Portfolio Selection of IT Service Products – Case Study
Antti Vikman
25.8.2009
Structure
Background Research problem Theory Company related part Synthesis - Deriving the model Model testing Conclusions Questions
Background
This Master’s Thesis deals with portfolio management of IT services in a case company
The case company is a local site of a large, multinational information technology company
In this company a lot of investments have been wasted due to poor portfolio selections
This had become a clear problem that needed to be solved
Research problem
Creating an evaluation method that can be utilized in the selection of the IT service products in the case company
The goal of this study can be divided into sub-goals: To provide an overview of portfolio management and to
identify the common portfolio management and selection methods and tools
To identify the case company’s current IT service portfolio management procedures and problems related to them
To identify a suitable portfolio selection model for the case company based on both theoretical and empirical findings
To test the model and its suitability in practice in the case company
Structure of the study
Theory
Product selection and portfolio management are critical challenges to senior management
Decision-making, prioritization and reprioritization, strategic alignment and realignment, allocation and reallocation of resources are the ongoing processes of portfolio management
Poor decisions and practices in this area may have harmful consequences for the whole business
Results from absence of portfolio management
Portfolio management
Goals: Value maximization of the portfolio Strategic alignment of the portfolio Balancing the portfolio Right number of products in the portfolio
Different methods: Scoring methods and checklists Financial methods Strategic methods Visual charts
Different tools emphasize different concerns
Popularity of different methods
Popularity does not necessarily equate to effectiveness
2,7
13,3
5,3
26,6
40,4
20,9
37,9
40,0
64,8
77,3
0 20 40 60 80 100
Checklist
Scoring model
Visual charts
Strategic approach
Financial Methods
Popularity (%)
Dominance (%)
Company related part
IT service product selection in Finland is made non-systematically and merely based on the decision-maker's personal know-how
No kills are done regarding new service products and rather all of them have been chosen into the portfolio
Many wrong choices have been made that have caused a lot of wasted investments
Need for a systematic way to evaluate the products
Synthesis
The model for evaluating the case company’s IT service products was developed by the author
Literature and research on portfolio management was reviewed and considered, the case company’s current portfolio management practices were studied, and a sales manager was consulted
The author customized the model to fit the case company's strategy, environment and current service product evaluation processes
After the initial model was developed, it was refined based on discussions with the sales manager to accomplish the final model
The created model
The purpose of the model is to assist the case company in the business analysis of standardized IT service products chosen from a global level offering
The model lists factors that affect the selection of the service products and should thus be evaluated
The created model contains three consecutive stages: a checklist and a scoring model with qualitative and quantitative elements
The evaluation model will be used primarily by the two product line leaders and business managers in the service organization
The checklist
The checklist including must-meet questions is used for initial harvesting
The must-meet questions:
1. The service product is strategically in alignment: the service product lies within the boundaries of the case company’s strategy and vision.
2. The service product clearly brings value for customers.3. Existence of market need for the service product: the market exists and is
growing.4. The service product is deliverable: it is reasonably likely that the product can
be delivered.5. There are no major barriers in selling the service product.6. No showstoppers: absence of killer variables at this point.7. The product is financially / commercially attractive: it is reasonably likely that
profits can be made.
The scoring model
Includes eight factors The qualitative elements in the scoring model: Business Strategy Fit,
Value for Customer, Market Potential, Fit for Existing Capabilities, Delivery Feasibility, Sales Feasibility, and Risks
The quantitative part of the model, Financial Reward, is given more weight in the scoring than the other elements
Every sub-characteristic is graded on a scale 0 - 10 The total score for each factor component is calculated by
averaging the individual scores The outcome of the service product evaluation is the sum of the
scores from the eight factors A high score indicates that the product is attractive and potential to
be taken into to the case company's IT service portfolio
Factor 2: Value for Customer
Factor 8: Financial Reward
Summary Scores: Product Attractiveness Score
Model testing
Eight IT service products from the global service portfolio of the case company were evaluated using the created evaluation model
The cases were chosen to represent a cross-section of the IT services in the case company
Both products that already existed in the portfolio and products considered to be taken into the portfolio
The service products were scored by the sales manager, who executed the testing individually
Due to confidentiality issues, accurate financial values cannot be revealed. In this study the financial aspect is therefore covered using only rough values.
Results of Initial Harvesting
Results of Scoring
Results of Scoring
0
1
2
3
4
5
6
7
8
9
10
Busi
nes
s S
trat
egy
Fit
Val
ue
for
Cust
om
er
Mar
ket P
ote
ntial
Fit to E
xist
ing
Cap
abilitie
s
Del
iver
y Fea
sibility
Sal
es F
easi
bility
Ris
ks
Fin
anci
al R
ewar
d
Factor
Score
.
Service Product 1
Service Product 2
Service Product 3
Service Product 4
Service Product 5
Service Product 6
Service Product 7
Service Product 8
Requirements for a good portfolio management method
Recommendations for Scoring
Evaluate several products simultaneously to compare the products to each other
At least a few persons evaluate the products The existing portfolio should be reviewed every once in a while in
order to drop misfits from the portfolio Recommendations can also be given concerning the single factors
and characteristics The model should be reviewed and updated annually or periodically
to ensure that the model maintains its relevance as a tool to the case company
The factors and characteristics can be easily changed as required and weights can be easily added to the different factors
Conclusions
The contribution of this research is more practical than scientific The results indicate that the created model is a truthful, efficient and useful
method for service product evaluation and selection in the case company As an additional result, the study gives indications about the fit of the
evaluated service products into the case company’s portfolio Utilizing this model the case company can better succeed in portfolio
management and secure its competitive advantage on the market The created model was tested in the case company only -> difficult to
evaluate whether the results are valid in other organizations Only one evaluator -> straight conclusions cannot be drawn about the
results of the evaluation The created model will be implemented in the case company, which can be
seen as an indicator of the usefulness of the study and feasibility of the results.
Further Research
Benchmarking the different methods used for portfolio management in different organizations
The differences in evaluating new service products and reviewing products already existing in the portfolio
How should the whole portfolio management process be handled including the creation of products, gathering of information and selecting the right products into the portfolio? What is the connection between these factors and how should they be integrated to support each other as much as possible?
How can scores and other information from evaluation be further used for other purposes, e.g. for evaluating the efficiency of the delivery or for focusing investments?
The implementation of a portfolio management model or the portfolio management practices
Questions?
Top Related