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IT Portfolio Management

Introduction

Just as investors have portfolios of financial investments to address their multiple investment objectives, firms have portfolios of information technology (IT) investments. Four different management objectives guide firms’ investment in IT resulting in four different asset classes. Each of these asset classes has a different objective and a unique risk-return profile (slide: Risk-Return Profiles in the IT Portfolio). Just like any other investment portfolio, the IT portfolio must be balanced to achieve alignment with the business strategy and the desired combination of short and long term pay off. Many firms have adopted IT portfolio management to help with IT prioritization as it provides a strong business-oriented lens familiar to most executives.

MIT CISR research has found that firms invest in IT to achieve four different management objectives (slide: Management Objectives for Investing in IT):

  1. Strategic (to gain competitive advantage);
  2. Informational (to provide management information);
  3. Transactional (to process transactions and cut costs); and
  4. Infrastructural (to provide shared services and integration).

Just like any other investment portfolio, the IT portfolio must be balanced to achieve alignment with the business strategy and the desired combination of short and long term pay off. Portfolios must also be reweighed when economic conditions or strategies change. We have identified the average and top performing firms’ IT portfolios in several industries and the statistical relationships between IT investment patterns and a wide range of firm performance measures including growth, profit and asset utilization. We continue to collect new IT portfolio data yearly and refine our understanding of the impacts of each asset class on firm performance (slide: Rethinking IT as an Investment Portfolio).

Slideshow

CISR IT Portfolio FrameworkManagement Objectives for Investing in ITRethinking IT as an Investment PortfolioCISR IT Portfolio Framework

Getting Started

Publications

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Title Author Type Date
Define Your Digital Strategy—NowRoss, Jeanne W.
Sebastian, Ina
Fonstad, Nils O.
Research Briefing2015-06-18
Sprint Corporation's New Normal: Achieving Speed to Market in a Highly Competitive MarketplaceWixom, Barbara H.
Kohli, Rajiv
Working Paper2015-04-03
Data Value Assessment: Recognizing Data as an Enterprise AssetWixom, Barbara H.
Markus, M. Lynne
Research Briefing2015-03-19
Beyond Governance: Changing the Conversation About IT InvestmentsRoss, Jeanne W.Video2014-11-06
Technology DebtShah, MihirVideo2014-10-31