Agencies take comprehensive approach to managing IT assets

What distinguishes portfolio management from other budget processes is that it's 'the only one looking at investment alternatives,' AID's John Marshall says.

Olivier Douliery

The Navy 'actually snuck our way into portfolio management' through NMCI, CIO David Wennergren says.

David S. Spence

'You need to look to the basics; choose projects that present a sound business case,' USDA's Marilyn Holland says.

Laurie DeWitt

'You've got to make it an enterprise process, not just an IT process,'DLA's David Falvey said.

Henrik G. de Gyor

When the Navy began rolling out its Navy-Marine Corps Intranet, the service's managers were doing portfolio management. They just didn't know it.

As part of getting NMCI in place, the Navy designated functional-area managers to evaluate applications against their business processes and decide which applications would be on the new network and which they didn't need.
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In the ensuing vetting process, managers got rid of legacy applications by the thousands.

That was a form of portfolio management, said Navy CIO David Wennergren.

'One day you wake up and say to the managers, 'Do you guys know what you were doing? You were doing portfolio management,' ' he said. ' 'You understood what your business processes were and then you understood the portfolio of applications and systems to support those processes. And then you began to manage them.'

'So we actually snuck our way into portfolio management,' added Wennergren, co-chairman of the CIO Council's Best-Practices Committee, which is developing guidelines on portfolio management.

Although there's more to the process than pruning legacy applications, the Navy's approach illustrates the underlying philosophy. In a portfolio system, IT is treated as a collection of assets to be monitored and manipulated for maximum results, much like a stock or real estate portfolio'except that the goal in government is to increase mission effectiveness rather than profits.

The idea of managing IT as an investment has been around for a while, springing from the Clinger-Cohen Act of 1996.

But the concept of portfolio management is only just catching on in government IT; use of the term itself is fresh.

The 2000 revision of OMB Circular A-130, for example, requires agencies to 'prepare and maintain a portfolio of major information systems that monitors investments and prevents redundancy of existing or shared IT capabilities' as part of the capital-planning selection process.

The General Accounting Office also has been brandishing the term, describing an IT portfolio as 'an integrated and competing set of investment options.'

The portfolio management approach, says GAO, lets an organization 'consider the relative costs, benefits and risks of new and previously funded investments and thereby identify the mix that best meets its mission, strategies and goals.'

And just last year, the CIO Council came on the scene with a guide, A Summary of First Practices and Lessons Learned in Information Technology Portfolio Management'at www.cio.gov.

Most agencies are in the very early stages of developing IT investment portfolios.

'A number of agencies are just taking the initial baby steps to set up an effective' portfolio management program, said John Marshall, CIO and assistant administrator for management at the Agency for International Development.
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As part of the A-130 capital planning process, portfolio management interrelates with other mandatory processes such as OMB Circular A-11's Exhibit 53s, which require agencies to provide budget estimates for overall IT investments, and Exhibit 300s, which require business cases for major IT budget initiatives.

'A lot of these pieces are part of a broader, decision-making framework,' said Marshall, co-chairman with Wennergren of the CIO Council's Best-Practices Committee.

He added that a major difference between portfolio management and other budget and regulatory processes is that portfolio management is 'the only one looking at investment alternatives' to maximize the effectiveness of IT assets.

Portfolio management probably has the most symbiotic relationship with enterprise architectures, which describe current and targeted relationships between business and management processes and IT.

'Ideally, you want portfolio management to be driven by your enterprise architecture,' Marshall said.

Marilyn Holland, chief of the Program, Planning and Management Division in the Agriculture Department's CIO office, concurred. 'An enterprise architecture provides a plan and strategy for investing in IT,' she said. 'In an ideal world, it would be wonderful to have your target architecture all developed so that you could look at your investments in terms of a portfolio to support that.'

While most agency architectures are still incomplete, managers can still use the principles of the enterprise architecture'and its emphasis on an inextricable link between business processes and IT'to propel their portfolios, Holland said.

At USDA, 'we're still developing our enterprise architecture but we're looking at IT investments in terms of lines of business and how many investments does it make sense to have within a line of business,' she said. 'You can do the consolidation there and eliminate duplication. Even without a full-fledged enterprise architecture, the principles help you focus.'

Start slowly

How do you get started on building an IT portfolio? Start slowly and focus on one aspect, such as a specific mission or program area, advises the CIO Council's guide. 'Over time you can add new portfolios until you have captured all of your IT investments,' the guide says.

It's also crucial early on to understand the assets you own, Wennergren said.

The Defense Logistics Agency, for example, took pains to survey IT assets to understand its baseline before beginning to build a portfolio. 'You've got to be vigilant in identifying all those IT investments,' said David Falvey, program executive officer at DLA.
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'You've got big-dollar-value investments and you've got little-dollar-value ones,' Falvey said. 'We rightly focus on the big investments but we have to remain vigilant to look for the little ones, too. If you take a $100,000 investment at one location, another at a second, another at the third, pretty soon you find out that all these $100,000 investments are redundant and that all those little, individual investments add up to one big investment.'

At the Agency for International Development, 'we're taking it one step at a time,' Marshall said. 'We've got a few of the building blocks in place.'

One of those building blocks is a governance structure whose executive board, among other duties, reviews IT assets and approves Exhibit 300 business cases.

'We're following the Exhibit 300 rules and beginning to build the lifecycle of activities around portfolio management,' Marshall said.

On a portfolio management maturity scale of one to 10, 'we're getting into the three to four range,' he added. 'I'd like to see us at seven or eight in the next couple of years.'

'It's not a speedy process,' said Rex Lovelady, account manager for Defense agencies for Robbins-Gioia LLC of Alexandria, Va. 'You can catch bits and pieces of low-hanging fruit but to institutionalize the process and get through that change management takes a lot of time.'

There is no single model for formulating and structuring a portfolio management program, observers said. Government agencies are too varied in size and disparate in mission for a silver-bullet approach to work.

At large government agencies with a multiplicity of programs and missions, 'you have different stakeholders with different objectives,' said Robert Guerra of Guerra, Kiviat, Flyzik and Associates of Oak Hill, Va., who worked on the CIO Council's guidebook as a representative of the Industry Advisory Council. 'Therefore, balancing and managing your portfolio [among stakeholders] is very, very challenging.'

As a result, implementing the appropriate management structure is crucial to the success of a portfolio management program.

DLA, for instance, has built a management structure to oversee its IT portfolio, Falvey said.

Officials organized the agency's IT investments into three portfolios'business systems, e-business and infrastructure. Then they designated portfolio owners for each of the portfolios and, under each portfolio owner, portfolio managers to oversee investment details, Falvey said.

Falvey said the idea of incorporating portfolio owners and managers came from a variety of sources, including lessons learned from other agencies, best practices from the private sector and principles from GAO's Information Technology Investment Management: A Framework for Assessing and Improving Process Maturity, available at www.gao.gov.

Once a portfolio is in place, it's vital to find the right blend of investments to support business processes and, in effect, get the best returns.

But along with the mix, it's also important to ensure that you're selecting high-value investments, Holland said.

'Portfolio management wants to look at the best mix of investments but underlying that, you want high-performing investments,' Holland said. 'So you need to look to the basics'choose projects that present a sound business case. And then you need to put into place the tools, human resources and processes that are going to help the individual projects to succeed.'

Putting together an IT portfolio is a highly complex undertaking and many leading IT portfolio managers use a variety of automated tools to help them formulate, manage and maintain their portfolios, the CIO Council said in its guide.

'The tool becomes valuable for the CIO,' said Rod Turk, senior consulting manager for Robbins-Gioia. 'You can develop the tool and put a dashboard together that allows a CIO to see exactly where his [portfolio assets are] at any given point in time.'

Many tools

Some agencies are using the Information Technology Investment Portfolio System (I-TIPS), a Web tool developed by an Energy Department-led team to help agencies manage IT investments. There's information online at www.itips.gov.

Other agencies are using commercial tools. The Agriculture Department, for example, is piloting WorkLenz from M'tier Ltd. of Washington to supplement I-TIPS.

But Holland and other IT executives caution that it's easy to become too reliant on automated tools to do portfolio management.

'I think tools will be very helpful to all of us in the federal community but they certainly don't take the place of having processes,' Holland said.

DLA's Falvey agreed. 'My personal recommendation is that agencies should focus more on the process than the tools,' he said. 'I think too frequently we go out and buy a tool and think that's going to solve all of our problems.'

Falvey noted that DLA is using Microsoft Excel spreadsheets to help organize its IT portfolio. 'We're doing portfolio management without a very sophisticated tool,' he said. 'It's all about having a sound process and getting people to work together, more than the tool.'

As with many other transformational changes in government, some of the biggest impediments to successful portfolio management are cultural, not technical.

'People in upper management see portfolio management as a value-add to their management processes, but I think it's going to take time to get people at the lower levels of the organization to understand that value,' Guerra said. 'There are going to be naysayers who say, 'Yeah, I understand this portfolio management stuff but my program is most important.' '

That's why it's imperative to approach portfolio management from the perspective of the entire enterprise, not the program level, IT execs said.

'You've got to make it an enterprise process, not just an IT process,' Falvey said.

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