Portfolio management

There is an established literature on IT portfolio management. I am particularly interested in how this works in an Agile environment, but before I can start to examine that aspect, it is valuable to review what I mean by IT portfolio management generally.

What is IT Porfolio management

Portfolio management is a way of looking at our IT assets not as individual assets but holistically. This is valuable because it lets us balance costs, risks and investments as a whole – enabling us to set strategic objectives for, as an example, what we consider to be an acceptable balance between potential benefits and risks and what our target rate of return is on the investment overall. Having decided on those strategic parameters it is the job of portfolio management to ensure that the investments we make in IT viewed as a whole meet those objectives.

Therefore the portfolio management function has a different perspective from the strategic planning function or the project/ programme management function.

portfolio priorities

What does the IT Portfolio consist of

When IT portfolio management first became prevalent in the 1990s it focussed on project management – the investments it was concerned with were primarily development. As the technique has matured, it has expanded to include the whole of IT investment

  • Applications (existing applications)
  • Infrastructure (both software and hardware)
  • Projects and programmes.
  • Thus the scope of portfolio management has increased dramatically to reflect better the assets managed by the IT function. With that in mind, simply listing those assets becomes a) a large undertaking, and b) valuable in itself.

    Having done so however we can categorise investments by their value and potential value to the business. In my experience a major part of IT investment is concerned with “keeping the lights on”, in other words keeping the existing IT facility running. So, a large part of our investment is maintenance – mostly BAU, sometimes more strategic changes to infrastructure.

    Resource allocation

    We therefore might categorise our portfolio in this way, enabling us to have a first cut at investment priority based upon our appetite for risk and the amount we might consider reasonable to spend in each area based upon previous experience.

    portfolio asset classes

    Project prioritisation

    Next we look at the projects we are funding, after all these are the discretionary investments we are making so it makes sense to see what value we are getting and what risk we are incurring.

    We can look at each of these separately and then make our prioritisation based upon the value we place upon IT as a strategic tool:

    portfolio boston square value

    Or take a more risk based view:

    portfolioriskfunding

    Performance tracking

    The final process is to track performance to ensure that the portfolio is delivering the benefits we planned. The nature of portfolio management changes here, from strategic planning to project tracking.

    portfoio tracking

    This is where the feedback loop occurs and where events and changes in the environment or in our plans update the portfolio. The objective is to ensure that although projects change, are put on hold, or are started, the overall portfolio continues to reflect our business strategy.

    Agile portfolio management

    So that is (very quickly) IT portfolio management. Interestingly portfolio management has up to now focussed very much on waterfall projects because of the top down focus inevitable in strategic planning.

    What I am interested in is how that works in an Agile environment. In my next post I shall address that specifically.