The purpose of the strategic IT controlling instrument portfolio controlling is to align and manage the IT portfolios by means of an comprehensible, standardized evaluation and selection process in that tried and proven concepts of portfolio management for capital goods are transferred to IT. The subjects of portfolio controlling include the application, project, product portfolio and, in the case of IT providers their region or market segment specific portfolios. The alignment of these portfolios is closely meshed with long-term investment planning and budgeting, as shown in Figure 1.

Application portfolio management has the goal of analyzing ­existing and planned IT applications to determine the related risks and value contributions and to create a foundation for goal-oriented investment management. Moreover, well-founded decision-making criteria for the optimization of the application portfolio in terms of the ideal value contribution profile are ­established. The IT controlling approach is tightly integrated into the method frameworks for IT strategy development such as TOGAF, SOA, and enterprise architecture management.

The objective of project portfolio management is to align all of the IT projects which are in the planning, execution, or closing phase based on criteria for economic efficiency, effectiveness, and risk. Economic efficiency is assessed on the basis of cost and earnings variables, amortization periods, or time periods. A good recommendation here is the use of methods of dynamic investment appraisal such as Net Present Value (NPV). In contrast to classic procedures, it may prove more efficient in practice to determine first the return flows as they can be used to calculate the maximum amount of the investment which can be then compared with the estimated capital employed, offering a basis for faster decision making. Criteria for the assessment of economic efficiency can be derived from the IT Balanced Scorecard, assuming that one has been defined, but are always oriented to IT strategy. The cause and effect relationships of the company’s value drivers can also be applied so that unquantifiable aspects can be taken into account during the assessment of the support of strategic goals.

The objective of product portfolio management is to align the IT product portfolio to customer requirements and that independently of the operating model. This involves generating a common understanding of the product and its modeling into a product portfolio from a service and applications oriented IT view and a process oriented customer view. Ideally, this is performed as a pro-active process and not just as a reaction to changes in customer requests. A target-actual comparison is then conducted with the aid of portfolio analysis, which in turn forms the basis for goal-oriented investment management.