An Economic Down-Turn Creates Momentum to Streamline the IT Portfolio

Take advantage of a challenging economic climate to construct a more valuable and less risky IT project portfolio.

The Positive Momentum of Challenging Times

As the pressure is on to stay profitable in a period with economic down-turn many companies decide to stop or postpone major IT programs and projects without short term tangible benefits. While the result of doing so is immediate cost relief a broader look at the project portfolio can yield surprising results. 

The good thing about a down-turn situation is that it will expose projects which have already been questionable for a long time. Examples could be:

  • That agile project that drag on for too long due to methodology discussions
  • The 3 year service oriented architecture (SOA) project
  • An 2 year data warehouse project
  • The 4 year global production system where the first 2 years is already spent on design
  • An secret inhouse private cloud project that somebody is working on.

The CEO will see these projects on the corporate "big ticket" list and start asking challenging questions about the cash flow, benefit profile and risk about the projects. 

Whereas in the past, these projects have been protected by the label "strategic investments" there is suddenly a momentum for reconstructing these projects and others with them.

 

Five Criteria for a Healthy IT project Portfolio

Having studies a large about of companies and project portfolios, Oleto's have observed that high impact portfolios typically fulfill 5 criteria:

1) Each project must be valuable. Projects must independently deliver accumulated benefits greater than the cost, so infrastructure projects should be broken into parts and bundled with other projects, e.g., dividing a data warehouse project into 5 sub-projects and integrating these into deliverables for more tangible projects such as ERP.

2) Value must be delivered step-wise. Each project must be value milestone at least every six months.

3) Business must have required the organizational change capacity. There is no reason to insist on the existence of a large IT project if the business is not ready to receive it since, e.g., the focus is on organizational restructuring.

4) IT must have the delivery capabilities. If the IT organization or external provider has failed with a global IT project once then the chance is it could happen again unless corrective measures are taken, such as realigning leadership, governance, methodologies.

5) The entire portfolio must be manageable. It must be structured it to transformation themes and each project linked to these. Too many single projects cannot be managed, while problems which are too large are also challenging to manage.

Restructuring a project portfolio typically takes 4 to 8 weeks depending on the scope and available transparency. 

About the authors: This article was written by a team of consultants from Oleto Associates, a strategy consulting firm based in Denmark. For more information please visit www.oleto.com.

November 2012