Improving IT Governance

By Fumiko Kondo

(Back to article)

The complexity of today's technology needs demands effective IT governance. Rational decisions about which projects to undertake or continue, and which applications to deploy, require a systematic management strategy.

Such a strategy can best be developed when investments in IT are seen as a portfolio of projects and applications, capable of being analyzed and balanced to align with overall business goals.

Assessing Assets

Smart financial investors maximize their long-term success by maintaining a balanced investment portfolio. They assess each asset -- whether it's bonds, stocks, mutual funds, or real estate -- within the context of the total portfolio to ensure they meet their financial objectives. Some assets may be working well, while others may need to be reduced or eliminated from the portfolio.

The same conceptual approach can serve as a tool for analyzing and rationalizing an organization's IT investments. Like financial investments, your company's IT projects and applications should be working to deliver the maximum possible benefit in alignment with organizational goals.

By providing a systematic process for rationalizing projects and applications, portfolio management provides management with an important tool to improve IT governance.

IT portfolio management provides a strategic overview of all current IT projects and technologies, and makes it possible to prioritize them within a centralized decision-making process. It identifies those investments that should be undertaken or maintained and those that should be rejected or terminated. It also establishes a structure within which accountability for IT projects and technologies can be maintained.

Business Alignment

The process of portfolio management means that every decision to undertake a project, or to purchase and deploy a new technology, revolves around a single question: Is the proposed project or application in alignment with the firm's business objectives? If it is not, then the investment should not be made.

Importantly, there are no sacred cows in rational IT management, and the rule that applies to new projects applies also to existing ones: if a project is not contributing satisfactorily to your firm's strategic goals, it should be discontinued -- even if the project itself is going smoothly.

Similarly, technologies that do not pay for themselves should be scrapped. Schedule a review cycle for the entire portfolio -- monthly, semi-annually, or annually, for example -- and make adjustments as needed.

If your company has many divisions, it may have implemented hundreds of different software applications. Portfolio management offers a way of bringing all of those applications into view at one time.

It's possible that many of them overlap -- deployed in various departments for the same set of tasks. Others may not be performing efficiently. It makes sense to identify and eliminate technologies that are unnecessary, obsolete, or too costly for the benefits they provide.It is common to undertake large-scale projects in phases. Let's say you're about to begin the third phase of a project that entailed the deployment of a resource management application in the first phase, and a performance management system in the second. The next phase involves integrating the two applications.

Now is a good time to assess costs and benefits: Is the project still in alignment with your company's strategic objectives? How risky or costly will the third phase be? Perhaps you've received enough return out of deploying the two applications, and the benefit from integrating them won't be worth the cost?

Depending on your assessment, you might be well advised to abandon that third phase. In short, projects do not justify themselves simply by being underway; all should be reassessed periodically.

The PM Process

Portfolio management typically involves four procedural steps: collect, analyze, balance, and implement.

In the first step, the task is to collect, or list, project attributes and business priorities. Project attributes the specific definitions your organization uses to define a project or application.

The next task is to analyze the effectiveness of your investments. That is, assess their relevance to your business' goals for IT. But first, you may need to spend some time consolidating and standardizing the attributes and this may require extensive workshopping and negotiation.

For example, the trading arm of a corporation will have its own set of project attributes, the research and development division another set, and human resources yet another. It is necessary to standardize these attributes and consolidate them to a manageable number to facilitate effective analysis.

The analysis will then involve an assessment of your strategic goals in terms of your technology needs. What types of technology should you be running? Which areas of your business stand to gain the most from utilizing technology? Which business processes should get higher or lower allocations? ... and so on.

In the third step, you balance the entire portfolio. This will enable you to prioritize your projects and technologies. At this stage it is important to integrate the portfolio management process with the made up of some of the most senior executives in the organization.

Importantly, balancing the portfolio does not require expensive, complicated software. It can be done with an office spreadsheet application by simply listing attributes across the top and projects/applications down the left-hand column. Collecting the information manually and reviewing the results often provides great insight.

The Final Step

After you've made your decisions, you then have to implement them. This is often very difficult and may initially require a lot of change management effort. Typical implementation tasks may include; the adjustment of budgets according to revised project/technology priorities, the development of project milestones to ensure that timeframes are acceptable, and the re-allocation of resources to ensure that the right people are on the right projects.

The portfolio management process can now be used to drive the adoption of IT governance by continually assessing the performance of the portfolio. This can only be done when the information contained in the portfolio management system is accurate and up to date.

In general, most of this information can be collected from existing systems (i.e. financials, project management, resource management, etc.) or direct manager input. Realistically, however, this will involve the integration of a portfolio management tool into these other systems.

Portfolio management improves IT governance by providing a strategic overview of projects, outlining a process for controlling them, and aligning your IT expenditure with business objectives. Rational decisions about adopting and continuing the deployment of specific technologies will give you a boost toward defining accountabilities and maximizing efficiencies within your organization.

Fumiko Kondo is the managing director of consulting firm Intellilink Solutions. Her areas of focus include IT governance, process redesign & systems implementation. She can be reached at info@intellilinksi.com.