Original published attached as a PDF here: BIJ- What is portfolio management and why should IT care – July 2004

What is Portfolio Management, and why should I.T. Care?

By Steve Force

How does a company know if they’re working on the right IT projects? How can they tell? Why do managers often make questionable IT investment decisions? Why don’t they know what technology is worth to the business?

According to a January 2002 META Group report:

• Eighty-nine percent of companies are flying blind with virtually no metrics except for financial ones.

• Eighty-four percent of companies don’t do business cases for their IT projects or do them only on select, key projects.

• Eighty-four percent of companies are unable to adjust and align their budg­ets with business needs more than once or twice a year.

These are pretty sobering statistics. Such numbers would improve with even the most rudimentary portfolio management methodology in place.

Organizations with portfolio man­agement methodologies in place have better, more relevant, actionable information. It might seem like an abstract, esoteric topic, but portfolio management is a topic all forward-thinking IT practi­tioners should embrace. It’s a tool that:

• Provides an over-arching view of IT projects across the enterprise

• Facilitates alignment of IT with corporate strategy

• Is not used to implement or maintain.

We all know the importance of link­ing technology to business drivers. However, many IT practitioners still use “IT speak” when talking to the business side. Yet, it’s best to use a language they truly understand: money, investment and risk.

Although it IT staff isn’t alone in failing to quantify their projects and programs (other business units and executives are equally guilty), that’s no excuse. If IT understands the value of quantifying their projects and programs, and performs the due diligence necessary to accurately value it, then IT is much closer ro providing true, measurable business value.

Now, how does this apply to portfolio management? Simply put, portfolio management takes an objective view of all investments, including IT, to ensure that such investments are made wisely and in keeping with the overall strategy. It gives the organization a method to align IT with strategic goals by prioritizing IT projects in the save manner as other elements of a financial portfolio.

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