IT portfolio management refers to the set of procedures that are aimed at applying systematic management to large classes of items managed by capabilities of enterprise Information Technology (IT).
Some of the activities that are performed with IT portfolio management.
· Planned initiatives and Projects
· Ongoing IT services like application support
· Quantification of previously informal IT efforts
· Enabling measurement of investment
· Objective evaluation of investment scenarios
Difference with IT financial Management
IT portfolio management comprised of project-centric bias initially, however it evolves into including steady-state portfolio entries like application and infrastructure maintenance. Generally, the IT budgets do not track these efforts with enough granularity in order to do financial tracking effectively.
Although the concept of IT portfolio management is equivalent to financial portfolio management however there are some noteworthy differences. In case of financial portfolio, the assets have consistent measurement information that allows for making objective and accurate comparisons. However, this feature is at the base of the idea usefulness in IT applications and it takes considerable effort in the IT industry for achieving such universality of measurement.
Another major difference with IT investments is that they are not liquid such as stocks and bonds. Some of the investment portfolios may also comprise of illiquid assets. IT investments are measured by using financial as well as non-financial yardsticks such as balanced scorecard approach. In case of IT portfolio management, a pure financial view is not enough.
The assets in an IT portfolio exhibit a functional liaison to the company such as a human resources (HR) system for tracking employees’ time or inventory management system for logistics. This is equivalent to a vertically integrated company that may own retail gas stations, oil field, and refinery.
IT Portfolio management differs from IT financial management as it has an unambiguously directive, and strategic goal regarding investment rather than divestment.
How to accomplish IT Portfolio management
IT Portfolio management is achieved by creating three portfolios including Application Portfolio, Infrastructure Portfolio and Project Portfolio.
Application Portfolio – The application portfolio management focuses on comparing the spending on existing systems on the basis of their relative value to the company and level of contribution according to IT investment’s profitability.
Infrastructure Portfolio: Infrastructure management (IM) comprises of management of necessary components of any operation including data, human resources, external contacts, policies, processes, and equipment for complete effectiveness. It can be categorised into storage management, systems management and network management.
Project Portfolio: A Project Portfolio Management (PPM) refers to set of procedure or methods used for analyzing and collectively managing a group of projects (current or proposed) depending on the various key characteristics. It is widely used by project managers and project management organizations.
Advantages of IT portfolio management
There are many advantages of applying IT portfolio management for IT investments.
· Agility of portfolio management
· Central oversight of budget
· Risk management
· Strategic alignment of IT investments
· Demand and investment management
· Standardization of investment procedure
· Standardization of Rules and Plans
Implementing IT portfolio management
According to Maizlash and Handler, IT portfolio management can be implemented by using a proven step-by-step method that comprises of eight stages.
· Development of an IT portfolio management plan
· Planning of IT portfolio
· Creating the IT portfolio
· Assessment of IT portfolio
· Balancing of IT portfolio
· Communicating the IT portfolio
· Developing and growing IT portfolio governance and organization
· Assessment of IT portfolio management process execution