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Should you treat IT as an investment portfolio...

...or as a town planning project?

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It's hard enough trying to run one development project, let alone several. Managing a whole portfolio of projects across a business can easily be compared to juggling Faberge eggs in a tornado, with only one arm.

Projects need to be delivered on time, to the original requirements. Resources need to be deployed appropriately – whether they're staff or infrastructure. Then there's the really tricky bit, making sure that all the projects are aligned with the business aims. Today's flexible businesses need IT departments that can respond to changing needs – adapting project plans quickly.

It's no wonder that a new generation of project management tools has arrived, tools that are able to bring information in from multiple sources to help control the myriad IT projects that cover white boards and fill spreadsheets.

As IT development moves away from application-centric ways of thinking to service oriented architectures, things get even more complicated, as many different business processes could depend on a single project. Project portfolio management is the key to helping development teams keep control of complex collections of projects, where autonomous departmental IT teams may be reinventing the wheel several times a month.

Taking a leaf out of the finance industry's book, project portfolio management treats projects as a set of investments. An alternative analogy comes from Forrester Research's Jost Hopperman, who compares it to how town planners work.

How does it work?

Projects are assigned priorities based on anticipated returns, and these are used to place resources. However, projects in a portfolio are also linked – so if project A depends on data and services from B and from C, then even if A has the highest projected ROI, B and C are given high priorities, even if they have low or even negative ROI.

Using traditional project management techniques where projects are treated in isolation their low ROI may have even led them to being cancelled. Other metrics are also used to help refine the model, including looking at available staffing resources (and the available skill sets) and the risk associated with a project. It can be difficult to quantify risk – so you'll need to develop a common risk model with the rest of the business.

There's also the opportunity to look to the future and develop scenarios that can help deliver longer term business aims. That's where Hopperman's town planning analogy comes into play, as it's these scenario planning techniques that help define how the projects in a portfolio are chosen.

Scenarios don't define the future, instead they're used to lay out a landscape that helps IT departments choose which technologies and projects will support key business aims. They're also a tool for IT directors and CIOs, who can use scenarios to budget for future work, while still responding to the changing demands of a flexible business.

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