| A key
factor in active portfolio management is understanding the extent to which
each discretionary project is likely to contribute to value creation,
remembering that circumstances change during the life cycle of a project
and those changes may impact certain of the assumptions in the original
business case. This implies a need for each project to report through
the project manager, perhaps on a monthly basis during the development
phase, to update the financial, risk and other relevant components of
the business case. This will help ensure that portfolio management and
governance are performed on the latest, most up-to-date information.
For some years the SeaQuation team, in IT investment portfolio work for ING, has used the cumulative NPV graph illustrated in figure 2 to indicate value creation (and destruction) from its IT investment portfolio. The example in figure 7 contains dummy data but it demonstrates in a very visual way how the total portfolio is intended to deliver value.  In this example it can be seen that from a total of almost 100 discretionary projects, positive value is expected to derive from little more than than half, and fewer than 20 will deliver 80 percent of the positive value of the portfolio. On the negative side, there are around 30 projects that look to be delivering zero or negative value. A picture such as this suggests two key actions: 1. Review all negative NPV projects to determine whether they should be cancelled, rationalised or re-scoped. 2. Ensure that the ‘crown jewel’ projects are properly resourced and managed and really will deliver the value intended – you may be ‘betting the farm’ on these projects. |
