Portfolio Management "Common Sense"
Cutter Consortium Senior Consultants Bob Benson, Tom Bugnitz and Bill Walton assert that "CIOs and CFOs in particular are beginning to understand that controlling the IT spend in a disciplined, holistic manner adds real power to management's ability to focus IT on the right things and to achieve greater business value. However, we have also observed the need for some management common sense. Portfolio management is not magic -- it requires the same kind of common sense as any other effective management practice in order to achieve its benefits."
Benson, Bugnitz, and Walton suggest four areas in which management common sense is vital:
1. Complete Application Costs
It is difficult to cleanly define the costs of servers and networks to applications. However, while portfolio management requires completeness -- including 100% of costs -- common sense does not require two-decimal-point accuracy. "Our experience is that 80% accuracy is fine so long as all costs are accounted for somewhere," reports Benson. With this ground rule, useful application costing can be accomplished with a minimum of effort.
2. Achievable Goals
IT management should identify short-run achievable goals. These goals should focus on specific decisions to be made, such as which projects to approve for the next year or which budget areas to reduce in next year's budget. The key, according to Bugnitz, is whether these goals can actually be achieved: "This requires management's acceptance of the portfolio management processes as part of the decision-making process."
3. Actionable Results
"Perhaps the most important element of common sense in portfolio management is the idea that the outcome should be practicable. We see clients put considerable effort into a portfolio effort that produces pretty pictures and reports ... and then nothing happens.
Even if limited goals cannot be put into practice for whatever reason, for example, lacking management support, lacking the ability to influence decision processes, then the portfolio management efforts should not be attempted. There's little worse than going through the exercises without some demonstrable result to be produced. Simply having a prioritized list or an assessed application portfolio, without some outcome in mind, is not productive," says Benson.
4. Avoidable Complexity
Complexity is never good -- and portfolio management is a perfect example. It is too easy to try for 100% complete coverage of every portfolio detail, especially for application and infrastructure portfolios. The key issue is often "granularity." For example, at too fine a granularity level, a firm might have 1,000 separate applications -- modules, really -- of higher-level applications. According to the trio, "Common sense says that we are primarily interested in basic direction and decisions, and this is often achieved with granularity at about 30 to 50 applications. The key is keeping portfolio management simple."
Benson, Bugnitz, and Walton conclude, "Portfolio management is not an end in itself. Portfolio management provides the means for making reasonable plans and decisions about the IT spend, including both projects and the ongoing "lights on" spend. This should be done with a minimum of complexity and effort, and with a maximum of purpose and intended management outcomes. Common sense makes this possible."
To request the Business-IT Strategies Advisor in which these comments were made, or to schedule an interview with Cutter Consortium Senior Consultants Bob Benson, Tom Bugnitz and Bill Walton, contact Ron Pulicari (+1 781 641 5114) or e-mail at press@cutter.com.
See more information about Bob Benson, Tom Bugnitz and Bill Walton.