META Report: CIOs Adopt Triggers for Portfolio Management

By Marnie Ross

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Overview: Triggers are changes that cause CIOs to re-evaluate their IT portfolio. Defining triggering events simplifies portfolio management through foresight and planning. CIOs seeking to manage IT as a portfolio must determine what events are likely to have enough impact on the IT portfolio to cause a rebalancing of investments to reduce risk, increase value, or both.


META Trend: By 2003, Global 2000 CIOs' need to enhance enterprise value will increase IT portfolio management usage, with 50% using it as a communication tool, 25% using it sporadically for risk/reward-based decision support, and only 3% employing it consistently to manage the entire enterprise as a single portfolio. Through 2006, these numbers will increase most rapidly in the first and second groups, to 80%+ and 40% respectively, but because of the organizational maturity and discipline required, only 6% will achieve consistent enterprisewide IT portfolio management.

Currently, fewer than 10% of CIOs use trigger- and scenario-based decision activities within a portfolio management (PfM) process. By 2003, 25% of Global 2000 firms will be using IT PfM for risk/reward-based decision support, but because they lack disciplined scenario planning capabilities, fewer than 50% of them will be setting and monitoring triggers to speed the decision process.

As more IT organizations (ITOs) begin using IT PfM (65% by 2004; >80% by 2006), those with mature processes in planning, governance, and program management (<10% of G2000 firms) will deepen their decision process with IT PfM through the use of triggers. Others will continue to develop these IT value management capabilities. Through 2006, IT decision makers, realizing the value of trigger- and scenario-based decision processes, will drive 40% of the G2000 to embrace PfM decision approaches (including the use of triggers).

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Triggers are predetermined events that could have an impact on IT portfolio investment mix. In a stock portfolio, a trigger would be a stock price hitting a predetermined buy or sell point. In IT portfolios, triggers include periodic activities (annual budget review), life-cycle events (desktop refresh cycles), and environmental events (interest rate changes).

What makes an event relevant as a trigger is the potential impact on risk or reward within the IT portfolio. Predetermining actions to be considered when a triggering event occurs prepares leading IT portfolio managers for quick decisions. Once triggers are defined, the ITO monitors the environment for triggering events. When one occurs, portfolio performance is assessed against targets to determine whether acting on the trigger will improve the reward or reduce risks. Rebalancing investments may occur.

Changes, from interest rates to skill availability, affect the possible risks ITOs face (i.e., on projects, within processes, and for asset purchases) or the return achievable (i.e., from a system replacement). When the potential risk or return is significant, savvy CIOs establish measurement thresholds, variances, or limits at which they will consider reacting to the change by rebalancing the investment mix in their IT portfolio. Associating these triggers with actions that may be taken if the threshold is met is an important IT PfM decision-making step.

Triggers are driven by timing, the economy, relationships, and specific business/industry events. But they are mainly determined by the business's tolerance for risk and desired return levels.

Triggers are set when investments have high associated risks or potential for high returns. Available venture capital may trigger projects and activities to propel one business into new markets, yet cause another in the same industry to make no changes in its portfolio based on risk tolerance or return expectations. Leading CIOs engage in dialog with business executives to clarify trigger significance on business change within risk/reward boundaries for their organization. The process of determining and agreeing on triggers is a great education opportunity for both ITOs and the business and prepares the business for the fact that there are times when action is a given.

Monitoring triggers requires foresight, planning, and drudgery. Some monitoring may be automated through calendar reminders and e-mail alerts from agencies such as those that track interest rates and other economic indicators. However, many, such as changes in skills/staff, processes, application life cycles, or industry/competitor changes, require people to pay attention to specific activities on a regular basis. Organizations with large marketing departments may already monitor market, industry, and competitors regularly. In general, the arduous trigger-monitoring task involves scanning news services, job boards, trade journals, Web sites, and internal measures and comparing current events against a trigger and threshold list on a regular (we recommend weekly) basis.

Continued...To fully leverage portfolio triggers, world-class portfolio managers develop scenarios for consideration when a trigger event occurs. Advanced consideration of potential actions prepares the portfolio manager with options for a quick decision. When business agility means competitive advantage, such decision enablers provide an edge. Establishing triggers without developing reaction plans can waste time and resources determining an appropriate tactic.


Once occurred, evaluating triggering-event significance invokes risk/reward impact analysis. The question is whether event repercussions are sufficiently consequential to warrant assessing and potentially rebalancing the portfolio.

Risk evaluation can range from simple (judging impact and probability on a low-to-high scale) to highly complex (statistical processes weighting various situational factors). Based on their risk tolerance, most businesses have a risk evaluation process that the ITO can employ. Reward assessment is specific to the investment and trigger. A customer satisfaction ratings trigger set when ratings drive above a certain threshold with regard to investments in the customer self-service portal may provide the reward of shifting Web skills to other potential projects. Vendor price reductions as a trigger on infrastructure investments may signal the opportunity to expand storage capacity within acceptable capital purchase limits (reduced risk), enabling data warehousing expansion (increased reward).

Not all triggers are event-based. Non-event (cyclical, periodic) triggers are drawn from fiscal calendar dates and business milestones. Annual or quarterly planning and budgeting activities would naturally trigger IT portfolio managers to assess and potentially rebalance IT portfolios. Life-cycle triggers, though potentially viewed as event-based, require special consideration. Hardware life-cycle risk/reward considerations based on total-cost-of-ownership curves are understood and well used, with most G2000 ITOs following a 30- to 36-month (trigger) refresh cycle (risk/reward decision) for desktop machines. Realizing the life cycles of other investments in the IT portfolio will greatly enhance portfolio benefit.

IT PfM is about dealing with change. Establishing triggers requires advance thinking by portfolio managers about changes and potential impacts on risks and returns. Using triggers involves: determining what is sufficiently important to warrant a trigger; setting limits, thresholds, or ranges beyond which a trigger evokes portfolio assessment action; monitoring for triggering events; evaluating the impact and relevance of an occurred event; and developing scenarios to consider in the event of each trigger. Leading CIOs economize IT portfolio evaluation and management through prework on establishing triggers. This is the resurgence of the need for scenario planning and further emphasizes IT's role in same.

Business Impact: Reducing risk in IT investments by careful re-evaluation of IT portfolio mix triggered by internal or external events provides businesses with a higher return on IT spending.

Bottom Line: Forethought regarding events significantly affecting portfolio investments provides leading CIOs with monitorable triggers that can significantly improve agility in adjusting the investment mix and reducing IT spending while improving IT value to the business.