Business is again on the move, ready to implement new strategies, new products and/or services and new ways of working. After several years of relentless cost cutting, CIOs are once again being asked to take on new initiatives. However, they are also expected to maximise value for money for their organizations’ IT spend. Once again there is an opportunity for ‘value-for-money’ to replaced ‘cost’ in the dialogue between the business and IT.

Not surprisingly, CIOs tell us that portfolio management is now top of their agenda. We reviewed the original idea in our work on IT Procurement Subscription required. In practical terms, this approach to IT management first emerged in the form of structured techniques for reviewing IT projects. Next, it was used to assess and manage legacy application investments by the classic 4 R’s technique (retire, reassess, redevelop and renew).

Today, portfolio management is also used to establish and prioritize the application portfolio, and to manage the entire IT spend from infrastructure to mission critical systems. The challenge is to make sure that the business is getting value from its past investments in basic applications such as SAP, whilst providing funding for innovation and business transformation projects. Today’s CIO also has more options to consider when building the portfolio. For example, the CIO can increase the scope of what is possible by using public infrastructure or by buying IT services on a pay-for-use basis. Increasingly, CIOs are taking on responsibility for specific business processes, and are expected to lead initiatives to innovate across all business processes. The IT portfolio therefore includes these processes, and not just IT operations or initiatives.

CIOs are turning to portfolio management to make the IT spend transparent, to set priorities based on business needs, and to demonstrate that IT spend is aligned with business strategy and future directions. It also helps the CIO manage technical and business risk. IT investments need to be evaluated based against risk as well as benefits. The portfolio approach forces the business and IT to identify the necessary sequencing and timing of projects. The process of putting together and managing the portfolio forces discussion between the business and IT, and among the various business units and functions within global organizations. Our earlier work has pointed out the need for business and IT to agree the value of IT to the business through a process of negotiation. Portfolio management provides the language, frameworks and techniques that make this negotiation possible.