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.