Service Portfolio Management and the Business Value of IT

IT and business must learn to speak a common language, manage according to business outcomes, and organize for value.

by Pete Waterhouse

The current economic turmoil is a double-edged sword for IT. On the one hand, in times of business uncertainty, companies are quick to demand ruthless cost cutting. On the other hand, internal competition for finite IT resources is becoming fiercer. This is especially true as more business executives see access to IT resources as critical to the success of their business units. Some executives even realize that the right IT strategy can be a career saver.

Little wonder, then, that the objective of IT-business alignment continues to poll highly in CIO surveys -- whether from the popular press or from analyst research. Yet no matter what the economic cycle, the holy grail of “alignment” always seems to be the number one objective for CIOs, seemingly beyond reach. It’s even the buzzword upon which vendors and consultants promote their wares.

The continuing fixation on IT-business alignment illustrates problems that perpetuate within organizations and which exist no matter what the prevailing business condition or economic cycle.

Forget IT-Business Alignment, Think Fusion

Leading organizations don’t focus on alignment but rather fuse IT within the business function so they become one and the same. Doing this requires the dexterity to quickly organize resources (be they staff, assets, and even vendors) to ever-changing business demand. Fused organizations also provide complete transparency into how IT costs relate to business value, and at all times can clearly demonstrate what the technology function is doing to drive business objectives.

This all sounds like stating the obvious -- it's just common sense, after all -- so why does the “obvious” still remain beyond the reach of many organizations?

Organizations remain fixated on alignment because they lack a shared IT business context upon which to drive improvement. For business, the context is simple, straightforward, and results-based. For example, “How can we improve customer retention?” or “How can the organization cross-sell product X to customer Y?”

IT struggles to connect its work to this business context and thus struggles to demonstrate its business value. This has partly been because IT has been organized using a technical or IT asset-based perspective. Over time, this practice has led to islands (silos) of technology, replete with specialists and experts. Although IT has become more expert in managing networks, servers, and other technology, this inward focus has often led to IT providing the wrong sets of answers to the value-based questions put forth by the business.

It’s not that reporting last month’s network availability or IT's project completion rates have no value -- of course they do -- but they have no shared context and are mostly meaningless to business stakeholders. The biggest problem (especially in tough economic times) is that unless IT makes its reports more relevant, it runs the risk of being perceived purely and simply as a black-box cost center, one into which endless streams of investment flows and from which no tangible value is returned. When any business unit is placed under a cost lens, the tendency is to cut costs wherever possible, with potential detrimental long-term impacts.

These problems don’t just persist because IT is technically focused and speaks a different language than the business, or because data is fragmented in silos. Many times it comes down to other issues:

  • The Quick and the Dead: Sometimes events are happening too fast, and it becomes time-consuming, contentious, and difficult to make tough budget decisions with trade-offs between very different kinds of investments (ranging from infrastructure to people to projects) for a variety of business units and internal demands. The result: “squeaky wheels” are oiled and “sacred cows” are preserved.
  • No Reading Glasses: IT is continuously looking for ways to be more efficient, especially when it comes to transferring more resources from “keeping the lights on” (normally where 80 percent of the IT budget is spent) to driving new business value. Unfortunately, cutting costs is the easy part -- it’s about knowing where to cut costs that's harder, and IT often lacks the insight and cost transparency to do this effectively without compromising the business.

The Role of Service Portfolio Management

Fortunately, after years of IT-business alignment procrastination, the tools and best practices that enable IT-business fusion are finally falling into place. Service portfolio management (SPM) is that part of that solution and can be regarded as a strategy for demonstrably improving the business value of IT. SPM achieves this not by introducing another IT management silo but by working across silos to continuously "rightsize" IT resources to business requirements for service function, quality, and cost.

Providing this level of maturity and bridging the contextual divide, SPM must deliver the following three key capabilities:

  • Comprehensive demand management through a unified process for balancing strategic, operational, and tactical service demand against available budgets, staff, and assets
  • Cost transparency into how IT asset, staff, and vendor costs relate to services the business actually cares about
  • Value centricity with fact-based ways of demonstrating how the services IT delivers support business objectives

For many organizations, these lofty goals may appear well beyond reach, so service portfolio management must be practical enough to address more immediate pain points while maturing the service-based culture of IT operations. These pain points include:

  • Communication and Coordination: For those organizations struggling to communicate the business value of IT and where business users become frustrated not knowing what IT actually delivers, SPM provides Web-based, customer-facing catalogs that describe IT services in clear business terms. Additionally, these systems incorporate repeatable, measurable, and automated techniques to orchestrate delivery of service according to IT and business policies (e.g., prices and service levels).
  • Service Evaluation and Prioritization: Where organizations have no standardized process for evaluating requests for new services and enhancements, service portfolio management should provide automated processes and “what-if” analytics to prioritize and coordinate resources. Ideally, this capability should extend to providing an integrated view of all demand -- whether operational, tactical, or strategic.
  • Over-Consumption of Finite Resources: Lacking visibility into the cost of their own consumption, some business organizations consume IT like it’s a free resource. To reduce wasteful spending on under-used or over-engineered services, service portfolio management provides the business a mechanism for self-regulating consumption based on choices at different costs.
  • Fact-based Decision Making: Many organizations struggle to compare the value of existing capabilities to proposed capabilities so they can better determine where to invest, divest, and even outsource services. Here, SPM should incorporate techniques to analyze the entire portfolio for cost, quality, function, and benefit. This allows organizations to surgically rationalize their portfolios rather than ruthlessly and indiscriminately hack costs and further erode value.

The Lean and Fused Organization

IT's future success depends on delivering a fused organization, one in which IT and business speak a common language, manage according to business outcomes, and organize for value. By continuously aligning resources to business demand and providing cost transparency, service portfolio management delivers a far leaner proposition of technology that is converted into business value and wasteful practices that are systematically reduced.

Pete Waterhouse is the senior director of enterprise IT management marketing at CA. You can contact the author at