Time to realign your IT investment portfolio

Every financial investor knows you're supposed to adjust your investment portfolio (stocks? bonds? money market?) when circumstances change, and adjust for risk. Well that's exactly what CIOs should be doing, too, according to The Hackett Group Inc., a strategic advisory firm.

Hackett says your IT investment portfolio should have four types of investments:

• infrastructure
• utility
• improvement
• innovation

The first two should be managed for efficiency (i.e., at the lowest cost per unit), Hackett says, while the latter two need to be optimized for effectiveness (i.e., contribution to business value).

So how are your IT investments allocated?

Hackett, which does a lot of performance benchmarking, says that the IT shops with the best "business value management" (i.e., in the top quartile in their benchmark study) plan to allocate no less than 60% (!) of their IT capital to innovation and improvement, compared to the peer group's 35%, over the next few years. (Infrastructure and utility make up the rest.)

Hackett's monthly IT metrics bulletin concludes:

Given that most companies have sharply cut costs, there is an immediate need to realign the IT investment portfolio, understand how to define IT investment categories (the four categories defined above can be used as a starting point), and set goals for allocation by investment category.

Sounds just like how you should manage your (shrinking) retirement account.

And the next time you're talking with the CEO or CFO, try talking about your IT investment strategy as "portfolio management." It's a concept that the business types readily understand.

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Related:

• CIOs: How to survive the recession and position for growth
• What really matters: The IT innovation budget
• Three questions CEOs ask CIOs