Report Details Feedback from 130 Senior IT Executives On the Challenges and Best Practices of Delivering and Measuring Value of IT Investments

Kellogg School of Management/DiamondCluster IT Portfolio Management Study Now Available
05.19.2003

CHICAGO, May 19, 2003 -- Senior IT Executives from 130 major companies speak out on their successes and frustrations in measuring the value of information technology in a new research report based from the Kellogg School of Management at Northwestern University and consulting firm DiamondCluster International, Inc. (Nasdaq: DTPI), in collaboration with the Society for Information Management (SIM).

The report, "IT Portfolio Management: Challenges and Best Practices," details how companies are successfully applying information technology (IT) portfolio management -- a set of techniques and practices aimed at managing IT assets as a portfolio of investments -- to ensure that information technology investments are delivering value to the enterprise. Copies of the 16-page executive summary are available on request by sending e-mail to: ITPMstudy@diamondcluster.com.

"Many CIOs are saying there's a real dichotomy between their aspirations and actual accomplishments when it comes to applying portfolio management principles," said Mark Jeffery, Assistant Professor of Technology at the Kellogg School. "However, our in-depth discussions also uncovered practical examples of ways CIOs have managed to use portfolio management to bridge the gap that can exist between the IT department and the rest of the organization."

For example, 65 percent of the respondents believe portfolio management will yield significant value to their organization and 78 percent said that the value of portfolio management will increase in the future as the pressure to link IT investments to quantifiable business value increases. However, only 24 percent are maximizing the value that can be obtained from portfolio management.

"It's easy to underestimate the challenge of implementing portfolio management practices," said Ingmar Leliveld, a principal at DiamondCluster, the global management consulting firm. "There are serious hurdles that a CIO must overcome - turf battles, a lack of the right financial skills among the IT staff, and misunderstandings and inertia within other parts of the business. The lessons learned by the CIOs we spoke with can be very valuable in helping others accelerate the rate of portfolio management success."

CIOs who believed that they are optimizing the value of their IT portfolio management initiatives pointed to several key lessons they learned in the course of their efforts:

Take the Initiative - Getting IT initiatives aligned with the rest of the business is inevitably the CIO's responsibility. The CIO of a global services firm said: "Business users all own some piece of the pie but only care about their own slice…they don't get or care for a portfolio view. One of the things I've done to get them over the hurdle is instituting a governance council right under senior management. This gave everyone visibility into what I was doing and why."

Leverage Existing Budget Processes - Avoid reinventing the wheel or trying to force the latest hot portfolio management software application through the company. Successful CIOs often first looked for ways to introduce ITPM principles into the budget and planning processes that the rest of the business already believes in.

Provide Basic Training - Don't expect IT staff to successfully apply new portfolio management techniques without training and management support. "The biggest barrier (to managing the IT portfolio) is educating the IT staff on building a business case justification for making changes, versus just wanting to please the client," said one CIO. "IT people hate to say 'no' to a client. They are often their own worst enemies. It is difficult, if not impossible, to find IT business case training materials. Templates for building business cases are not included in project management methodologies."

Define Scope and Objectives - "Big bang" approaches are likely to fail. It's better to be selective about what to analyze and specific about why you're doing it. As one CIO said, "Resources are scarce. I think that's the biggest hurdle. You've got to decide whether to use staff to better analyze the existing environment or to go out and implement new projects."

Phase in New Portfolio Management Capabilities - It's important to build confidence and trust with the rest of the organization by introducing IT portfolio management incrementally and systematically. As a bank CIO said: "Show them you care about their personal issues and then ask what's best for the overall company. Once you get a willingness and maybe even comfort to say, 'hey, I'm a contributor, I'm a player,' then you can move much faster."

Involve Audiences Early - Get constituents on board from the start to build consensus and cooperation. If consensus is hard to find, reduce scope. The CIO of a major utility reported, "Having an effective capital budgeting process and a quarterly steering committee for prioritizing IT projects has eliminated turf battles and disagreements. The proper role for the business units is deciding what to do - the proper role for IT is deciding how it should be done. The steering committee, composed of the business unit vice-presidents does a very good job of deciding priority and affordability. I chair the committee but the decision to do a project is a collective decision. Everyone understands how the decision was made, everyone supports the decision."

Despite the challenges documented in the Kellogg/DiamondCluster/SIM report, it's clear that the payoff can be worth the effort.

"Without portfolio management, I wouldn't have been able to communicate to senior management about the lack of value we get for the money we invest in our systems," said one CIO. "Because we have such complexity in our application and infrastructure portfolios, pumping more money into them would never provide a great return. The portfolio perspective helps people understand what we have and why we need to change."

The Kellogg School of Management
The Kellogg School of Management at Northwestern University was founded in 1908 and is widely recognized as a global leader in graduate business education. The school is home to a renowned, research-based faculty and MBA students from more than 50 countries and six continents. In 2002, BusinessWeek magazine ranked the Kellogg School the number one graduate school of business in the United States, an honor it has achieved four times since the biennial survey began in 1988. In October 2002, the school also was named the top MBA program in the world by The Economist Intelligence Unit, a division of The Economist Group.

DiamondCluster International
DiamondCluster International (Nasdaq: DTPI) is a premier global management consulting firm that helps leading organizations develop and implement growth strategies, improve operations, and capitalize on technology. Mobilizing multidisciplinary teams from our highly skilled strategy, technology, and operations professionals worldwide, DiamondCluster works collaboratively with clients, unleashing the power within their own organizations to achieve sustainable business advantage. DiamondCluster is headquartered in Chicago, with offices across Europe, North America, and South America. To learn more visit www.diamondcluster.com.

The Society for Information Management
Established in 1968, the Society for Information Management (SIM) is the premier network for IT leaders comprised of nearly 3,000 members, including CIOs, senior IT executives, prominent academicians, consultants, and other IT leaders. SIM is a community of thought leaders who share experiences, rich intellectual capital, and who explore future IT direction. In partnership with its 28 chapters, SIM provides resources and programs inspired by IT leaders for IT leaders that enable CIOs to further develop leadership capabilities of themselves and the key and emerging leaders in their organizations. SIM provides the collective voice to advocate policy and legislation on behalf of the IT profession across industries. To learn more visit www.simnet.org.

Source : DiamondCluster International