nest_eggOver many years of preaching and teaching IT portfolio management, I’ve been frequently frustrated and disappointed by seeing IT organizations screw up portfolio management, and as a result, miss out on the significant and important benefits this discipline holds.  They do so by buying into the concepts, then jumping to a tool choice, implementation, declaring success, then moving on to the next IT management challenge.

This is sad, to say the least.  It typically means that not only do they not get the real benefits of portfolio management, but also they’ve spent money on a tool and implementation effort that they can ill afford, and next time when the perils associated with a lack of effective portfolio management surface, they will assume that it can’t have anything to do with portfolio management because they’ve already fixed that.  So they look elsewhere, tweaking and probing, trying to figure out how to improve business-IT alignment.  It might take them several years (or a change of CIO, whichever comes first) to figure out that at root, they still have a portfolio management problem.  And its much harder to fix something you already think you’ve fixed!

To illustrate the point, let me describe a typical IT capability assessment engagement (I’m involved in these several times a year).  The first day usually comprises interviews with the executive leadership team followed by a lengthy meeting with the CIO.  In addition to describing their hopes for IT, each of the business leaders describes how and where they see the IT organization falling short.  This typically includes descriptions of various symptoms of portfolio management dysfunctionality:

My unit constantly gets short-changed by IT.

I’m not a demanding kind of guy, but I get punished because IT only supports the people who always make the greatest demands – I keep getting squeezed to the back of the line!

The costs of IT are spread across the business units, but only some of them are getting real value.

IT is not sufficiently service oriented!

When I meet with the CIO, I probe around these issues.  Frequently, at this point I’m told with great pride about the sophisticated IT portfolio management tool they’d implemented in the last year or so.  The CIO will often grab a spiral bound report and display page after page of glossy, colorful pie charts of portfolio data.  “See!  Portfolio management is now a real strength of the IT organization.  And we drill into all sorts of resource allocation and time tracking data in the very same tool.  It’s really helped us!”

What he may as well have said was, “We took a powerful portfolio management tool and use it really well to do resource tracking and allocation!”  When I ask, “How do you know that the portfolio allocation model is consistent with business strategic intent?” I get a blank look as he processes the question, followed by, “Oh, well they get all these reports!  And, in fact, they can get at this data on line if they’d like – it’s all totally transparent!”

Let me explain what’s going on here through the imperfect analogy of managing one’s personal investment portfolio (I know – not a very popular thing to be reminded of just now!)  It’s as if my financial planner took my savings, then sent me (or gave me access to) all sorts of fancy data about my personal investment portfolio, but had never educated me and taken me through the crucial decision-making (and regular review) of my financial goals, needs and ambitions (these are not the same thing!) and my risk tolerance, financial situation, time to retirement, and so on.  Then one day I call him up and say, “Fred, I’m retiring tomorrow but see that all my savings have vanished!  What happened?”  And he says, well, you were in and extremely aggressive portfolio of very high risk investments, and unfortunately the market tanked.  Weren’t you tracking the portfolio reports I sent you every month?”  In other words, this would indicate that I never sat down with my financial planner and figured out my family’s financial strategy – made informed decisions about the right portfolio mix for my circumstances, how that mix changes over time and how I will monitor the portfolio performance.  If he had taken me and my family through this process, several important things would have happened:

  1. My family and I would have become educated in investment strategy.
  2. We would have created an investment strategy appropriate to our situation.
  3. My family would be aligned around that strategy, understanding and making the needed tradeoffs between education needs, family vacations, degree to which we can afford discretionary items like a fancy sports car, and so on.
  4. We would have understood the portfolio performance data our investment manager was sending us.
  5. We would have make appropriate adjustments as our family situation and investment performance changed.

Translate this into the process of IT investment portfolio strategy and planning, and how this process can align the business leadership team and CIO.  You begin to see the dangerous trap of confusing the implementation of an IT portfolio management tool with the process of IT portfolio strategy and management.  Does you organization really have IT portfolio strategy and management?  Or is it simply going through the motions of tracking spending and resources?  If the latter, and not the former, what dysfunctionalities might it be causing?  What will you do about it?