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What is the definition of portfolio management?
IT portfolio management is the process of aligning investments
with corporate business needs, and the analysis and proper mitigation
of investment risks. It involves the selection of work
to be managed and delivered, as well as the oversight of progress
against plan.
At its most mature, IT portfolio management is accomplished
through the creation of three portfolios:
Application Portfolio - Management of this portfolio
focuses on comparing spending on established systems based upon
their relative value to the organization. The comparison
can be based upon the level of contribution in terms of IT investment’s
profitability. Additionally, this comparison can also
be based upon the non-tangible factors such as organizations’
level of experience with a certain technology, users’ familiarity
with the applications and infrastructure, and external forces
such as emergence of new technologies and obsolesence of old
ones.
Project Portfolio - This aspect of portfolio management
specifically addresses the issues around spending on the development
of innovative capabilities, in terms of potential ROI, and on
reducing investment overlaps in situations where reorganization
or acquisition occurs. The management issues with the
second type of portfolio management can be judged in terms of
data cleanliness, maintenance savings, suitability of resulting
solution, and the relative value of new investments to replace
these projects.
Resource Portfolio Management - RPM involves analyzing
and forecasting the talent that companies need to execute their
business strategy, proactively rather than reactively; it is
a critical strategic activity, enabling the organization to
identify, develop and sustain the workforce skills it needs
to successfully accomplish its strategic intent while balancing
career and lifestyle goals of its employees. RPM helps
control labor costs, assess talent needs, make informed business
decisions, and assess talent market risks as part of overall
enterprise risk management. RPM’s chief goal is helping
companies ensure they have the right people in the right place
at the right time and at the right cost.
What is the typical job description for a portfolio manager?
A portfolio manager’s principle duty is to act as the IT business
partner for their respective business units. The responsibilities
of the portfolio manager include helping the business unit understand
the total cost of ownership for their application portfolio,
working with the business units to prioritize new work (projects),
communicate the business value proposition for new projects
to the IT organization, helping the business understand and
mitigate risk, and actively managing the application portfolio.
New IT projects often fail because the business unit can not
deploy the new application or enhancement. The portfolio
manager must be able to articulate the total costs associated
with new projects including the impact to the business unit.
The required qualifications for a portfolio manager include
project management, business process modeling, cost modeling,
and the ability to integrate operational data into the application
portfolio. Outcomes for the portfolio manager are more
business value for IT investments, and reduced TCO costs by
eliminating legacy and duplicate applications.
Where does portfolio management fit within an IT organization?
The portfolio management function typically sits within the
IT Progam Management Office.
What are some of the industry standard ways of measuring the
value of the following IT portfolio elements: Systems,
Assets, Services?
There is no industry standard for measuring the value of the
IT portfolio elements. There are, however, best practices
and metrics for the elements. System key metrics
are average CPU utilization, power consumption, and BTUs (amount
of heat produced) as data centers become concerned with the
cost of energy. IT assets usually have financial
and operation metrics associated with them, such as maintenance
costs, depreciation and availability. IT services
should be defined in the service catalogue, to communicate the
development and infrastructure services available to the business
units.
SmartSummary
A major driver in the use of portfolio management is to benchmark
the organizations profit, people and processes; so portfolio
management and project management disciplines are consistently
monitored to enhance performance and profit. Portfolio
management, project methodology, company strategic plans, budgets,
projects and people should all integrate in a single source,
providing the portfolio manager clarity on which projects are
providing the value to the firm.
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