Matakuliah : A0824/IT Investment Portfolio
Tahun
: 2009
DEVELOPING THE PORTFOLIO
Pertemuan 7-12
If you really want to do something, you’ll find a was;
if you don’t you’ll find an excuse . ~ anon ~
PREPARING FOR PORTFOLIO DEVELOPMENT
•
•
•
•
An updated strategic plan
An updated enterprise architecture plan
An established investment management process
Established policies and procedures for the content of
business cases and proposals
PORTFOLIO SCOPE AND CONTENT
• Content of the Portfolio – the data and information included in the
portfolio
• Categories of Content – the content of the portfolio is divided into
categories and subcategories.
• Category Name - refers to the name of a category of portfolio
content, such as Ongoing Projects or Infrastructure Systems
• Structure of the Portfolio – refers to the organization of the
portfolio, including its categories and subcategories of content and
their relationships, to enable selective and efficient data access and
analyses.
• Data Structure – refers to the organization of a grouping of related
data, such as the basic data elements that make up an “Ongoing
Project. “ Data structures usually have links to other data structures
Effect of Business-IT Convergence
• The convergence of business and IT has increased the
scope and amount of content that needs to be included
in the IT portfolio.
• Practically every activity in an organization is supported
by IT and linked to other activities by IT. Since the IT
portfolio documents the IT systems and the performance
of the activities they support, it will contain information
about almost every activity in the organization.
Early Portfolio Decisions (1)
• Decide on the purpose of the IT portfolio
• Decide on organizational scope – should it be
department? Division? Business unit? Enterprise?
• Decide on content scope – what should be included?
– Which IT systems, IT assets, IT proposals, IT projects?
– What organizational performance information?
– Collect what data and how frequently (daily? Weekly?)
• What business and portfolio management decisions are
to be supported by portfolio information? (affects content
scope)
Early Portfolio Decisions (2)
• What analysis must be done and when – what ondemand analysis and reports should be supported?
• What are the requirements for portfolio views,
dashboards, and reports?
• What drill-down levels and horizontal capabilities (levels
of detail and relationship) are needed?
• What linkages with other databases need to be
established? (e.g., financial, project management,
customer relations)
Portfolio Purpose (1)
• Establish the agency IT portfolio as a primary tool to
support IT decision making.
• Manage investments in IT as one would manage a
portfolio of investments of assets such as real estate or
financial instruments.
• Enhances the ability of key decision-makers to assess
the porbable impact of investments on an agency’s
programs and infrastructure, as well as on the overall
state IT infrastructure.
• Demonstrates the agency’s allocation of IT resources in
support of the agency’s mission and programs
• Documents the linkages among an agency’s programs,
strategies, and business processes and its use of IT.
Portfolio Purpose (2)
• Demonstrates how investments in new projects balance,
complement, and strengthen investments already being
managed in the portfolio.
• Supports the systematic analysis of alternative IT
investments in relation to agency business requirements.
• Facilitates analysis of the risks associated with IT
investment and helps ensure that appropriate risk
mitigation strategies are adopted.
• Provides a baseline for agency and state-level
performance
• Helps ensure that the state IT infrastructure as a whole
is effectively integrated.
Organizational Scope (1)
• How much of the organization is to be included in the IT
portfolio.
• Being developed for the entire enterprise or for one
business unit?
• Are there IT portfolios in other parts of the enterprise that
need to be taken into account?
Organizational Scope (2)
• Large enterprises tend to have more than one IT
investment portfolio, such as one at the enterprise level
as well as one in each large business unit.
• These portfolios must be compatible with each other in
terms of content and structure to enable the aggregate
portfolio to present enterprise views.
Content Scope and Content Items
•
•
•
•
•
•
Supporting Management Decision Making
Aids to Defining Decision Support Needs
IT Asset Inclusions
IT Asset Exclusions
Create a Base Line Inventory
Create the Portfolio Structure
Supporting Management Decision Making
– On the specific items of content and how the items should be
categorized and structured are important because they
determine the types and levels of data available for analysis and
reporting.
– If certain content is not entered into the portfolio, the portfolio
cannot provide it to support management decision making.
Implications for Portfolio Capabilities (1)
• Track enterprise performance on each priority
organizational objective, identify performance gaps, and
the IT investment supporting each objective
• Provide output and outcome performance feedback
information from four perspectives – customer, financial,
internal operations, and learning and growth.
• Enable the analysis of the benefits, costs, risks and other
characteristics of individual investments and groups of
investments over their life cycles.
• Be integrated with other databases (e.g., corporate
finance, project management office, data warehouse), so
that data are entered once, used many times and there
can be synergistic results.
Implications for Portfolio Capabilities (2)
• Serve as a ready source of information about competing
investments and the net effect of each on the IT portfolio
(nature, purpose, milestone dates, any duplication or
overlap, effect on portfolio risk, etc. )
• Monitor the cost, risk, and performance of investments in
contributing to priority goals.
• Provide senior management and other managers with
tailored views, dashboard displays, and reports on an
scheduled or on-demand basis
Implications for Portfolio Capabilities (3)
• Provide real-time information in sensitive areas,
especially those that involve threats or intrusions that
involve information security
• Support portfolio analysis and balancing objectives, such
as optimizing investment return with acceptable cost and
risk.
• Support investment management activities, including
selecting the best IT projects to fund, controlling ongoing
project, and evaluating the results of completed projects
and implemented systems.
Information requirements for IT investment
analysis and portfolio management (1)
• What IT assets/investment are owned? Where are they
now?
• What opportunities exist for increasing the return on
certain investments and improving the overall portfolio
return?
• What interrelationship and dependencies exist among
specific IT assets/investments?
• Should some IT resources be re-deployed? If so, which
ones and how?
Information requirements for IT investment
analysis and portfolio management (2)
• Is maintenance (e.g. updates, replacements, services)
being performed at the appropriate times?
• Is the IT infrastructure meeting demands? Is there
sufficient flexibility to accommodate unexpected
problems or respond to unexpected opportunities?
• Is every identified security risk under control? Are their
indications of unidentified risks?
Each of the statements and questions above can be
translated into requirements for portfolio content
Aids to Defining Decision Support Needs
• Risks in deciding on content without the involvement of
the managers who are expected to use that content:
– There is the risk that managers will conclude that the content
selected is not suitable for their needs.
– Failing to consult with them can reduce their support for the IT
portfolio as well as their cooperation, which can weaken or even
doom the effort.
IT Asset Inclusions
• The content captured should include :
–
–
–
–
–
Description
Value
Location
Use
Interrelationship with other investments
• Typical assets include:
–
–
–
–
–
Hardware
Software
Service agreements
Lease agreements
Outsource agreements
IT Asset Exclusions
• Small purchases of IT hardware and software, such as
an item used by only a few individuals, provided the item
is not critical, sensitive, or significant for organizational
performance
• Some purchases for R&D
• Embedded IT
Create a Base Line Inventory
•
•
•
•
•
Projects
Applications
Infrastructure
Licenses
vendors
Next Step : Create the Portfolio Structure (1)
• Established or confirmed the four elements of the
foundation required for portfolio development (updated
strategic plan with supplemental performance measures,
updated enterprise architecture plan, preliminary
investment management process, and policies and
procedures for the content of business cases and
proposals)
• Determined the portfolio’s organizational scope
• Determined the portfolio’s content scope
Next Step : Create the Portfolio Structure (2)
• Determined the specific information needs and wants of
management
• Decided tentatively what to include in and exclude from
the portfolio and the category names for the content to
be included
• Made an inventory of the items to comprise the initial
content of the IT portfolio
PORTFOLIO STRUCTURE
•
•
•
•
•
•
•
•
Portfolio Design Aids
Basic Design Elements
Category-Subcategory Structures
Portfolio Structure Illustrations
Model Portfolio Structure
Prototyping Portfolio Views, Analysis, and Reports
Portraying Results Chains
Other Considerations
Portfolio Design Aids
(a) Visit successful organizations that are using an IT
portfolio approach to learn about the content categories
and portfolio structures they are using
(b) Examine a number of portfolio management software
systems to determine what capabilities they provide and
obtain recommendations on content and structure from
the vendors based on their experience
(c) Contact IT research organizations to obtain their latest
reports on IT portfolio design, and
(d) Hire consultants who are expert in IT portfolio design.
Basic Design Elements (1)
• Maintain comprehensive information about each
investment over its life cycle
• Adopt a life cycle viewpoint for costs, benefits, risks, and
interdependencies
• Maintain linkages with other databases
• Identify and monitor the results chains for investments,
to demonstrate linkage of an investment to
organizational goals and performance measures
• Provide for capturing, monitoring, and reporting on
critical performance indicators
Basic Design Elements (2)
• Build in analytics to the extent possible and automate
portfolio views and reports that are tailored to the needs
of groups and individual managers
• Incorporate methods for monitoring and controlling
investment diversification and portfolio balance
• Ensure that portfolio information is easily accessible
enterprise wide
• Maintain a record of all investment decisions and
changes in the portfolio
Category-Subcategory Structure
Examples of general content category with a one-level
content breakdown:
Infrastructure systems
• Implemented systems
• Ongoing projects
• Selected projects
Line of business systems
• Implemented systems
• Ongoing projects
• Selected projects
Pending business
case/proposal
• Frontier
• Enhancements
• Utility
• Infrastructure
Infrastructure systems
• Implemented systems
• Ongoing projects
• Selected projects
Improvement concepts
• Frontier
• Enhancement
• Utility
• Infrastructure
Portfolio Structure Illustrations
Infrastructu
Administratio
Program
Specific
Sensitive/
Critical
Mandated
R&D
Improvemen
Concepts
New
Approved
Ongoing
Completed
Projects
Delayed
Example of a Portfolio Structure for IT Investment
Model Portfolio Structure
• Strategic
Which focuses on strategic goals, including innovation and high
value-added enhancements
• Informational
Which supports management decision making and better
information quality, integration, and cycle time
• Transactional
which focuses on transaction, such as for cost-cutting and increased
throughput
• Infrastructure
which supports flexibility, integration, reduced cost due to
standardization
Portfolio Allocation of Total IT Investment Based on Focus
on the Firm
Cost Focus
Balance Cost and Agility
13%
20%
5%
42%
Informational
Informational
Strategic
Strategic
50%
Transactional
15%
Infrastructure
Transactional
Infrastructure
40%
15%
Agility Focus
14%
Informational
17%
Strategic
Transactional
58%
Infrastructure
11%
Source : Weill and Broadbent
Prototyping Portfolio Views, Analysis, and
Reports
What information do they want, in what for do they want it,
how often do they want it, and how “fresh” must the
information be?
The prototypes promote understanding of the value of the portfolio
and provide evidence that it is becoming a reality
The portfolio must provide the information and tools to monitoring
the performance of IT investments, identifying performance gaps
that need to be closed, and generally managing the IT investment
process and IT portfolio.
Protraying Result Chains
• The portfolio structure should facilitate efficient access to
performance information for specific business processe.
It should also facilitate an analysis of the results chain
that leads to the business process results.
• The ability of the portfolio to portray a results chain – the
chain of results from an IT-supported work activity
through its related business process and its goals and
performance measures-can help managers identify and
improve underperforming activities.
Bina Nusantara University
34
Illustration of a Results Chain
VCA = Value Creativity Activity
MR = Measurable Results
Bina Nusantara University
35
Others Consideration
• Taking Advantage of Tools
• Accesibility of the Portfolio
• Automated Recordkeeping
Bina Nusantara University
36
Sources of Inputs to the Portfolio
•
•
•
•
•
•
•
•
•
Strategic Goals and Performance Targets
Business Cases
Performance Information
Risk Information
Investment Review Board Inputs
Board’s Staff Group Reports
Stakeholder Evaluation of Proposals
Project Reports
Inventory of Assets
Bina Nusantara University
37
Responsibility for the IT Portfolio
• Is the principal advisor to senir management, including the
Investment Review Board, on IT management matters
• Develops in partnership with other executives the corporate-wied,
strategic view of the use of IT to support the organization’s strategic
goals
• Monitors IT’s ongoing contributions to organizational performance
• Has responsibility for managing the IT infrastructre, which is
organization-wide
• Is generally the enforcer of the enterprise architecture standards
• Monitors IT trends, emerging IT, and IT that competitors are
adopting
Bina Nusantara University
38
Several factors are for successful IT Portfolio
Development
• Have a good foundation of management practices
• Devise supplemental goals and perfromance measures as
needed
• Use common portfolio design principles
• Clearly define the scope, content categories, and structure of
the portfolio
• Capture the data required by the portfolio as a part fo the
regular work using automated methods to the maximum
practical extent.
• Acknowledge a shared responsibility for the effectiveness of
the IT portfolio
Bina Nusantara University
39