1 May 2012

No wonder portfolio management leaves everyone confused

If you were an artist, investment manager or a government minister you would describe a “portfolio” in very different ways. Even within the domain of the CIO the word has several distinct uses. Here is my attempt to summarise what constitutes the different portfolios that are relevant for a CIO. In subsequent blogs I’ll expand on what I have learnt about each of these from my research and my own experiences.
  1. IT project portfolios - These days most people I talk to about IT associate “portfolio”, first of all, with a collection of projects and programmes. There are good odds that any IT portfolio manager you meet will be a projects and programmes specialist. In the vast majority of cases IT projects should not be purely focused on IT (and so IT project portfolio management could be considered to be a flawed idea) but I am realistic that many organisations need to perform IT project portfolio management as a step on the journey to enterprise-wide project portfolio management.
  2. Application portfolios - Another common use of “portfolio” in IT is Application Portfolio Management. Application portfolio managers are quite rare and are usually involved in applications rationalisation and applications modernisation. Since applications usually embody the way that an organisation works application portfolios should be of great interest beyond IT but, often, the goals are defined in terms of IT costs and adopting common technology standards. There is a need for new approaches in this area.
  3. IT investment portfolios and IT asset portfolios - This seems to be a growing topic of conversation in IT circles and borrows the language of portfolios from the financial services sector but only rarely does this extend to borrowing the tools and techniques. Sometimes references to IT investment portfolios encompasses all IT commitments but more often it is used to mean just project related spending or even just spending on projects owned by the IT department. IT assets are usually assumed to be traditional fixed assets and physical goods. Sometimes it includes software licences. Although systems and data are often referred to as corporate assets and can be accounted for as capital investments they are not usually covered in the scope of IT asset management processes.
  4. IT service portfolios and IT capability portfolios - This is a relatively rare use of “portfolio” in IT and could be viewed as a wrapper for all of the other types of portfolio. Managing the service portfolio involves understanding what services are required by an organisation, its customers and suppliers and making decisions about how to provide these in an efficient and effective way.
  5. The CIO portfolio - Another uncommon use of the term and the only one which uses “portfolio” in the sense of covering the responsibilities and duties of a corporate or government officer. Although this phrase is rare questions about this topic - what a CIO is for?, what should they do?, to whom should they report? - are the subject of a lot of debate in the IT media and social networks.

Keep a watch for future blogs which will cover each of these areas in more detail.

Related blog post: Do's and Don'ts for Portfolio Managers (thanks to Tim Washington for the link)

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