If you receive errors when attempting to view this white paper, please install the latest version of
Adobe Reader.
"Planview, the leading provider of comprehensive portfolio management solutions, today announced that it has acquired substantially
Business Engine. Business Engine focus in
IT portfolio management further strengthens Planview as the clear independent market leader in the IT portfolio management market."
Source : Business Engine
Aligning IT and the Business: An In-Depth Look at Scoring - Selecting and Scheduling the Project Portfolio
Scoring Model and Project Portfolio are also known as:
Credit Scoring,
Credit Scoring Model,
Credit Scoring Software,
Credit Scoring System,
Lead Scoring Model,
Management Scoring Model,
Risk Scoring Model,
Project Scoring Models,
Score Group Models,
Score Model,
Score Models Directory,
Score Models List,
Scoring,
Scoring Analysis,
Scoring Assessment,
Scoring Methods,
Scoring Model,
Scoring Model Example,
Scoring Model Project,
Scoring Model Wiki,
Scoring Models,
Scoring Rules,
Scoring Techniques,
Testing Scoring,
True Score Model,
Scoring Model Development,
Scoring Model Integration,
IT Project Management Software,
Project Change Management,
Project Cost Management.
Business Engine is a registered trademark and the Business Engine Network and BEN Alignment
Engine are trademarks of Business Engine, Inc. All other brand and product names referred to herein are
trademarks or registered trademarks of their respective companies.
Executive Summary
Making the right investment decision is the
difference between business success and
failure. Senior executives must seek tools to
help balance efficiency, effectiveness, cost, and
growth in concert with new investments.
According to Forrester Research, Portfolio
Management is "the manifestation of the
alignment of the corporate and IT strategic
plans, viewing the portfolio as a suite of
complementary investments that collectively
provide the best possible allocation of resources
to meet the business needs of the corporation."
Portfolio optimization, then, is the process of
analyzing the technology portfolio and managing
the assets within it, to obtain the highest return
given a specified level of risk.
Why Optimize?
Recent studies, including one from the Harvard
Business Review, indicate that an astounding 90
percent surveyed feel they do not have control
over their project pipeline. Add the fact that
resource constraints force companies to be
reactive instead of proactive, and a resultant 60
percent of all projects fail to meet budget,
deliverables, or delivery dates.
These issues lead to broader challenges
including:
- A perceived lack of project value
- Strained relationship between IT and business
- Poor/Non-existent alignment with business goals
Organizations that drive business and IT
alignment can reap the benefits. These include:
- Enhanced customer satisfaction
- Firm establishment of IT as a value center
- Increased ROI potential for IT investments
- Increased credibility with business units
- Low-risk catalyst for organizational portfolio management education
- Material portfolio alignment
- Organizational preparedness for recurring, robust portfolio selection and alignment processes
- Shared accountability with business partners
The BEN Alignment Engine allows the
enterprise, presented with a choice of portfolio
items, to hold the appropriate amount or
weighting of each item to achieve the highest
returns, at a desired level of risk. It provides
organizations with the visibility and control to
make better business decisions and ensure
continuous alignment of programs to business
objectives.
Establishing a Scoring Model
At its core, alignment of business and technology goals follows a simple five-step process. These are
outlined below.
- Facilitate IT and Business agreement on a scoring model encompassing business objectives and relative weighting, as well as measurement criteria
- Inventory of new and existing projects and initiatives
- Collaborative IT and Business scoring of projects/initiatives against the scoring model
- Calculation of a prioritized list of projects
- Facilitation and analysis of projects/initiatives against resource/budget constraints and final optimized portfolio selection.
To this end, it is important to consider a list of business objectives or drivers (e.g., Increase Revenue,
Decrease Costs, Increase Customer Satisfaction, etc.) and, potentially even financial results. As shown in
figure one below, each of these is then given a weight that maps to corporate objectives and strategy.
Figure 1: Business Objectives and Relative Weighting
| Business Objective |
Weight |
| Staff Reduction |
100 |
| Increase Revenue |
300 |
| Decrease Costs |
100 |
| Customer Satisfaction |
200 |
For each objective, the organization specifies a measurement criteria value ranging from 1 - 10. Each
criterion is associated with a value. Staff Reduction is used as the business objective example below.
Figure 2: Measurement Criteria for the Business Objective "Staff Reduction"
| Criteria |
Value |
| 1 to 3 FTEs |
1 |
| 4 to 6 FTEs |
2 |
| 7 to 9 FTEs |
3 |
| 10 to 12 FTEs |
4 |
| More than 12 FTEs |
5 |
The score for a given project or initiative is the sum of the products of the weights of the business
objectives multiplied by the value for the measurement criteria. A simplified scoring model is detailed
below in Figure 3:
Figure 3: A Simple Scoring Model
| Business Objective |
Weight |
Criterion 1 |
Value 1 |
Criterion 2 |
Value 2 |
Criterion 3 |
Value 3 |
| Increase Revenue |
200 |
Low |
1 |
Medium |
2 |
High |
3 |
| Decrease Costs |
100 |
Low |
1 |
Medium |
2 |
High |
3 |
| Increase Customer Satisfaction |
100 |
Low |
1 |
Medium |
2 |
High |
3 |
As shown in table four below, the score for ‘Project A’ was determined by looking up the weight of the
business object ‘Increase Revenue’ (200) and multiplying it by the value for the criterion ‘Medium’ (2) to
arrive at: 200 * 2 = 400.
Figure 4: Sample Scores
| Project |
Score |
Increase Revenue |
Decrease Costs |
Increase Customer Satisfaction |
| Project A |
400 |
Medium |
|
|
| Project B |
300 |
|
High |
|
| Project C |
100 |
|
|
Low |
| Project D |
700 |
High |
Low |
|
| Project E |
400 |
|
Medium |
Medium |
A more complex example is ‘Project E.’ This example is scored by taking the weight for ‘Decrease Costs’
(100), multiplying that by the value for the criterion ‘Medium’ (2), and adding it to the product of the weight
for ‘Increase Customer Satisfaction’ (100) and the value for the criterion ‘Medium’ (2). Numerically this
would be represented as follows: (100 x 2) + (100 x 2) = 200 + 200 = 400.
Specifying Constraints
An important consideration of the aligned portfolio is an understanding of constraints—be they resource,
funds, or otherwise. Financial constraints are expressed in terms of money (USD, Euro, or some other
currency). The financial constraints, by default, are labor1, capital, and expenses. A fourth financial
constraint is FTE costs and is calculated based upon FTE rates and FTEs.
The portfolio of work in question should cover a period of time, up to 24 time periods is likely plenty.
These can be specified as months, quarters, or years. For each period, two types of constraints can be
applied: Financial and FTEs2
The assignment of resource types (e.g., DBA, Business Analyst, etc.) is a logical next step in determining
constraints. Each resource type will have an associated periodic rate. For example, if the period is
measured in quarters and the units were FTEs, the rate would then be the cost of that resource type, per
FTE, per quarter. As a result, each resource type will have a constraint (capacity) per period. The grid
below delineates a set of sample constraints. Notice the detail around both labor and cost constraints.
Figure 5: Understanding the Business Constraints
The grid above effectively provides detailed, time-phased comparisons between Supply and Demand for
Cost and Capacity Constraints. The detail affords the organization drilldown views into the demand on
individual projects and candidate ideas. It also provides the ability to model up changes in the supply
profile by making changes to labor, cost, and capital requirements. This is critical in determining the
number of resources and the financial requirements to execute the portfolio.
1 Labor is meant to represent costs associated with non-contingent, non-employee labor such as project consultants from Accenture, for example.
2 By default, FTEs are used. This can be renamed to any unit such as person months, hours, person days, etc.
Specifying Demand and Associated Benefits
The constraints analysis only completes the supply side of the equation. Demand in most organizations
can seem endless. Thus, a time-phased demand analysis creates the demand side of the portfolio. This
can be accomplished by evaluating each resource type per project or program. The grid below illustrates
this aspect. In this particular potential portfolio of projects, multiple scenarios are being considered based
on differing evaluation criteria. This view allows for pragmatic decisions and forces projects into the
portfolio regardless of score or financial metrics. It is very useful for categorizing pet projects!
Figure 6: Understanding Potential Demand
In addition to specifying the time-phased demand, the organization must also specify benefits. By default,
benefits can be revenue, savings, or FTE savings.
Figure 7: Understanding the Cost Benefit Equation
As shown in the charts above, a cost and benefit analysis is a key component of the analysis that needs
to be conducted prior to the optimal portfolio selection. In these cases, the percent of cost allocated to the
various sponsor organizations is juxtaposed against the benefit provided by the same organizations.
Selecting the Optimal Portfolio
As with any automated process, manual intervention is vital. A project or initiative should have the
capacity to be forced in or out depending on external events (e.g. regulatory requirements, industry
mandates etc.) via various mechanisms. A project should become a component of the final portfolio via:
- Manual inclusion or deletion from the portfolio
- Forced in due to the project or initiative being in a mandatory category
- Forced in due to the project or initiative being in a mandatory category
Once all of the information is collected, projects and initiatives are scored and the portfolio is ranked and
selected based upon rank and resource constraints. The ranking can be based upon up to three criteria.
The default is the score divided by the cost (descending), followed by total benefits (descending),
followed by total cost (ascending). Other factors may be used such as ROI, net benefits, etc.
Selection Algorithm
The selection algorithm can be a significant differentiator. The selection algorithm works as follows:
- A first pass selects all of the projects and initiatives that have been forced in, and decrements the
available constraints even if the constraints are exceeded.
- A first pass selects all of the projects and initiatives that have been forced in, and decrements the
available constraints even if the constraints are exceeded.
At this point, the optimized portfolio can be reviewed. Adjustments may be made to the scoring model,
individual scores, constraints, demands, and benefits. Additionally, projects and initiatives can be forced
in or out. The ranking and selection process can be executed as many times as necessary to derive the
optimal portfolio of work.
Achieving Strategic Alignment
An alignment tool can calculate the score and rank of each of the proposed items via an association of all
projects, initiatives, ideas, budget initiatives, or project budgets to measurement criteria for each corporate
objective. The retrieval of the data in a useful and appealing format (grid chart views) can show the relative
alignment of the portfolio against the objectives.
The graphic below shows a visual representation of a portfolio alignment exercise, with the actual scores
juxtaposed against maximum, or perfect, scores. In this particular case, although the programs falling
under the various corporate objectives do meet requirements, the portfolio is not as aligned as it could be
in the Risk category. In this case, the organization can choose to accept the portfolio as currently aligned,
or re-work the mix of programs for the period in question.
Figure 8: Strategic Alignment
Scheduling the Portfolio
Once an optimal portfolio of work has been agreed upon, the next step is to conduct high-level
scheduling. The portfolio is selected based upon total demand vs. total supply, so it is necessary to make
sure that time-phased demand can be met by time-phased supply.
The figure below provides one view of the time phased resources that will be required for a particular
scenario of the optimized portfolio.
Figure 9: Quarterly Resource Allocation by Proposed Scenario
BEN Alignment Engine
Bridging the IT and business chasm requires alignment of business objectives with the IT portfolio.
Achieving this alignment necessitates:
- A single view of proposed and existing services and programs that can be evaluated against strategic objectives
- Optimization of a portfolio within the constraints of time, money, resources and assets
- Guidance to budgeting and operational execution so that funding and delivery are aligned
The BEN Alignment Engine™ allows IT and the Business to collaborate on the definition of an IT portfolio
that maximizes contribution to the Business and optimizes the use of IT infrastructure and resources. With
the Alignment Engine, any IT stakeholder can submit ideas to the IT portfolio. Subsequently, IT portfolio
managers can work with the Business to define weighted strategic objectives and measurement criteria
against which the new ideas and the existing IT portfolio can be evaluated.
The BEN Alignment Engine is designed to align the organization’s portfolio of work with the firm’s
business objectives, and optimize the portfolio based upon alignment and resource constraints, all
accomplished automatically with the click of a few buttons.
An embedded scoring model and easy to use analytics allow portfolio managers to quickly create and
evaluate alternative portfolio scenarios against risk, return on investment and strategic contribution.
Integration with BEN's workflow engine ensures that the Business and IT participate in a consistent
governance process for new ideas and related portfolio changes.
An integrated solution also allows for approved portfolios to ensure consistency with budgeting and
execution. The result is alignment of IT with the Business and the portfolio plan with the budget and
project execution.
The BEN Alignment Engine provides a complete solution to project organizations that need to enhance
their strategic value. With the Alignment Engine, the organization can:
- Work with the Business to continuously evaluate and select the optimal IT investment portfolio
- Invest operational savings in programs that grow the Business
- Easily demonstrate business alignment of the IT portfolio
Taking advantage of an aligned portfolio of programs allows organizations to schedule a time-phased
supply and demand balanced set of activities fully in synch with the business objectives. The net result is
a set of projects and work that can actually be done.
Established in 1985, Business Engine is a leading provider of enterprise software for 'running the business of IT'. The
Business Engine Network allows global IT organizations to manage strategy, financial governance and operational
execution within a single Web-based solution, creating enterprise transparency that dramatically improves IT
investment decisions, business alignment and delivery results. Business Engine serves over 80,000 end-users at
global organizations including Boeing, Deutsche Bank, Lloyds TSB, Merrill Lynch, Raytheon, Siemens and Tesco.
Visit www.businessengine.com for more information.
Business Engine is headquartered in San Francisco, California and has offices throughout the United States, United
Kingdom, Belgium, and India. Privately held, key investors in Business Engine include Oak Investment Partners,
Technology Crossover Ventures, and Morgan Stanley Venture Partners.