Effective portfolio management is a holistic process which takes the interdependencies among the individual IT portfolios into account and creates a transparent basis for the continuous improvement of IT value contribution. Product portfolio management provides clarity regarding the services to be provided by IT, their structure, and their alignment according to the requirements of the business, and influences among others the application portfolio. Application portfolio management is utilized to provide flexible, adaptive management of the investments in IT applications and the contemporary, need-oriented implementation of optimization measures. If they are implemented within the frame of projects, this affects the project portfolio. Project portfolio management establishes an comprehensible basis of decision-making by answering the question about the ideal distribution of limited resources among a number of projects ­leading to maximum value contribution.

The use of portfolio analysis enables portfolio controlling to provide a holistic overview of the distribution of costs, thereby creating the basis for reducing costs; for example, by ­canceling projects with a low cost-benefit ratio or by consolidating ­applications, in turn supporting business requirements oriented investment and budget management. As a method of IT business alignment portfolio controlling therefore supplies an effective process for maximizing IT value contribution while ­simultaneously maintaining transparency regarding the risks ­involved in the individual IT portfolios.

“You can’t manage what you do not measure”

The Balanced Scorecard (BSC) developed by Kaplan and Norton at the beginning of the 1990s is an established performance management system for the strategic management of companies or company divisions such as IT. The BSC of IT operationalizes the IT strategy on the basis of strategic IT goals, performance indicators, and measures. Starting from the vision, the strategic IT goals for the four typical perspectives are derived and ­documented in the strategy card, whereby the various ­cause and effect relationships are also identified. The individual ­perspectives are viewed from corresponding questions: “How does our IT benefit us monetarily?” (Financial perspective); “What does IT do for our internal and external customers?” (Customer ­perspective); “Where do we have a competitive advantage from/in IT?” (Internal business process perspective); “How innovative is the IT?” (Innovation and Learning perspective). Monetary as well as non-monetary performance indicators are assigned to the goals as measurement for goal ­achievement, summarized in the target values card and measured by the scorecard. The ­target ­values should be incorporated into the organization’s ­target ­system to assure sustained implementation. The appropriate operational measures are defined for the realization of the ­strategies and objectives.