Portfolio management enables organizations and IT executives to decide on and prioritize IT investments that would support the organizational objectives efficiently, while balancing the risk involved in the process. In particular, portfolio management provides a collaborative setting, where the decision-making upon projects which are added into the organizational portfolio is driven by specific business criteria, aligned with corporate governance and culture. In that way, portfolio management improves the business performance, while providing simplicity and precision into the process.
Planning and managing different IT investments as a portfolio of diverse investment categories, i.e. transactional, informational, strategic, and infrastructure, leads to the optimization of risk and return on these investments. Organizations follow portfolio strategies in order to achieve transparency suggesting that the more complex the decision-making process is the less optimum the investment decisions become.
Examples of IT Portfolio Management
Transactional IT investment would be performed by a company like UPS. UPS is a leading provider of specialized transportation and logistics services globally and a corporation of near US$43 billion aiming to facilitate global commerce. In logistics industry, time and convenience of service are essential. A major part of UPS’s success is attributed to the committed use of IT. UPS offers free package tracking services to its clients so that they knew precisely where their package is at any given minute and when it would be actually delivered. Before the use of IT technology, tracking services were provided via phone calls which generated additional call centre costs of $2 to $6 per customer. Today, with the use of transactional IT investment UPS offers a higher quality of services at a lower cost, thus cutting costs and increasing productivity and customer satisfaction.
Informational IT investment would be performed by a company like 7-Eleven. 7-Eleven is the largest operator, franchisor and licensor of convenience stores globally. Being a customer-centric corporation, 7-Eleven uses IT in order to gather information about trends in accounting, compliance, or communication to be able to improve the service provided and to introduce new product lines. In that way, 7-Eleven increases profit margins by constantly meeting customer needs through a consistently high-quality offering of products and services at reasonable prices. Moreover, through informational IT investment, 7-Eleven uses proactively the information towards a better decision-making and it achieves better information, better integration, faster operations and increased control over its business practices.
Strategic IT investment would be favoured by a company like Carlson Companies. The organization provides a broad range of services operating as a global leader in the marketing, travel, and hospitality industries. Through Carlson Shared Services the organization offers also IT and financial services, which signifies the introduction of innovative products in the market. In that way, it gains competitive advantage and improves global positioning. Typically, strategic IT investment is viewed as high-risk high-return strategy; however organizations that favor this type of IT investment enjoy high profitability through product innovation.
Infrastructure IT investment would be applied by a company like Raytheon Company. Being a global technology leader in defence, homeland security and other government markets, Raytheon views infrastructure IT investment as a means to provide standardized high-quality products and reduce costs. Moreover, enhanced IT infrastructure capability facilitates IT initiatives and flexibility. Providing excellent electronics, mission systems integration, and other capabilities in the areas of sensing, effects, command, control, communications, intelligence systems, and mission support services, Raytheon would need to invest highly in IT infrastructure to ensure business flexibility, business integration, and reduced IT costs.
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