 |
|
   
|
|
|
|
Charles Chang, Gartner vice president |
|
|
|
How To Set Priorities For IT Investments
Tuesday, 11 March 2003
Companies always have more projects for IT than they can fund. They need to prioritize, but this gets harder as investment opportunities are increasingly business projects requiring varying degrees of IT support. Their broader scope involves more stakeholders and possible conflicts of interest.
"When the prioritization process is not objective, consistent and backed by strong governance, vested interests and politics aim to subvert it," says Gartner vice president, Charles Chang.
Speaking at Symposium/ITxpo in Florence, Italy, on Tuesday, Change provided attendees with six critical factors for success in prioritizing and managing a portfolio of IT projects:
- Establish effective governance and clear accountabilities
- Allocate sufficient resources to support the portfolio management process
- Ensure the process is disciplined and sustained
- Develop an objective prioritization framework
- Support decision making with tools
- Maintain communication and education programs
Chang then offered advice for implementing each one.
1. Establish Effective Governance and Clear Accountabilities
Enterprises should form an investment decision council and set clear accountabilities for all stakeholders (business sponsor, portfolio manager, program management office, program manager and project manager). The council typically includes the CIO, COO, CFO or financial controller, strategic planner and business unit heads. Its role is to make funding decisions and routinely review the portfolio.
2. Allocate Sufficient Resources to Support the Process
Assign one person to own the portfolio management process, overseeing its implementation and setting stakeholder expectations. The best candidates will likely be experienced executives able to work with senior business managers. The support team needs the skills to design and introduce the new process, so it needs to be respected throughout the business. To start with, team members will likely have to help business sponsors draft the initial cases for investment.
3. Ensure the Process is Disciplined and Sustained
All proposals must be evaluated in the same manner, using consistent criteria and procedures. A major challenge is designing a process that cannot be circumvented by powerful executives. And the process must ensure that approved initiatives are re-evaluated when conditions change.
4. Develop an Objective Framework for Prioritization
Prioritization is at the heart of the process. The process requires the council to assign weighted scores to each business case, reflecting the enterprise's objectives and business drivers and the relative importance of each of the objective criteria. Ultimately, though, prioritizing is a judgement call by the council, which should seek to achieve a portfolio with a balanced mix of risks and returns.
5. Support Decision Making With Tools
Commonly used tools provide:
Standard business case templates
Improved cost-estimating accuracy
Financial models or spreadsheet templates to calculate financial measures
Online repository of project data
Scoring/decision models to analyze and evaluate proposals
6. Maintain Communication and Education Programs
Communication and education is necessary to build the business case for creating and supporting a disciplined process, to develop needed skills and to communicate the results and lessons learned from applying the process.
In addition to these six critical factor, Chang identifies five steps in the process of project portfolio management.
1. Define initiatives
2. Evaluate initiatives
3. Prioritize initiatives to ensure a balanced portfolio
4. Match approved initiatives to resources
5. Actively manage the portfolio
These steps, says Chang, can take place sequentially, with feedback loops between them.
Having defined the initiatives, the council needs to use objective criteria for business value, financial return, strategic fit, technical fit, risk (implementation and operational) and others. A key task is to categorize projects. The simplest method is to identify mandatory vs. discretionary projects, although discretionary projects can be further categorized as:
Strategic — to gain a competitive advantage or implement a major innovation
Informational — to provide better information
Transactional — to reduce the cost of doing business
Infrastructure — to provide a shared IT capability
In matching initiatives to resources, the council may consider using external resources, reprioritizing projects or splitting larger projects into smaller ones.
The council should regularly review the project portfolio to
Cancel under-performing initiatives
Delay or accelerate the timing of initiatives in response to changed business conditions
Redefine the scope of projects to reduce risk and cost, or increase benefits and strategic fit
Combine or split initiatives to eliminate overlap or improve manageability
Chang concluded by listing the three most important actions in project prioritization:
Balance risks and returns within a portfolio of projects
Integrate processes for managing the project portfolio and those for business strategy
Agree objective indicators of business value.
David Seabrook
Gartner Staff
|
|
|
|
|
|
|
|
