WHITE PAPER
Integrated IT Portfolio Management:
A balanced approach
For IT executives, the job of managing IT has increasingly become
one of balancing a growing number of responsibilities—including an
expanding collection of projects and applications. IT executives
must now balance three “prime directives”: align IT with strategic
business objectives; increase opportunities for IT to directly benefit
the organization’s growth and profitability; and effectively manage
new and existing IT investments.
To deliver on these three prime directives, a series of challenges
relating to managing the heart of the IT organization, the IT
portfolio, must be mastered:
IT Portfolio Management (ITPM) is a discipline whose time has
come. Recently gaining the notice of CIOs as it has matured, ITPM
is a disciplined and structured approach designed to map business
requirements to IT decisions. Taking a portfolio approach enables
IT organizations to categorize, evaluate and manage IT resources
(i.e., applications, people and processes) and to prioritize initiatives
that will create new business opportunities or enhance the value of
existing resources. This approach also enables IT organizations to
align their spending with business priorities and achieve optimal
balance of risk and reward.
>> mitigate risks efficiently
>> communicate and demonstrate the value of IT
>> connect IT budgets to strategic business objectives
“Studies indicate organizations that are mature in IT
portfolio management tend to be industry leaders.
These organizations consistently maintain sharp focus,
>> manage line-of-business and executive expectations of IT
balance the need of current market areas and new
>> create strong project management discipline
growth segments, and exhibit higher performance
>> ensure that the right IT resources, skills and infrastructure are
available to meet strategic objectives
>> drive and execute IT strategy, while delivering measurable value
on time and on budget.
To achieve these requirements, IT organizations need a management
discipline for all portfolio-related processes—and one that is specifically
designed to bring together a comprehensive view of the portfolio.
levels than their competitors, rapidly eliminating
underperforming IT investments and reallocating funds
to new value-revenue generation opportunities.”
IT Portfolio Management Step-By-Step:
Unlocking the Business Value of Technology,
Bryan Maizlish and Robert Handler, John Wiley & Sons, 2005
IT Strategy
& Business
Requirements
Strategic
Initiative
Portfolio
Planning
Project
Portfolio
Management
IT
Resources
Operational
Demand
Application
Portfolio
Management
automation of a wide variety of associated portfolio management
processes and makes this information available for IT and business
groups across the enterprise.
The three elements of IT Portfolio Management
A critical aspect of IT Portfolio Management—and effective IT
governance—is the ability to track where and how resources are
utilized across the organization, determine what applications the
business uses, and measure the true cost of IT initiatives and
associated risks. This comprehensive view, however, can only be
achieved when IT organizations are able to manage their portfolio
like a business: automating and optimizing the management of
projects, applications, resources and processes to provide real-time
visibility into key performance metrics.
Further, a properly designed and integrated solution can deliver
greater benefits by enabling users to access needed information
through web-based portals, to speed decision-making even as they
add to the quality of the decision-making process. Without an
integrated view of Portfolio Planning, PPM and APM, however, IT
organizations will face continued frustrations as they try to achieve
the full benefits. In the drive to achieve consistency, repeatability
and accountability within their portfolio management processes,
only an integrated solution delivers on the promise of a wellmanaged IT portfolio that supports strategic business goals.
To that end, ITPM provides a business-oriented roadmap to help
organizations achieve a more comprehensive, accurate and profitable
management of IT. By automating portfolio management processes,
however, IT organizations gain a vital capability: an integrated view of
the business of IT. An ITPM solution must not only address key
portfolio disciplines—Portfolio Planning, Project Portfolio Management
(PPM) and Application Portfolio Management (APM)—with more
accurate oversight, but also bring information together to create a
comprehensive view of the overall IT portfolio. This improves higherlevel decision making by taking the entire portfolio into account. IT
Portfolio Management delivers the promise of a truly integrated IT
organization, as a business within a business. ITPM as an integrated
discipline brings together measurement, analysis, prioritization and
Let’s look at each of the three key elements of ITPM—which
roughly correspond to the three “prime directives” of CIOs
mentioned at the beginning of this white paper—and how each
provides an integral part of a complete and integrated solution:
Portfolio Planning is the basis and rationale for selecting which
portfolio investments to fund. Portfolio Planning helps IT
organizations to select and prioritize proposed IT projects and
infrastructure investments that best support strategic business
objectives, while at the same time balancing risk and value. In
providing specific, repeatable business criteria by which proposed
2
projects are evaluated, Portfolio Planning helps IT organizations
determine whether a project aligns with corporate strategy/business
objectives and confirm that it meets agreed investment goals.
Project Portfolio Management (PPM) focuses on projects that have
been funded. The goal of PPM is successful project delivery;
to optimize current project resources across the portfolio and
proactively manage project risks in an environment of constantly
changing requirements. By tracking all projects in development and
their current health, PPM processes create a consolidated view of
all projects with ongoing evaluation of their value and risks.
These solutions help to eliminate the common and often expensive trap
of having to prioritize projects merely by which project owner can apply
the most pressure, which leads to fixing the “squeaky wheel”—whether
it makes business sense or not. Portfolio Planning solutions help instill
a strong, understandable and defensible process to evaluate each aspect
of a proposed project, usually through a well-defined process that
uses multiple perspectives to prioritize investments, such as:
PPM processes serve as a continuous “gating” mechanism to assure
projects remain aligned with their strategic intent, assumptions
defined in their original business case are adhered to, and decisions
made during development are based on timely and accurate data. By
their very nature, timelines, budgets, scope and project teams change
over time. PPM processes and disciplines seek to provide real-time
data that can assist in making daily project decisions, as well as more
analytical “what-if” scenarios that can direct future portfolio decisions.
>> Financial: What are the complete economic costs and benefits of
the project? This requires identification of all resources needed to
complete the project and then comparing the cost of these resources
against the value of expected benefits. For example: Does it make
financial sense to perform major maintenance on an aging
application? Can a planned upgrade be put off if its benefits are
negligible? Can a new application be expected to provide significant
ROI beyond a seemingly high cost of installation?
Application Portfolio Management (APM) directly complements PPM
by providing “current state” information on applications. APM
processes are focused on continuous measurement, evaluation,
categorization, assessment and justification of each application in
production, and how its performance is—or is not—providing return
on investments. Ongoing monitoring and analysis of the application
portfolio enables IT organizations to develop more accurate strategic
roadmaps for each application across its life cycle. Measuring the
risk, cost and value of an application also provides cumulative data
that, over time, can be collected into a single repository and accessed
as input for portfolio planning. These measurements can provide
line-of-business managers and executive teams with accurate and
compelling information for their decision-making processes.
>> Business Impact: What contribution will the project make to
the organization’s performance? This perspective requires an
understanding of the business objectives the project will affect or
automate. Differentiated from end-user requirements used during
application development, this perspective focuses on qualitative
gains a proposed project may or may not have on specific business
processes, and ultimately the stated strategic goals for an organization.
>> Risk: Some level of risk exists in all projects, but portfolio
planning processes expand and standardize the collection of data
that can more accurately measure project risk and determine which
risks are worth taking. Upgrades, migrations, modernizations and
retirements of applications all carry unique risks and must be
weighed against other organizational factors that can either
mitigate or magnify their effect on strategic business goals.
“By 2007, enterprises that implement a disciplined application
management strategy can reduce IT expenses by at least 20%
and future application transformation costs by 30%.”
>> Architectural Fit: Here, the focus is on the appropriateness
of a project based on the organization’s current enterprise
architecture, business strategies and objectives.
Meshing Architecture, Project and Application Portfolio Processes for
Effectiveness, Jim Duggan, Gartner, Inc. 2005
3
>> Make IT Portfolio Management an integral part of IT
governance: ITPM provides inportant support for IT governance
initiatives. Vital IT governance entities and processes—from
reporting structures and committees to organizational templates
and decision criteria—are significantly hindered without a portfolio
management discipline. ITPM solutions provide the depth of
information on portfolio status, performance and planning that
IT governance structures and processes depend on to be successful.
For IT portfolio management initiatives to be truly successful, they
must be designed to help decide which projects to undertake,
manage their progress and measure their success once complete.
Obviously, the extent to which an organization applies and acts
on the elements of an ITPM discipline will vary, depending on the
organization’s business, its strategic goals, maturity and the size and
complexity of its portfolio.
Moreover, ITPM is not a magic bullet. The success of this discipline
depends greatly on an organization’s commitment; fostering process
maturity; and enhancing the skill and effectiveness of the various
stakeholders throughout the organization.
>> Involve stakeholders/executive teams/IT account managers:
An important means by which to ensure support of portfolio
management disciplines is to engage stakeholders throughout
the organization and have them provide input into portfolio
metrics and prioritization, among other criteria. Integrated
portfolio management solutions provide a stable framework that
can turn an otherwise complex, labor-intensive and potentially
argumentative series of discussions into a simpler and more
collaborative process.
There are, however, several best practices that have been shown to
significantly increase the effectiveness of any size of ITPM initiative.
Best practices for a balanced IT portfolio
One of the most oft-repeated best practices for a successful ITPM
initiative, large or small, is to take a top-down approach. The
discipline is based on creating a comprehensive view of the IT
portfolio, but not a cumbersome one. Further, its primary goal is to
align the IT portfolio, and all decisions related to the portfolio, with
business requirements—not the other way around. To that end, a
top-down approach requires stakeholders throughout the
organization to identify and agree upon key performance indicators
and document critical success factors directly related to the needs of
the organization. Only then are IT strategies mapped to
organizational strategies. Companies that use the top-down approach
have been shown to have a higher probability of simplifying and
standardizing their portfolio management processes.
>> Start small and add capabilities as you go: ITPM is not a quick
fix; indeed, it takes time to bring it to full maturity within an
organization. But that doesn’t mean you can’t find immediate
benefit—improvement on the return of IT investments—from
using a portfolio management discipline even in its early
adoption stages. IT organizations can find significant savings
via incremental optimization, such as identifying and eliminating
redundant applications (and their licenses). This incremental
approach can be the most sensible choice for many IT
organizations, gradually easing their organization to full adoption
of portfolio management.
>> Charter the Project Management Office (PMO) to carry out
ITPM: Those organizations that have created their own PMO—
to act as repository for project management expertise and be
responsible for applying that expertise to ongoing projects—are
extending the responsibilities of the PMO to implement,
manage and communicate the progress of portfolio management
initiatives. It’s an innate fit, and organizations that are aligning
their PMO with ITPM processes are already reaping the benefits:
portfolios that are attuned to business requirements.
From here, several other beneficial best practices have been
identified to help increase success rates, reduce the time and effort it
takes to implement, and maximize the benefits of ITPM:
4
>> Assess the portfolio regularly: It would seem like a no-brainer:
projects and applications need to be reviewed on a regular basis
to determine if they are being completed on time, within budget
and providing the benefits for which they were designed and
developed. Yet far too often, projects stray from their intended
requirements and initial design. In contrast, a portfolio
management discipline puts consistent, timely and disciplined
reviews on the entire portfolio. Whether a change in a project
stems from changes in the business requirements, market forces,
shifts in technologies or a business merger or acquisition, a good
ITPM process reviews all proposed portfolio changes against predefined benchmarks of cost, risk and return on investment.
The benefits of IT Portfolio Management
As IT organizations move to directly support business objectives,
they are being asked to operate like any other line of business or
department within the organization. Executive managers need to
know exactly how decisions are reached in IT, what the real-world
valuations are, and what the return on investments will be.
Essentially, they need more transparency into IT decision-making,
and to be presented with sound justifications for expenditures.
Further, IT organizations are expected to manage more risk factors
within projects and applications, and satisfy compliance issues in
the face of increasingly stringent regulatory guidelines and legislation
such as HIPAA and Sarbanes-Oxley. Lastly, if IT is to become an
equal contributor to the organization, it must find ways to reduce
its operating costs and pass the savings on to the business or invest
in new strategic projects.
>> Provide transparency into decision-making processes: Because
ITPM makes the prioritization process transparent, managers can
evaluate proposed projects against a set of objective criteria.
This allows IT organizations to make tough decisions with more
confidence that the decision is not only the right one, but more
likely to be agreed upon by a wider majority of constituents and
line-of-business managers. Difficult decisions—such as rejecting
proposed projects that are politically motivated, shutting down
projects in progress that are no longer aligned with business
strategy, or retiring aging applications that no longer add value
to the bottom line—are more easily supported by stakeholders
when objective, clearly communicated data on the portfolio is
brought into the decision-making process.
In each case, IT Portfolio Management—and mature, integrated
solutions designed specifically for portfolio processes—help deliver
increased levels of risk control, project and process visibility,
communication and cost reduction. The right mix of discipline
and automated solutions enables IT alignment with the strategic
goals of the business today. Indeed, IT organizations can take
advantage of an integrated ITPM solution to achieve five major
benefits for the business as a whole:
>> Increased visibility into IT spending: By helping to create a topdown view of IT spending as it relates to business requirements—
and by linking portfolios to their related business processes—IT
and business managers can evaluate the value of each portfolio
component and what should be spent on it.
>> Communicate on a regular basis: Because an ITPM discipline
can bring significant changes to the way an organization
validates, manages and maintains its portfolios, the need to
effectively communicate decisions is paramount. Integrated
ITPM solutions that help gather and communicate data and
criteria used in decision-making processes can have a significant
and positive effect. A good portfolio management discipline also
facilitates early buy-in by involving stakeholders in determining
criteria for strategic decision-making.
>> Increased transparency into IT decision-making: When selecting
and prioritizing requests for new projects, altering the current
project portfolio or making application life-cycle decisions, IT
organizations can use portfolio management processes to include
stakeholders in decision-making. Further, by helping to create
standardized and highly visible decision processes, ITPM engages
business stakeholders and makes them partners in the process.
Giving stakeholders more collaborative input into decisions
earlier in the process means greater buy-in and more effective
decisions on an ongoing basis.
5
>> Reduced costs: Without a clear understanding where expenses are
incurred and why, it’s impossible to reduce costs. Portfolio
management processes throw a bright light on the projects
and applications currently under management. ITPM delivers
a regular, rigorous review process that helps ensure that decisions
are based on well-defined business criteria, which helps to shut
down projects that have become ineffective or applications that
are no longer used, and identify where resources can be applied
more effectively.
Compuware Changepoint automates key IT processes that directly
affect an IT organization and drives relevant data up to portfolio
views. Changepoint provides total visibility into all IT portfolios, so
that the right information is available to the right people at the right
time. Changepoint helps IT organizations gain control over not only
projects but also non-project work. In other words, Changepoint
helps manage all the work of IT.
Changepoint’s flexible design allows IT organizations to take a phased
approach to implementation. Using Changepoint, IT organizations
can realize the value of a completely integrated portfolio management
solution and manage change within their organization by adopting the
capabilities they need, as they need them.
>> Managed risks: Identifying and managing risks in the portfolio is
a major function of portfolio management. An IT organization
identifies and codifies risk assessment criteria, by which each
component in the portfolio is weighed and evaluated against the
organization’s risk threshold.
Changepoint’s three areas of management parallel the three key
elements of ITPM:
>> Greater agility: Once resources and budgets have been defined and
are managed, IT organizations can quickly gain a complete view
of the portfolio. ITPM helps bring agility to IT management by
enabling a complete view of the portfolio, thereby enhancing
an organization’s ability to respond to change with a better
understanding of the effect on the entire portfolio.
>> Portfolio and Investment Planning: With Changepoint’s portfolio
and investment planning capabilities, IT executives and their
line-of-business counterparts can select and prioritize proposed
IT projects and investments that best support business priorities,
balancing risk and value. IT executives can use specific,
repeatable criteria to evaluate the cost of a project’s delivery,
determine whether the project aligns with corporate strategy/
business objectives, and confirm that it meets investment goals.
“According to research, CIOs who embrace IT Portfolio
>> Project Portfolio Management: Changepoint’s Project Portfolio
Management capabilities provide unprecedented views into
portfolio health through graphical summaries, including
portfolio health assessments, project scorecards, bubble charts
and portal visibility. Portfolio health can be assessed though
leveraging predefined metrics related to cost, schedule, scope
and quality. Additional metrics such as risk and satisfaction
are easily incorporated. With Changepoint, weighted metrics
and thresholds can be easily defined, assigned and tracked to
support portfolio management processes and ensure every project
brings value to the organization. Because Changepoint helps to
provide detailed information on IT spending and delivery, while
measuring the overall return on investment, IT organizations
can position themselves as a contributor to business goals rather
than a cost center.
Management have an exemplary record of continuous
IT efficiency improvements, with some companies
able to reduce costs by 20% to 30%.”
IT Portfolio Management Step-By-Step:
Unlocking the Business Value of Technology,
Bryan Maizlish and Robert Handler, John Wiley & Sons, 2005
IT Portfolio Management and Compuware Changepoint:
A balanced and integrated approach
Compuware Changepoint is an integrated solution that supports
ongoing alignment and management of all IT investments, and helps
maximize the value of the entire IT portfolio. Changepoint also
helps manage end-to-end business processes associated with the
business of IT, from capturing all demand for services to prioritizing
and selecting portfolios to continuous monitoring of project and
application health.
6
Compuware Changepoint provides visibility into key performance indicators.
>> Application Portfolio Management: Changepoint’s Application
Portfolio Management capabilities enable IT organizations
to inventory, measure and conduct ongoing assessments of
their application portfolios. Changepoint helps categorize
each application and collect key business metrics such as risk,
performance, total cost, user satisfaction and overall value to the
business. Using a graphical dashboard and reporting capabilities,
Changepoint provides insight and analysis culled from a wealth
of application portfolio information. With this information, IT
organizations can finally gain visibility into redundancies within
their application portfolios cataloged in a single repository.
Further, Changepoint helps IT organizations develop a strategic
roadmap to investing in, maintaining, replacing, or retiring each
application in the portfolio.
“Organizations that employ portfolio optimization
demonstrate significant increased returns and
greater business value from their IT investments.”
Optimizing the IT Portfolio for Maximum Business Value,
Craig Symons, Forrester Research, September 30, 2005
7
Changepoint: a powerful solution that grows with your business
As IT portfolios grow in size and complexity, it becomes increasingly
important for IT organizations to adopt an integrated discipline that
will give them a comprehensive view into their portfolio. IT
Portfolio Management, or ITPM, is a thorough discipline that
enables organizations to gain greater control of and derive greater
benefit from each project and application in the portfolio. By
providing greater insight into which projects to invest in, how to
better allocate resources, and how applications deliver value in the
business, IT organizations can make portfolio decisions that are not
only more accurate, but also more valuable and viable—throughout
the entire life cycle.
Vital to the success of an ITPM discipline is an integrated solution;
one that can address the three key elements of Portfolio and
Investment Planning, Project Portfolio Management and
Application Portfolio Management. Compuware Changepoint
addresses all three key elements as an integrated solution that
organizations are using today to gain control over—and visibility
into—their IT portfolios. Further, Changepoint is designed to be
flexible enough for an incremental approach to ITPM, enabling
organizations to evolve their portfolio management processes at their
own speed. In short, Changepoint delivers on the promise of ITPM
with a balanced solution: a powerful, automated solution that can
evolve with your IT organization.
To learn more about Changepoint, visit
www.compuware.com/changepoint
Compuware products and professional services—delivering IT value
Compuware Corporation (NASDAQ: CPWR) maximizes the value IT brings to the business by helping CIOs more effectively manage
the business of IT. Compuware solutions accelerate the development, improve the quality and enhance the performance of critical
business systems while enabling CIOs to align and govern the entire IT portfolio, increasing efficiency, cost control and employee
productivity throughout the IT organization. Founded in 1973, Compuware serves the world’s leading IT organizations, including
95 percent of the Fortune 100 companies. Learn more about Compuware at www.compuware.com.
Compuware Corporation Corporate Headquarters
One Campus Martius
Detroit, MI 48226
For regional and international office contacts, please visit our web site at www.compuware.com
All Compuware products and services listed within are trademarks or registered
trademarks of Compuware Corporation. Java and all Java-based marks are trademarks or
registered trademarks of Sun Microsystems, Inc. in the United States and other countries.
All other company or product names are trademarks of their respective owners.
© 2006 Compuware Corporation
6/06