March 27, 2015 Leave a comment
Over the past years IT Leadership and Vendors have dabbled in what they have called “Portfolio Management”. The process has been primarily a budgeting activity to date with the goal on how to allocate funds to be spent on new development projects and cash reserved for continuing operations. Typically at the end of much gnashing of teeth and hand wringing a spend plan is created and executed on. Attention to the portfolio or rather collection of projects and technology is quickly switched to monitoring how money in the budget accounts are spent. For those organizations that have advanced in accounting practices tracking as to if the projects have completed are reviewed on target or if projects exceeded original forecast and the IT Asset has been acquired or created.
While the financial maturity of IT organizations has increased over the years I would not say these practices constitute Portfolio Management unless tracking creation and acquisition of technology is considered the enterprise’s goal for a portfolio which could be managed by a simple inventory management system. To me Enterprise Portfolio Management suggests, like financial portfolio management, an activity to balance investment return and risk.
In financial ecosystems, return is based upon the increase in value of the assets acquired and risk is the possibility of those assets decreasing value. In the typical enterprise scenario IT asset value is typically measured in terms of depreciation (i.e., decreases in value). Does this sound like an investment management activity?
What needs to be changed in IT Portfolio Management is expanding to account for the value side of the equation. However, typical ROI approaches within most IT organizations are little more than forecasts based upon hopeful assumptions and soon forgotten once budgets have been approve. Just before Y2K several thought leaders had push forward towards this concept of tracking enterprise project value: Strategic Capabilities Network (William A. Tulskie, Jr., Sugato Bagchi) , Benefits Management (John Thorp), and Benefits Dependency Network (Cranfield University) to name a few.
However, unless a visionary CEO and CIO had the insight to establish such practices it was easier to just continue with a budgeting approach. Even when a value management approach was introduced it was often not established at an high enough organizational level to have the needed information and impact. This may be due to the maturities of the practice, organization, and the confidence of the CFO that often sees this as a challenge to his/her role and authority.
As newer enterprises have started to take dominate position in the economy,thought leadership in business and a recognition that business models gaining mindshare in executive offices, an opportunity exists to advance the state of the art in Enterprise Portfolio Management. However IT needs to stretch its understanding of where value is created. The portfolio that needs to be managed is the capabilities the enterprise uses and will need and the associated technology assets used to enable these.
The practice of managing a multi-layer/dimensional portfolio is where this blog continues to document research and results of practice.