The reason most organizations struggle to demonstrate business gains from information-technology investments is that their IT portfolio management (ITPM) is inadequate. Research at 130 companies, including Harrah's Entertainment, Waste Management and Blue Cross Blue Shield, shows that only 17% are at the advanced, or synchronized, stage of ITPM. Scrutiny of that 17% reveals best practices for successfully aligning IT with strategic goals.
The key to bridging the business-technology divide and improving results is early communication. Not only must senior business managers understand more about how IT affects both strategy and the bottom line, CIOs need to learn to communicate the vision, strategies and goals of the IT organization in terms non-IT executives can understand. The most effective partnerships studied were those in which the CIO took initiative in discussing ITPM with business leaders and eventually transferred accountability to them.
The most successful practitioners obtained cost savings of up to 40% of pre-ITPM budgets, better alignment between IT spending and business objectives, and greater central coordination of IT investments across the organization. By following certain specific steps to establish or upgrade ITPM and by benchmarking against synchronized companies, large organizations can make IT an integral part of their competitive advantage.
Mark Jeffery is assistant professor of technology at the Kellogg School of Management's Center for Research in Technology and Innovation at Northwestern University in Evanston, Illinois. Ingmar Leliveld is a principal with DiamondCluster International Inc. in Chicago. Contact them at mjeffery@northwestern.edu and ingmar.leliveld@diamondcluster.com.
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