The Strategy to Action Value Chain

 

The Role of Portfolios

The following is an excerpt from  "From Business Strategy to IT Action"

"Portfolios are the foundation for NIE practices

Our goal is to translate the company’s business strategies and goals into the right IT actions to produce the right bottom-line impact. This is done by effective planning, appropriate resource decisions, and workable budgets and operational plans.  The tools of portfolio management, implemented through the NIE practices, make this possible.

Development / enhancement and lights-on portfolios support NIE planning, innovation, prioritization, alignment, and performance measurement practices with consistent and complete information about IT resources.  The information includes specifics such as how many applications there are and where they are being used, quality and service levels, and information about the business impact

 

 

Each NIE practice makes uses portfolio information extensively.  For example, the planning practice uses the assessments of quality and service, and the bottom-line impact of the lights-on applications portfolio, to develop the IT strategic plan.  Portfolio management also, and perhaps as equally importantly, connects the NIE practice outcomes to the annual planning and budgeting processes of the company.

This is a core part of NIE.  We believe that the outcomes of NIE practices must affect the behavior of the IT organization and the company; this can only be done if budgets and annual plans are directly affected.     Portfolios and portfolio management make this possible.[1]

Applying Portfolio Information in NIE Practices

By using portfolio information, applying NIE tools such as prioritization, alignment, and performance measurement, management can make effective investment decisions.

Portfolio information can be used to give management understanding of IT investments and enable decisions about the investments.  It’s in this way that the NIE practice use of portfolios most closely mimics the financial investment origins of portfolio management.

Putting IT resources into portfolios permits management to analyze the line-items within the portfolios using the portfolio management tools in Right Decisions, Right Results. For example, by characterizing line items in the application portfolio (in the lights-on budget) by quality and service levels, management can determine the highest and lowest quality and service level applications.  This provides the input to management decisions making about renewing or abandoning applications.

Portfolio information enables management to:

  • Prioritize new investments

  • Understand the allocation of resources in both new investments and in on-going lights-on expenses

  • Set targets for resources in the lights-on budget, in terms of service and quality, and in terms of cost and cost reduction

  • Evaluate the performance of portfolio elements

  • Cull the lights-on portfolios of low quality or poorly performing or overly costly elements

  • Establish strategy for the renewal of lights-on portfolio elements

In doing these things with portfolios, managers avoid case-by-case assessments by using the same rules for all elements.

By using IT portfolios and NIE practices (as described in the next chapters), management can determine whether:

  • The IT resources applied are at the right level

  • Which applications or services or infrastructure elements need renewal, or elimination

  • The set of investments in IT match the current needs of the business

  • The set of investments serve its long-term strategic intentions

  • The mix of investment in the portfolios are in some reasonable stage of balance with regard to service and quality

  • Which IT resources are under-performing

These are exactly the kind of decisions management needs to make."

Excerpt from "From Business Strategy to IT Action"