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.
Integrated IT Portfolio Management: A balanced approachFor 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:>> mitigate risks efficiently>> communicate and demonstrate the value of IT>> connect IT budgets to strategic business objectives>> manage line-of-business and executive expectations of IT>> create strong project management discipline>> 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. 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. Studies indicate organizations that are mature in IT portfolio management tend to be industry leaders. These organizations consistently maintain sharp focus, balance the need of current market areas and new growth segments, and exhibit higher performance 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, 2005Untitled Document2The 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. 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 higher-level 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 automation of a wide variety of associated portfolio management processes and makes this information available for IT and business groups across the enterprise. 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 well-managed IT portfolio that supports strategic business goals.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 IT Strategy& BusinessRequirementsPortfolioPlanningApplicationPortfolioManagementProjectPortfolioManagementStrategicInitiativeOperationalDemandITResourcesUntitled Document3projects 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. 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:>> 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?>> 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.>> Architectural Fit: Here, the focus is on the appropriateness of a project based on the organization s current enterprise architecture, business strategies and objectives. 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. 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.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. 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%. Meshing Architecture, Project and Application Portfolio Processes for Effectiveness, Jim Duggan, Gartner, Inc. 2005Untitled Document4For 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.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 portfolioOne 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.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:>> Make IT Portfolio Management an integral part of IT governance: ITPM provides important 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.>> 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.>> 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.Untitled Document5>> 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 pre-defined benchmarks of cost, risk and return on investment.>> 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. >> 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.The benefits of IT Portfolio ManagementAs 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.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 top-down 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.>> 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.Untitled Document6>> 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.>> 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. >> 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. IT Portfolio Management and Compuware Changepoint: A balanced and integrated approachCompuware 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. 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.Changepoint s three areas of management parallel the three key elements of ITPM:>> 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.>> 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. According to research, CIOs who embrace IT Portfolio 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, 2005Untitled Document7>> 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, 2005Compuware Changepoint provides visibility into key performance indicators.Untitled DocumentCompuware Corporation Corporate HeadquartersOne Campus MartiusDetroit, MI 48226For regional and international office contacts, please visit our web site at www.compuware.comAll 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 Corporation6/06Changepoint: a powerful solution that grows with your businessAs 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, visitwww.compuware.com/changepointCompuware 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 per formance 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, including95 percent of the Fortune 100 compa nies. Learn more about Compuware at www.compuware.com.Compuware products and professional services delivering IT value