and practices. Most programs are capped off by some form of interaction with a senior-executive steering committee.
Portfolio management done right gives next-generation IT leaders a powerful tool to reduce complexity and improve decision making. Many CIOs use portfolio management to manage the total lifecycle of IT projects. "Within the IT organization, all new projects are scored against criteria of risk, benefits and investment," says the CTO at a major apparel retailer. "This score is used to define start date and to define which resources are used for projects. When resource contention occurs, the higher-score project gets the best resources."
Mykolas Rambus, the CIO at W.P. Carey, a midsized investment management firm in New York, adds, "For us, portfolio management is project portfolio management: the rigorous planning and execution of nonoperational initiatives that are prioritized against business objectives, vetted by the IT steering committee, and whose successful delivery is part of the IS report card [i.e., the balanced scorecard]."
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