Value-oriented IT project portfolio management

Abstract

In the present enterprise computing environment, it becomes more and more important to be able to demonstrate financial gains of IT (Information Technology) initiatives compared to their cost. A valuation methodology is a logical, repeatable framework for making IT investment decisions and monitoring projects to ensure that they ultimately contribute to the financial health and growth of the enterprise. Traditionally, organizations have used a bottom-up approach for technology valuation by using metrics such as return on investment and net present value. While it provides a simple, easy-to-understand valuation mechanism, the traditional approach is limited in the type of analyses. To provide more flexible and versatile valuation of technology, we propose a value-oriented project portfolio management with which organizations can view IT staff and initiatives not only as costs but also as assets managed in a similar way as a fund manager would apply to any other investment. The proposed approach is comprised of multiple steps that collectively compute and help maximizing value of IT initiatives for business transformation. It integrates a value model with a project portfolio to factor in financial values in selecting projects and optimizing the portfolio.