Evaluating The IT Portfolio

CIOs are under pressure to take a more systematic approach to evaluating the value of information-technology investments, mapping IT expenditures to the company's goals and providing business users with greater visibility into development projects.

More than half (52%) of the 300 business-technology managers surveyed in InformationWeek Research's Outlook for 2005 survey, part of our quarterly Priorities series, say they plan to increase their use of tools and methodologies such as balanced scorecards to evaluate IT investments in 2005.

That would continue a recent trend. Spending for project-portfolio-management software increased to $398 million in 2004 from $362 million in 2003, according to Gartner, a market-research firm.

Panasonic USA uses data produced by a portfolio-analysis system from ProSight Inc. to create balanced scorecards, sets of metrics that map operating-unit performance to corporate financial objectives. The scorecard for Panasonic's 325-person IT department includes some 38 key objectives, such as maximizing business-unit productivity and better understanding customers. The ProSight system "allows us to get a snapshot of where we are [and is] a management tool for looking ahead as well as looking back," says Bob Schwartz, president of management information-technology services.

Performance metrics help turn IT project management, if not into a science, at least into more of a discipline. They provide a basis for determining which projects get funded, expanded, or dropped. (For more information on portfolio-management tools, see informationweek.com/1020/invest_sb.htm.)

Tools that help IT managers determine who's getting the most value out of IT also can help with chargeback expenses. At mutual-fund company Fidelity Investments, an application from Evident Software Inc. that monitors wide area network usage and bills internal departments has produced $90 million in savings over the last six years through better network utilization and capacity planning. It also has improved user satisfaction by tying charges to actual consumption, says Bobby Lie, senior VP of enterprise architecture. That has led to a large redistribution in costs: Application developers, heavy users of Fidelity's WAN, were only footing 2.5% of WAN costs before deployment of the Evident system. Now that's up to 13%.

Performance metrics allow IT plans and budgets to become "living, breathing documents," says Janette McKenna, chief of IT internal services at the Oakland County, Mich., department of information technology. The department has licensed Clarity, a project-portfolio-management system from Niku Corp., to help manage its $35 million, 200-employee, 150-application operation.

The county's IT department develops a biennial master plan with cost and return-on-investment estimates for every IT project. Niku serves as an all-purpose governance system, performing time and expense tracking, resource prioritization, what-if analyses, and other project-management functions. Web-based reporting in a Niku upgrade planned for this year will provide snapshots of IT projects from formation through execution and retirement.

Illustration by Gordon Studer

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