PPM: Deciding Where to Begin
As I've discussed in previous articles, the IT portfolio is comprised of two distinct sub-portfolios. They are the project portfolio and the asset portfolio.
While the project portfolio governs the spend of IT investment dollars for building new systems capabilities, the asset portfolio provides direction over the money spent maintaining the existing IT assets already deployed in the company.
These IT assets I speak of include hardware, software, data, processes, and IT's human resources.
The practice of portfolio management applied to each of the sub-portfolios provides exceptional, but unique, benefits. But, before starting a formal portfolio management practice, an IT executive needs to understand the difference between these groups of benefits and match them up against his organization's most pressing needs.
In doing so, a CIO can reap the largest advantages of portfolio management for their company and improve his department's image in terms of reliability, integrity and trustworthiness in the eyes of the business executives. In my experience, this has always been a welcomed benefit.
As mentioned, the organizational benefits of each sub-portfolio (i.e. project and asset) are different. To get a clear understanding of these differences a comparison and contrast of the benefits is required. Below is a side-by-side look at the benefits that each sub-portfolio brings to the table:
Project Portfolio Management:
Asset Portfolio Management:
Notice that the benefits of project portfolio management (PPM) focus on identifying and maximizing the business value of IT projects and improving the working relationship between the IT department and the lines of business.
Because the PPM process evaluates a project request from multiple perspectives, such as support of business goals and cost/benefit ROI measures, it cannot be accomplished in isolation by IT alone.
In fact, the process requires participation from the business lines and the finance department. Thus, forcing the business to learn about IT and IT to learn the business.
On the other hand, the benefits of asset portfolio management (APM) focus on cost savings and squeezing as much usage and capability out of the IT assets already in place throughout the IT environment.
APM is about disciplines such as lowering administrative costs at each phase of hardware and software lifecycles, standardizing infrastructure, and ensuring compliance with regulations and corporate security policies.
By their nature, these activities are typically the responsibility of IT and do not require much participation from business constituents.
Determining the appropriate portfolio management discipline for a company is based on understanding the unique combination of the IT department's credibility throughout the business community and the company's overall dependency on information and the technology that manages and maintains it.
The following matrix, developed and promoted by Howard Rubin of the Meta Group, provides a straightforward mechanism that you can use to determine which portfolio management discipline is the right one to start with in your specific case.
|Dependency of business
on information technology
|High||Project Investment Portfolio Decisions||Project and ALL Asset Portfolio Decisions|
|Low||Infrastructure & Applications Asset Portfolio Decisions||Information, Process & People Asset Portfolio Decisions|
|Credibility of IT organization throughout business community|
Scenario #1: Low Credibility & Low Dependency
Hardware and software are the most tangible of the IT assets, which normally translates into the quickest path for providing tangible cost savings to your company.
Being proactive in finding cost savings is a great start to increasing your credibility and a great way to self-fund an overdue infrastructure build-out.
Scenario #2: Low Credibility & High Dependency
The essence of PPM is to engage business leaders in the IT investment decision-making process. In doing this, IT leaders begin to understand the business better and start to speak in business terms.
Likewise, business leaders begin to get a better understanding of the complexities of the IT environment, as well as the business enabling capabilities that appropriately used information technology can provide.
Over time, business and IT strategies become interwoven, the investment process is transparent to all critical parties, and the business dependency on IT-enabled projects steadily grows.
Scenario #3: High Credibility & Low Dependency
While you more than likely already have the operational and administrative costs well in control, you can still reap additional cost savings benefits and improve the IT department's quality-of-service from managing the remaining IT assets.
These assets are somewhat intangible and it takes longer to understand their lifecycles as compared to the more tangible hardware & software assets, but the fact that IT's credibility is high implies that the business will be patient as you build this portfolio and the appropriate management processes.
Scenario #4: High Credibility & High Dependency
Okay, okay ... I know this scenario is extremely rare, but it does exist somewhere. Doesn't it? Just in case it does I'll round out the discussion with the final option.
Because the IT environment is being solidly managed and a strong relationship between IT and the lines of business exist, the only way to make a significant impact with portfolio management is to build a comprehensive IT portfolio.
So, include both the projects and all the assets in your pursuit of deploying portfolio management.
In summary, recognize your unique situation and understand the true priorities of the business as they pertain to information technology.
With APM, you have the opportunity to improve the credibility of the IT department as well as your own credibility in the eyes of business leaders. Moreover, if you feel that your company is missing opportunities to leverage information technology as a strategic weapon, PPM can be used to educate business leaders and improve the business dependency on information.
Make your choice wisely and you'll maximize the success of your first portfolio management initiative and set the stage for additional programs.
Jeff Monteforte is president of Exential, a Cleveland, OH.-based information strategy consulting firm, which specializes in IT governance, information security and business intelligence solutions. He can be reached at firstname.lastname@example.org.