Too many IT disasters have their roots in bad planning. Overruns in time and budget are the result, and ultimately no noticeable benefit to the business. Why does this happen? Because all too often IT is an “ivory tower” that is not integrated into the business, according to Roy Illsley, senior research analyst at Butler Group.

But many organisations are now adopting project portfolio management, a more rigorous approach to deciding which IT projects to go ahead with. Portfolio management gives an organisation a bird’s eye view of its IT projects by considering them in relation to each other rather than independently. In a portfolio approach, information about cost, resourcing and the project’s potential value is gathered, analysed and presented to the business.

Illsley explained, “Portfolio management is about coming up with ways to take the information you’re given so you can present it back and say, ‘Look, we’ve done the analysis: the marketing project’s going to cost £5m, use these resources, take this long and give this value to the organisation over three years. The sales project is going to cost £3m, use these resources and give this value. As a group we can only do one of them. If we do both, the cost of one will increase because we’ll be using outside contract resource. What do you want to do?’.”

But adopting the approach is not just a question of buying a suite of portfolio management tools. A cultural change is also required, advised Tim Newman, senior executive in strategic IT effectiveness at consultancy Accenture. “It’s very important to explain to each individual role in the organisation why you’re asking them to do things differently, what benefits it will have for the whole organisation, and also what’s in it for them and the role they play in that,” he said.

Donna Fitzgerald, research director at analyst Gartner, said it does not matter where the portfolio management team sits in the organisation, provided “there is company-wide agreement that it has the charter to actually do the portfolio”. What is important, she added, is that the portfolio manager remains independent. The role is about analysing information objectively and presenting it to the board, not making the final decision about how the money is spent.

While cost is important, the business should also consider whether the project is aligned with its business strategy, whether it is risky, and whether it is helping to simplify the suite of IT applications, Newman said.

This stress on business alignment requires IT to rethink the kind of staff it needs. Illsley said, “As things are going to be much more business focused, you’re looking less at the programmer route and more for someone who has broad business ability, softer and more customer-oriented skills, and understands the technology enough to translate the requirements.”

Increasingly, organisations are extending portfolio management to their entire IT spend and not just the project budget. “If you don’t include 100 per cent of the IT spend, you cannot balance what’s in the portfolio,” said Fitzgerald.

The obvious benefit of portfolio management is that budget is allocated to business-critical projects rather than the department that shouts loudest. But because it is also about assessing supply and demand, it makes it easier for IT to carry out long-term resource planning: to know in advance when it needs to recruit, retrain staff, bring in contractors or outsource.

Illsley advised it can take up to four years before organisations start reaping the benefits of a portfolio management approach. The change from ivory tower to an integral part of the organisation can be painful, he said, but worth it. “Once organisations have cleared that hurdle, it gives them a greater view of how they can use IT to drive the business forward,” he added.