From Project Portfolio to Service Portfolio Management
In my today’s blog, I would like to discuss the fact that Project Portfolio Management is still the key IT Governance player in most IT organizations and present a few arguments why it is absolutely important to extend this by a predominant Service Portfolio Management in order to be a successful IT Service Provider, delivering value to the business.
I think we all agree that providing the right services to our internal or external customers should be one of the ultimate goals of every IT organization and it is generally recognized that the Service Portfolio Management discipline plays a key role in this – at least in theory… If we look at the reality, it appears that an end-to-end Service Portfolio Management actually does not exist in most organizations. Instead informal ways are established that try to achieve the same result. On the pragmatic end this can be a yearly brainstorming session, in which the management team reviews existing applications/products (I deliberately do not use the term service here) and thinks about what to introduce or change next year, which eventually results in concrete projects. In more mature organizations this is typically extended by a professional Project Portfolio Management, which acts as a gatekeeper to make sure only valuable projects are approved and coordinates running projects, ensuring that objectives are met within time, cost and quality (the magic project management triangle).
Project and Service Portfolio Management compared
If we compare Project and Service Portfolio Management, they have obviously many things in common. First of all they both share the same technique and same goal of general Portfolio Management: Making right decisions about investments (by the way, interestingly enough this is not different from classical Financial Portfolio Management, which is completely non-IT):
- For Service Portfolio Management this means that each new service or change to an existing service needs to have a clear business case, showing the value to the business (part of the service pipeline). This portfolio technique is continued by tracking the investment of services throughout their lifecyle (service design, transition and operation), thus enabling the company to evaluate its strategy, as well as its ability to execute according to their strategy.
- On the other hand, Project Portfolio Management does the same for the lifecycle of projects. It ensures you do the right projects the right way. Since new services or changes to existing services are typically managed as projects, the Project Portfolio Management is obviously very much part of the Service Portfolio Management (and by the way not the other way around!).
The issue with Project Portfolio Management and how to solve it
Although Project Portfolio Management ensures success in the project world and optimal resource allocation, if you rely merely on it, there are two main issues which come up: First of all, Project Portfolio Management stops where the project stops. But as we all know, there is a world after the project, which is operations – the moment of truth, where services are actually delivered to the clients on a day-to-day base. As a result we often see a deep cut between the IT application and the IT operation world and there is a gap between what the business originally expected and what is delivered at the end. The graph below nicely illustrates this issue:
Secondly, if you look at Project Portfolio Management historically, it is clearly not about Services, it’s about Products (introduction of new applications, platforms etc.). At the end of a project there is a result, after that is delivered, the project ends. There is a fundamental difference in the philosophies of Project and Service Portfolio Management. With our customers we should talk about services. Remember what a service is? It’s a means of delivering value to customers by facilitating the outcome customers want to achieve, without the ownership of specific costs and risks. THIS is what customers want. And this is where Service Portfolio Management steps in as the overarching Governance process to make sure value is delivered to our customers, end-to end from service strategy, service design/transition (this is where the projects steps in) and finally operation and continual service improvement. This change also requires a shift in how the IT Service Provider talks with the business and how the organizational structure looks like. It’s a fundamental shift towards IT Service Management:
By establishing a true Service Portfolio Management, there are a couple of significant benefits, which exceed the limits of Project Portfolio Management:
- Your customers are able to exactly understand what you as a service provider will deliver to them and under what conditions. In this sense Service Portfolio Management is a prerequisite for other disciplines such as Service Level Management and Service Catalogue Management.
- You have a mechanism in place to enable the organization to investigate and decide on which services to provide, based on the potential return and acceptable level of risk.
- Analyze which services are no longer viable and when they should be retired.
- Track the investment in services throughout their lifecycle, thus enabling the organization to evaluate its strategy, as well as its ability to execute according to the strategy.
I hope you enjoyed this blog and it gave you some new ideas. Don’t forget: In case you want to establish Service Portfolio Management, make sure it determines the Project Portfolio Management – and not the other way round!