IT Portfolio Management's Benefits a Draw for Midmarket Companies

Midmarket fims are investigating portfolio management -- no longer the sole province of large enterprises -- to manage costs, reduce risk and improve IT investment decision making.

IT portfolio management started out modestly enough at W.P. Carey & Co. in New York City, as it often does at midsized firms like this $225-million real estate investment management company.

"Our IT governance structure was really just me in a room with the CEO, determining what were the correct purchases," says Mykolas Rambus, who signed on in 2002 as CIO at W.P. Carey, which owns and manages assets worth $7 billion. When he arrived, the company's small technical team was burning out just trying to keep everything up and running.

"There wasn't a good interface with the business, the people who are investment professionals," Rambus recalls.

Fast-forward to the present. The CIO is now part of an executive steering committee that has grown far beyond prioritizing the projects managed by his 10-person IT staff. The senior managers focus instead on new and existing initiatives most likely to drive business in the highly competitive real estate space.

"The thing I like most about this team," says COO Tom Zacharias, "is that we can approach our business as though we have an in-house technology consulting group, like a SWAT team. To me, it's been a great way to drive tech improvements."

How Rambus brought his team so far in three years speaks volumes about the 26-year-old MIT graduate and onetime high-tech entrepreneur. But it also highlights the burgeoning importance of the craft of IT portfolio management (PM). Its appeal is catching on at many fast-growing midsized companies because managing IT this way can reduce risks, cut costs and bring IT and business decision makers together.

At its best, portfolio management is inseparable from IT governance, a major control point where senior executives come together to evaluate multiple projects, budgets, priorities and resources. Whatever software or tools a company uses -- and there are dozens to choose from -- matter much less than the governance process itself, CIOs and industry experts agree.

"I've seen a lot of business executives better able to understand the issues on IT and investment after these conversations," says Jeff Kaplan, author of Strategic IT Portfolio Management and a director at the management consultancy PRTM in Waltham, Mass. "In the first hours of the process, some companies save hundreds of thousands of dollars just by red-lining or canceling projects that were well intentioned but weren't a priority."

Software can also play a significant role in managing the IT portfolio, and midmarket companies make up at least 60% of the customers buying applications in this space, says analyst Evan Quinn of Framingham, Mass.-based IDC, which tracks some 48 vendors in this segment and estimates the scope of the project and portfolio management market broadly at $2.1 billion in annual sales.

"The average implementation of PM systems is still down in the range of 250 to 400 users," notes Rich Murphy, founding partner at EPK Group LLC in Jupiter, Fla., which builds portfolio and resource management systems. "It isn't the size of the organization that determines the type of system you need. In terms of the basics, midmarket companies need the same type of systems that larger firms do." (See "PM Tools: The Spectrum.")

This was first published in December 2005

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