A: Technology Portfolio Management is a strategy for systematically unlocking the value from IT investments that Fortune 100-1000 companies have already made. The key concept here is investments already made.

You see, in the late 1990s, companies invested incredible amounts of money in technology. Now, these same companies are asking-how do I get the value out of my IT investments?

Information Technology Portfolio Management (ITPM) enables you to unlock this value.

It's amazing how few companies can actually articulate precisely what technologies they've invested in. In fact, relatively few companies have a rigorous methodology for aligning business goals and strategies with IT investments.

ITPM provides that rigorous methodology-providing a way for companies to start looking at their IT investments in the same way that they would look at stock investments. Which IT investments are high risk, but offer a high pay off in terms of increased competitiveness or ROI? Which IT investments are low risk, but perhaps don't offer much of a return? And which are low risk, high return... which are high risk, low return?

Looking at IT investments in this way empowers companies to create a portfolio that maximizes the value the companies are getting out of IT, while balancing risk and return in a manner that is appropriate for that particular company. What is "appropriate" will vary from company to company, of course, depending on a company's age, situation, goals, or industry.

At the very basic level, ITPM purports that companies can save literally millions of dollars per year-even billions-simply by knowing what IT projects are running and what tools are being used to run them. The most basic level of ITPM-the foundation of the ITPM pyramid, if you will-requires that companies create a database of all of its projects. Gaining this thorough view will reveal the duplications of effort. Companies can then save significant dollars simply by eliminating duplications and rolling up projects where possible.

The next level up is to then identify the different needs within an organization. For example, strategic planning may need IT investments that differ from the IT needs for supply chain management, and so forth. This level requires categorizing IT needs to create suites, if you will, within the portfolio-with the understanding, of course, that some types of IT investment, such as an active data warehouse, are going to embrace all areas of the company.

The third level is to align that IT portfolio with the corporate strategy. At this level, the process becomes more challenging, because inevitably companies will find that some of their IT investments really don't fit with the corporate strategy. To maximize return on IT investment, companies must then cut those investments. Companies may also find that they need new IT resources to address parts of the corporate strategy that aren't being supported by the current IT portfolio. This alignment process, by the way, can't be static if it is to deliver value to the company-the process should be ongoing, with top management getting together to take a long, hard look at the alignment every three months or so.

The fourth level is to then match strategy with concrete objectives-and ensure that every IT project in the corporation aligns with these objectives. And the fifth, and highest level, of ITPM is to automate the whole process from the top down, so that strategy drives objectives, which in turn drive IT projects, which in turn drive what is included-and what is removed-from the IT portfolio, which is in turn tracked in a corporate-wide database to ensure that the redundancy that set in motion the need for ITPM in the first place doesn't reoccur.

Ideally, I must say that companies would actually start from the top of the ITPM hierarchy-creating the strategy that drives the objectives, and so forth. But in real world terms, sometimes companies must simply take that initial step of creating the database that pulls together all of the current IT projects and investments-thus creating, in effect, the ability to see just what the company is dealing with in terms of what it's already invested in. ITPM provides, if you will, a level-setting for understanding the current state of a company's IT investments-and that, ultimately, will lead to the unlocking of IT value that I described before.

Secondly, by aligning IT investments with corporate strategies, competitiveness will improve significantly. This aligning process, through the ITPM methodology, enables a company to become very focused in ways that it has not been before.

As for how ITPM empowers decision-making within a corporation-well, I have to say that ITPM is very empowering because it enables decision-makers to not only know what tools are available, but shows how to align IT projects to support strategic business goals. Decision-makers are empowered to calculated the alignment of projects to strategies very, very clearly-and execute the projects that align, and eliminate the projects that don't. There's really no place for guesswork in business decision making-particularly in today's economy-and ITPM doesn't allow for guesswork. It's really a focusing process.

When we work with a company to guide it through this process, we show the company how to build score cards that enable it to rate projects and IT investments for ROI, risk, and alignment with business strategy, as well as qualitative factors such as what the company can learn from executing a particular project, and will the lessons learned be of enough value in the future to justify a current expense, even if there aren't immediate returns to the bottom line.

But what we've found is that nearly 20 years ago, when McFarland's forward-thinking article appeared, technology had not proliferated to the point that companies really needed to worry about this. And in the 1990s-I like to call that era the roaring 90s of technology-companies were somewhat heady about acquiring new technology, almost with abandon, partly because of new developments and partly because of our soaring economy. Now, companies cannot afford to take those same attitudes.

The idea of aligning IT investments with business strategies has been around for a while. What we've done is build upon this classic idea, and we are working to develop a practical, in-depth methodology that produces real-world applications and measurable results. That's ITPM.

But the risk of unwillingness to change and grow is stagnation. We take a close, hard look at risk versus return in the ITPM methodology. In my opinion, the risk of ITPM is far outweighed by the potential returns: improved operational effectiveness, strategic alignment company-wide, even increased market share.

NOTE: Part two of this continuing series on ITPM will focus on proof: real-world case studies of ITPM in action and the results.