PORTFOLIO MANAGEMENT
"Transforming the buisness tends to be a high-risk, high-yield activity."
Nuts and Bolts: Portfolio Management was built around a premise that many other valuation approaches have since borrowed. To contribute to a company's bottom line, organisations must view IT staff and projects not as costs but as assets managed by the same criteria a fund manager would apply to any other investment. That means CIOs should continuously monitor existing investments and evaluate new investments by cost, benefit and risk. Just as stock managers diversify risk in a stock portfolio, so too should IT managers assess risk of technology projects and diversify accordingly.
"You have investments to run the business, grow the business or transform the business," explains Howard Rubin, developer of Portfolio Management and research fellow at the Meta Group (US). "Run-the-business investments are low risk, low yield. Growth is medium on both sides. And transforming the business tends to be a high-risk, high-yield activity." The level of risk associated with a component should determine the tightness with which it is managed.
Walter Weir, CIO at the University of Nebraska in Lincoln, says adopting ProSight Portfolio software has helped clarify IT priorities - no small task for a department that services 50,000 students on four campuses and has responsibility for universitywide computing, administration, SAP, student information, budgeting, facilities and Internet initiatives. Weir now divides projects into four categories - administration, service, production and enhancement - then tries to emphasise the higher-level strategic activities as much as possible. "The first three I try to cut down on so we can add resources to the enhancement piece," he explains. "It's been a wonderful tool to help me say no when I need to and to help me get extra funding when I need that."
Word of Mouth: This is not to be undertaken lightly. If your organisation isn't willing to undergo a change of management processes to accompany its new asset philosophy, Portfolio Management won't be as effective. It can also take time to get the proper mind-set ingrained in the organisation.
Time and Money: Full implementation in three to six months; cost ranges from about $180,000 for companies in the annual revenue range of $US500 million to $2 billion, to $500,000 and up for large companies with revenue at the $US50 billion level.
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