IT portfolio management (ITPfM) is the application of systematic management to large classes of items managed by enterprise Information Technology (IT) capabilities. Examples of IT portfolios would be planned initiatives, projects, and ongoing IT services (such as application support). The promise of IT portfolio management is the quantification of previously mysterious IT efforts, enabling measurement and objective evaluation of investment scenarios.
Debates exist on the best way to measure value of IT investment. As pointed out by Jeffery and Leliveld (2004), companies have spent billions of dollars into IT investment and yet the headlines of misspent money are not uncommon…IT portfolio management started with a project-centric bias, but is evolving to include steady-state portfolio entries such as application maintenance and support, which consume the bulk of IT spending. (Wikipedia)
- ITPfM is related to the federal requirement for capital planning and investment control (CPIC), especially the select phase in which investments are authorized and funded.
The IT Management Reform Act of 1996 (Clinger-Cohen Act) specifies that executive agencies “establish effective and efficient capital planning processes for selecting, managing [controlling], and evaluating the results of all its major investments in information systems.”
The Architecture Alignment and Assessment Guide by the Federal CIO Council, November 2000 defines capital planning and investment control (CPIC) as—“a management process for ongoing identification, selection, control, and evaluation of investments in information resources.”
- CPIC/ITPfM and EA are closely linked processes. Enterprise architecture conducts technical reviews of proposed new IT projects, products, and standards and provides findings and recommendations to the IT Investment Review Board for decision-making on authorizing, prioritizing, and funding IT.
The Architecture and Assessment Guide states that “CPIC and enterprise architecture functions are closely linked…both have a common focus: the effective and efficient management of IT investments.
Further, the Office of Management and Budget (OMB) Circular A-130 requires that agencies establish and maintain a CPIC process and that they “must build from the agency’s current enterprise architecture.”
According to the Architecture Alignment and Assessment Guide, the three phases of CPIC align to EA as follows: CPIC’s select, control, and evaluate align to EA business alignment, technical alignment, and architecture assessment.
The Journal of Enterprise Architecture, February 2008, has an article by George Makiya that discusses “Integrating EA and IT Portfolio Management Processes”.
Makiya states “at the strategic level, the EA has to agree with the business side, what objectives the IT portfolio will be designed to achieve. It is imperative that the EA negotiate with the business side what constitutes value-add. The EA must then use ITPfM to engage the business to document or articulate its strategy and business objectives.”
Further, “at the operational level, the EA using ITPfM employs prioritization and selection processes to ensure that IT investment reflects the objectives and priorities of the business…through proactive management EAs can help the CIO align the IT budget with the demands of the portfolio.”
According to the Federal Enterprise Architecture Practice Guidance, November 2007, the performance improvement lifecycle starts with the agency’s strategy, and then has the three phases of architect (“develop and maintain EA”), invest (select investments and “define the implementation and funding strategy”, and implement (“execute projects”), which in turn yields strategic results.
- Generally speaking, ITPfM decisions are made on the basis of return on investment, risk mitigation, strategic alignment, and technical alignment to the EA.
There are many touch points and linkages between EA and CPIC.
- EA’s target architecture and transition plans drives the investments and portfolio make-up in the CPIC process.
- CPIC investments are used to provide updates on systems, technologies, and standards to the EA.
EA and CPIC/ITPfM are truly mutually dependent and create synergy and value for the organization through enhanced decision making and IT resource control.