An important starting point for realising value from investments in IT is the Investment Portfolio.
This describes the investments in applications and services (those already in place, those planned and future possible applications), not in terms of technology but in terms of their role and contribution to business performance.
The portfolio enables senior business and IT managers to work together to get a clearer focus on doing the right things: setting priorities and ensuring strategic alignment of investments in IT-enabled change. The portfolio is based on a paper by McFarlan (Harvard Business Review, 1981) and work by Ward & Peppard (see their book Strategic Planning for Information Systems, 2002).
There are four classes of contribution to business performance. Core Operations systems are those where the IT is so embedded and necessary that if the system failed the organisation would suffer extensively, e.g. an airline booking system. In any given industry or sector, organisations will have more or less the same Core Operations portfolio.
Support systems are about efficiency improvement. Their failure does not have far-reaching consequences, e.g. training records unavailable for a week. Eventually of course, if the records remained unavailable for a significant period there would be some impact on performance.
Strategic and Exploratory are quite different – they both concern themselves with the future. Strategic systems are not just very big systems – they are those that genuinely contribute to the business’s plans and strategies. When these are implemented, people will work in very different ways – ways that will confer a competitive advantage for instance. The system does not deliver the strategic benefit – that comes from the change in the way business will be done, but the system is nevertheless crucial to the business change, e.g. integrated international supply chain systems needed for truly global operation.
Exploratory investments are the Research & Development of IS activity – prototypes, pilots, etc. of ideas that may confer large benefits. These projects are the basis for innovation. The uncertainty means that large sums of money should not be laid out until some preliminary business experimentation has taken place to explore if the benefits really exist and how they can be realized.
Find out more about Using the portfolio here.