by Andrew Makar

The past six articles described the goals, objectives and a framework for portfolio management. It all looks good in theory, but how is the framework put into practice? This article describes how an IT organization from a Fortune 500 manufacturing company applied the framework to its portfolio of accounting and finance applications.

The accounting and finance business functions had multiple IT systems supporting users across global business units. The company had grown through acquisition by acquiring smaller manufacturing firms, and consequently the company acquired a new set of accounting and finance systems. Worldwide, the accounting and finance function had over 150 applications creating, updating and reporting financial data. The company was able to inventory the variety of MS-Access databases, mainframe systems, Oracle databases, SAP ledgers and PeopleSoft accounting packages due to the architecture layer the organization implemented as part of their portfolio management strategy.

Architecture in Action

At the architecture level, the company implemented an in-house developed IT inventory and management system that stored application profile information. The profile information ranged from server names, domain names, integrated applications, financial operating costs and supporting personnel contact information. The database stored technical information about the software stack, physical hardware and related vendors. Each element in the technical architecture was compared against the company's approved catalog of technology standards. Fans of enterprise architecture would also be impressed with the system's alignment to enterprise level process model and data entities.

On top of the transactional IT inventory system was a data warehouse. IT managers could slice and dice the data to generated different views of application portfolio data. With a click of a button, a portfolio could be analyzed to identify outdated hardware. Managers could quickly identify all the systems integrated with their applications in their local portfolios. Portfolio managers could also identify potential redundant application across the global finance and accounting environment by reporting all the applications that create accounting transactions or generate financial statements.

Ideally, all business units would use one system to generate an accounting transaction rather than use multiple systems that required consolidation and general ledger account translation. By leveraging the architecture layer and gathering the business intelligence from the portfolio, the managers were able to identify portfolio opportunities.

Organizational Operations

At the organization layer, the metrics, methodology and common terminology describing portfolio management processes were implemented through the IT organization. Training sessions were held to inform managers about the primary processes used to manage the portfolio and communicate consistent terms found in planning activities using the supporting IT inventory application. Process guides, a portfolio management website and portfolio coaches were made available to coach the organization in applying portfolio management techniques to the portfolio and support the annual cycle plan.

The implementation of the IT inventory system was a success because the organization focused on the organizational process layer as well as the primary process layers. If portfolio managers failed to dedicate time to the organizational layer, the IT organization would have implemented another application that was feature rich but lacked the meaningful data to provide any business intelligence.

Support Layer Symbiosis

Portfolio management is an ongoing cyclical process. The support layer in the IT organization had clear financial management, risk management and project management standards that shaped how project opportunities were analyzed and ultimately executed. The IT organization had enterprise level and organizational level PMOs in place to support projects and guide project managers on successful execution.

A standard risk management technique was implemented through the organization. As portfolio opportunities were identified, risks were identified, analyzed and quantified. Depending on the risk analysis, the portfolio opportunity would proceed in the process or be deferred.

A common financial management process was used to calculate portfolio actual costs and forecasts. Dedicated financial portfolio planners established processes to forecast, plan and report actual costs against the accounting portfolio. These costs were collected and updated in the IT inventory system to provide further information on the operating cost of the portfolio. The technology architecture management team also provided insight into the latest standards for IT development and helped the organization determine what platforms were best supported given the constant change and advances in IT technology.

Primary Layer Performance

The previous three layers provided a strong foundation for the portfolio management processes found in the primary layer. During portfolio monitoring, the accounting and finance IT team analyzed the reports in the IT management tool and identified redundant applications, declining hardware and software components, and applications running on non-standard platforms.

The team funneled these observations into opportunities for the portfolio planning and prioritization processes. The organization facilitated an all-day portfolio planning seminar to review the applications with European and North America stakeholders. At the conclusion of the event, both IT and business stakeholders had a better understanding of the portfolio and were able to coordinate on tactical and strategic roadmaps for the next year and future cycle plans.

Prior to the end of the year, the IT team reviewed the major project candidates and obtained funding and approval from the business to pursue project execution. The next year's portfolio focused primarily on consolidation of redundant accounting platforms, a few system upgrades and an approved list of minor enhancements. Project execution followed and the portfolio management tool was updated with the latest results.

The combination of all four process layers provided the organization with an effective portfolio management model. Process challenges such as communication, coordination of the analysis, agreeing on portfolio priorities and updating the IT management tool still existed. However, the IT organization was able to follow a standard process model for portfolio management that was consistent across the portfolio. Reams of paper can be written on portfolio management theory; however, it is useful to review the case studies and proven examples of a portfolio management model in action.