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.
IT portfolio management started with a project-centric bias, but is evolving to include steady-state portfolio entries such as application maintenance and support, which consume the bulk of IT spending. The challenge for including application maintenance and support in portfolios is that IT budgets tend not to track these efforts at a sufficient level of granularity for effective financial tracking.
The concept is analogous to financial portfolio management, but there are significant differences. IT investments are not liquid, like stocks and bonds (although investment portfolios may also include illiquid assets), and are measured using both financial and non-financial yardsticks (for example, a balanced scorecard approach); a purely financial view is not sufficient.
Financial portfolio assets typically have consistent measurement information (enabling accurate and objective comparisons), and this is at the base of the concept’s usefulness in application to IT. However, achieving such universality of measurement is going to take considerable effort in the IT industry.
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.
At its most mature, IT Portfolio management is accomplished through the creation of two portfolios:
IT portfolio management started with a project-centric bias, but is evolving to include steady-state portfolio entries such as application maintenance and support, which consume the bulk of IT spending. The challenge for including application maintenance and support in portfolios is that IT budgets tend not to track these efforts at a sufficient level of granularity for effective financial tracking.
The concept is analogous to financial portfolio management, but there are significant differences. IT investments are not liquid, like stocks and bonds (although investment portfolios may also include illiquid assets), and are measured using both financial and non-financial yardsticks (for example, a balanced scorecard approach); a purely financial view is not sufficient.
Financial portfolio assets typically have consistent measurement information (enabling accurate and objective comparisons), and this is at the base of the concept’s usefulness in application to IT. However, achieving such universality of measurement is going to take considerable effort in the IT industry.
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.
At its most mature, IT Portfolio management is accomplished through the creation of two portfolios:
- Application Portfolio - Management of this portfolio focuses on comparing spending on established systems based upon their relative value to the organization. The comparison can be based upon the level of contribution in terms of IT investment’s profitability. Additionally, this comparison can also be based upon the non-tangible factors such as organizations’ level of experience with a certain technology, users’ familiarity with the applications and infrastructure, and external forces such as emergence of new technologies and obsolesce of old ones.
- Project Portfolio - This type of portfolio management specially address the issues with spending on the development of innovative capabilities in terms of potential ROI and reducing investment overlaps in situations where reorganization or acquisition occurs. The management issues with the second type of portfolio management can judged in terms of data cleanliness, maintenance savings, and suitability of resulting solution and the relative value of new investments to replace these projects.
Information Technology portfolio management as a systematic discipline is more applicable to larger IT organizations; in smaller organizations its concerns might be generalized into IT planning and governance as a whole.
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