DEVELOPING THE PORTFOLIOPertemuan 7-12

Matakuliah : A0824/IT Investment PortfolioTahun : 2009

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 on-

demand 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 StructureExamples 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 IllustrationsInfrastruct

ureAdministrati

onProgram Specific

Sensitive/Critical

Mandated R&D

Improvement Concepts

New Proposals

Approved Projects

Ongoing Projects

Completed Projects

Delayed Projects

Example of a Portfolio Structure for IT Investment

Model Portfolio Structure• Strategic

Which focuses on strategic goals, including innovation and high value-added enhancements

• InformationalWhich supports management decision making and better information quality, integration, and cycle time

• Transactionalwhich focuses on transaction, such as for cost-cutting and increased throughput

• Infrastructurewhich supports flexibility, integration, reduced cost due to standardization

Portfolio Allocation of Total IT Investment Based on Focus on the Firm

Balance Cost and Agility

20%

15%

15%

50%

Informational

Strategic

Transactional

Infrastructure

Agility Focus

14%

17%

11%

58%

Informational

Strategic

Transactional

Infrastructure

Cost Focus

13%

5%

40%

42%Informational

Strategic

Transactional

Infrastructure

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 ActivityMR = 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