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IT Strategic plan, portfolio management, Project analysis

September 17, 2015

Doing the Right Thing

 

When your potential IT investments are varied in size, impact, risk and potential benefits, it can be a daunting task to determine which ones will be part of the investment portfolio for the upcoming fiscal year.

You need a way to compare apples to apples, and this is where using a prioritization methodology comes in.

What criteria will your company use to prioritize and select potential IT investments?

Typically, these criteria fall into one of three categories: Cost, Benefits, and Risk.

Examples of cost criteria are Project Cost, Ongoing Operational Cost, Payback Period and Total Cost of Ownership, which takes into consideration both initial costs as well as future costs during the useful life of the investment.

For benefits criteria, you may want to include elements like Competitive advantage, Financial Benefits, Cost Avoidance, Risk Mitigation, Improved Customer Experience, Increased Agility and Alignment with Company Strategy.

And finally, for risk criteria, you could include Stakeholder Alignment, Readiness for Change, Project Complexity, or even Project Duration. Note that these are risks related to the potential project and not company risks which are taken into account in the benefits criteria (Risk Mitigation).

Once you have determined the criteria that your company will be using, you need to set possible values for each and a weighting for each criteria so that you can then compare the potential investments. You’ll need to test your scoring, see if it gives you the results you were expecting, and adjust. For example, if the scoring penalizes too much the Project Cost criteria, you will find yourself with only small projects at the top of the list when you know you always need to have a few larger transformational projects to ensure the long-term survival of the company. And your criteria and weighting will be based on what’s important for your company at a specific point in time, which means the scoring system should be reviewed at least once a year.

Once you’ve mastered the criteria-based prioritization, you’ll want to analyse your portfolio to ensure it’s in line with your company strategy. But that’s a discussion for another day!



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By Rachel Bachmann
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