The purpose of Portfolio Management, when applied to Provider investments (especially, IT investments), is a central mechanism to an overall Value Management approach by making investment allocation explicit against strategic choices such as how much to invest in potentially high value, but usually risky initiatives versus safe but low-value activities.
The Service Portfolio represents the complete set of services that are managed by the service Provider. It is used to manage the entire lifecycle of all services and is defined by three categories of services. The service pipeline represents service that is under consideration (purposed) or those that are currently in development but are not yet ready for deployment or consumption by the business partners. The next category is the service catalog which represents all live services or services that are available for deployment to the business partners. The final category is retired services. This represents the services that are currently in the process of being retired or those that have been retired.
There are many methods to classify a Portfolio for Information Technology. Choosing and implementing a Portfolio scheme is a way to clarify what is of strategic importance to the business partner and is an important contributor to demand shaping and investment prioritization. In an earlier blog, I referenced the IT service portfolio as one of the four elements in the Business / Provider alignment model that help to ensure alignment between the Business Partners needs and the Service Providers capabilities. Here we are going to utilize the Weill/Broadbent Classification Scheme and take a deeper dive into the four elements of the Service Portfolio.
Peter Weill defines infrastructure as, “The base foundation of budgeted-for IT capability (both technical and human), shared throughout the firm as reliable services, and centrally coordinated.” This is quite different from the common usage of the term infrastructure, but it gets to a powerful and strategic way of thinking about the topic. (1) Infrastructure investments underpin the services delivered to the business. Their objective is to provide the base foundation of shared IT services. This base foundation suggests that all other capabilities are built upon and depend upon this base. Organizations try to cost-justify infrastructure. This can be quite difficult. It’s the things that infrastructure lets you do that create the value. In other words, it is the services that allow you to deliver value, not the infrastructure. Some other important aspects of the infrastructure are what we budget for, that it is shared throughout the entire organization and that it should be centrally coordinated but not necessarily centrally managed.
These represent traditional IT services such as payroll, accounting or sales order processing and represent a major part of the service portfolio. These services are normally low risk, not usually associated with a significant change to the way the business operates and the main objective of their investment is to reduce the cost of doing business through some type of automation.
An increasingly important class of investment today. They provide the business with better, more accurate and up to date information by synthesizing data generated by the transactional services into information which can be analyzed and create knowledge and wisdom for both the business partner and service provider.
These investments are ones that can provide the business with a competitive advantage in the market space, sometimes by radically changing the way a business can operate and compete. A strategic investment is one that the completion must somehow respond to or face the loss of significant market share or some negative impact to their brand or reputation. We must remember that these types of investments also come with very high-risk factors.
By looking at the services offered in this light, it allows the Business Relationship Manager (BRM) and the business to be able to better understand how to invest the resources across the portfolio while doing the appropriate risk assessments, yet ensuring an appropriate Return on Investment.
(1) Leveraging the New Infrastructure: How Markets Leaders Capitalize on IT - By Peter Weill & Marianne Broadbent.