In yesterday’s post, I introduced the concept of a tier 2 portfolio, and how the concept of strategic coupling works in a tiered portfolio. This post continues that discussion with an overview of a decoupled portfolio.
A decoupled portfolio means that IT understands where the business is going, and instead of reacting to that, makes plans hand in hand with the business to achieve those goals. In a decoupled portfolio, the IT organization identifies a series of strategic drivers that guide investment programs to support the business. These investment programs, in turn, provide the governance framework to a series of projects that better position IT to deliver effective, efficient services to the business.
Some characteristics of a decoupled portfolio are that:
- IT is proactively identifying what the business will need, and preparing those capabilities in advance.
- These proactive efforts end up being bundled into programs, where each program is designed to enhance specific capabilities.
- As a secondary benefit of bundling efforts into programs, IT is better positioned to invest in options assessment, i.e. to invest in alternatives analysis to determine the optimal approach to developing a specific capability. The budget for such efforts may be attached to the program as opposed to waiting for business funding.
- There is significant investment in shared platforms to support business projects. Coordinated investment replaces piecemeal investment in shared platforms.
The Role of Programs in Decoupled Environments
In the absence of a defining business program structure, a decoupled portfolio naturally lends itself to the bundling of projects into logical programs defined by IT. These programs, in turn, provide a structure to the IT portfolio that enables it to both define funding priorities, and to approve these priorities within the program – thus providing a more agile governance structure.
The challenge inherent in this rebundling of IT project work is that it necessitates a reassessment of the traditional IT funding model. In a tightly coupled IT environment, each project is owned by a business unit, and hence funding is easy to determine. In a decoupled portfolio, more investments tend to be made in an entire platform – that is then leveraged by multiple business units to achieve economies of scale.
Thus, as IT organizations move to this decoupled model, a new funding model is necessary – either splitting the costs equally across business units, or more logically, moving to a transaction based costing model. This is the inevitable result of moving away from a coupled IT portfolio.
Of course the issue with any framework is that it is overly simplistic. I’d no sooner finished writing this post when I started poking holes in it. For example, if tier 1 portfolios are defined in terms of what makes us a profit, and tier 2 portfolios support the people that provide the tier 1 services, then where does new product development (NPD) fit in? In alignment with the proposed framework, NPD is another tier 2 portfolio that is designed to generate the grist that goes into the tier 1 portfolio and makes a profit.
The entire tier 1 and tier 2 thing may be a bit of a hazy line at some times. For example, what if I have an IT consulting shop that shares resources between internal and externally facing projects? Are those projects all one portfolio? Do I have two portfolios?
I’ll defer to later posts for clarifying that question.