Sloan Management Review Mark Jeffery and Ingmar Leliveld

IT Portfolio Management A Status Report

68% of corporate IT projects are neither on time nor

budget $100 billion to $150 billion of US IT projects have failed altogether Challenges:
How do we select projects that are synchronized with

corporate strategy? How do we maximize the business value from IT investment?

Do Managers Know How to Manage an IT Portfolio ?

Out of 130 Fortune 1000 CIOs: 89% were very aware 65% believed that ITPM yields significant business value

But only 17% realized the full value

What Happened? 41% did not have central oversight of IT budget 46% did not document applications and infrastructure well 47% did not track projects centrally 57% did not have criteria to define project success 68% did not track the benefits of projects Why dont executives adopt what they believe in? Perhaps they did not have a framework to follow!

Effective IT Portfolio Management The Answer ?

What is an IT Portfolio? Direct and Indirect IT projects and assets

Infrastructure, Outsourcing contracts, software licenses

Goals Increase the ROI on individual and aggregate technology investments Reduce Risk

For both existing and planned projects

From Capability Maturity Models to IT Portfolio Management Maturity Model.

Can we define stages in which a company can be positioned in its

ITPM capabilities? Yes, we can! Ad Hoc Stage Defined Stage Managed Stage Synchronized Stage Some Enlightening Statistics 4.5% of firms in the Ad Hoc stage 24.5% of firms in the Defined stage 54% of firms in the Managed stage 17% of firms in the Synchronized stage

Ad Hoc Stage
Make decisions about IT investments in an uncoordinated

way
Example: 4 CRM projects under way in 3 divisions using

software from different vendors

An Unfounded Perception Large corporations having complex IT needs are poor candidates for ITPM Reality When synchronized, ITPM allows you to regain control, align IT with strategy and gain ROI

Defined Stage
Have identified and documented the key components of

its IT portfolios, roughly estimating each elements costs and benefits Missing Features
Consistency in organization-wide compliance Links into budgeting cycles Feedback loops to assess actual returns

Visible parameters Often struggle to link IT portfolio to business strategy Lack of common beliefs and standards

Managed Stage
Beyond the defined stage, have a standardized ITPM

process that enables:

Objective project selection Clear links to business strategy

Visible Parameters IT portfolios are managed as part of existing management control processed Reviews are usually annual, rather than ongoing

Synchronized Stage
Beyond the Managed stage, align investment portfolios with

business strategy by:

Using evolving metrics to measure a projects value through its

lifecycle Assessing risks at the levels of both individual projects and portfolios on a continuous basis Responding to risks on a continuous basis Ensuring IT efforts stay aligned with strategy after investments are decided on using ongoing reviews Adopting Balanced Scorecard/Strategy maps or other tracking and guiding frameworks, specifically for IT portfolios

Dimensions of IT Portfolio

Benefits
Greater the level of synchronization, greater the ROI Top 10 perceived Benefits 1. Improved IT-business alignment 2. Centralized Control 3. Cost Reduction 4. Communication with business executives 5. Improved ROI 6. Improved customer service 7. Professional respect 8. Competitive Advantage 9. IT integration in mergers and acquisitions 10. Improved Decision making

Implementation Hurdles
Metrics and Measurements 82% identified the ability to estimate IT benefits as a challenge 33% never established baselines to compare outcomes against 30% changed project scope too often 13% lacked clear objectives for IT investments Skills and resources 46% IT staff lacked business knowledge 37% encountered frequent staff turnover 28% lacked staff to gather data 18% lacked relevant training Business Alignment Business executives lack respect for IT 46% of business leaders did not know about ROI on IT investments

Surmounting the Hurdles

Use Staged Implementation Organization, Components, Analytics, lifecycle management Apply a process to upgrade ITPM Train and prepare staff Ensure involvement and support from business leadership

and executives