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IT Portfolio management step by step - Maizlish B

Maizlish B, Handler R. IT Portfolio management step by step - John Wiley & Sons, 2005. - 401 p.
ISBN.: 978-0-471-64984-8
Download (direct link): itportfoliomanagement2005.pdf
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Recall that in identifying portfolio tuning options, the goal was to identify the various options that led to an optimized IT portfolio. This activity analyzes the cross-portfolio impacts, identifying the changes that could be made and selecting those that will be made. It generates a multitude of graphics and a wealth of supporting analysis to create and receive approval for a list of doable action steps to optimize the portfolio. Spreadsheets are generally used to support financial analysis. Advanced risk analysis tools can be used for risk assessment in complex situations involving high-risk transformation. While advanced techniques such as Monte Carlo simulation might be called upon, they are not typically used in practice. The value derived from the effort must exceed the cost. Project and program management skills are also leveraged to build an actionable plan that includes dependencies.
Select/Approve Portfolio Changes
Select/approve portfolio changes is a task that selects a subset of the tuning options and secures approval to implement changes. Chapter 6 discusses software tools that allow business and IT to rapidly analyze many variables and parameters in the portfolio in order to quickly assess, alter, rebalance, and optimize the mix of investments. Examples of variables and constraints that can be adjusted when balancing the portfolio are:
Analytic hierarchical structure
Weighting factors assigned to each investment
STAGE 5: BALANCING 255
Hurdle rates used to calculate net present value
Scoring criteria for each factor
Acceptable range of the probability and the impact of risks
Resource constraints
Schedule
Labor
Budget
Dependencies
Allocations in investment categories
Percentage of long-term versus short term investments
Local versus global allocations
Offensive versus defensive investments
The portfolio is optimized for generating the highest level of value (mandatory investments may not generate return, but are value added for companies) at acceptable levels of risk. Many companies are benchmarking their balance of investments against the competitors and leading companies in other industries. In balancing the portfolio, there are other subsets of tuning options that can be changed to alter the costs, risk, and ability to reach goals of the portfolio:
Fixed versus variable costs: As a means to possibly gain efficiencies, companies may look to turn fixed costs into variable costs. On-demand offerings, insourcing versus outsourcing, and reassessment of the value chain are options for companies to explore.
Repositioning of service levels: Service levels define the level of costs versus the availability for an offering. In the example in Exhibit 5.40, understanding the right number of nines and the value per increment dollar per 9 is essential to understanding how to balance and optimize the IT portfolio. The investment in availability is made to decrease the risk of downtime (which can have adverse revenue impact consequences).
Alternative investments: When analyzing new investments and looking at trade-offs such as value, risk, and cost, there are times when the right functionality of a particular solution is an exact match to the capabilities needed. However, while the right solution may look like a perfect match, the costs of the solution greatly exceed the costs of an alternative solution (one that may have 80% of the capabilities needed). Balancing the portfolio means that IT and business work together and optimize based on a variety of variables.
256 CHAPTER 5 BUILDING THE IT PORTFOLIO
EXHIBIT 5.40 BALANCING THE PORTFOLIO: AVAILABILITY
Availability Minutes of Outage per Year
99.9999 0.53
99.999 5.26
99.99 52.56
99.95 262.80
99.9 525.60
99.5 2,628.00
90 52,560.00
!________Cost vs. Availability outage
Cost (Minutes)
Availability (%)
Consolidation opportunities: Balancing the portfolio enables the company to look across various portfolios and investments to see where opportunities for consolidation may reside. Exhibit 5.41 shows a company with multiple divisions, each maintaining its own independent human resources application, and associated infrastructure and staffing. Depending on the unique business rules associated with the HR applications, this appears to be a likely candidate for portfolio balancing.
Life cycle and asset relationships: Portfolio management occurs throughout the life cycle of an asset. Knowing the useful life of an asset, understanding the features, functionality, dependencies, and relationships of the asset, knowing when an asset has overengineered its target, having visibility across the company regarding other possible asset relationships, and being able to assess whether the asset is delivering on the initial assumptions (see Exhibit 5.42) are critical to balancing the portfolio. There are instances where new technology will displace an existing asset, and the decision to make these changes is difficult for many companies. Knowing when to retire or replace
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