Are you managing cost or delivering value? Many folks will look at the statement and ask, "What's the difference?"

I just finished a discussion with a colleague on this very subject. They were trying to succinctly characterize the objective of IT project and portfolio management (PPM) in relation to serving their business constituents. The following is the statement they proposed:

"Deliver IT services that business stakeholders value at the lowest possible cost."

I was immediately bothered by the statement because it included the "c-word" - cost. I can't stand the term, even in this down economy when "cutting costs" is practically a universal mantra. I still tell audiences, "I don't care about cost. I care about "value."

Consider two of my favorite descriptions of PPM:

"The goal of Project and Portfolio Management is to ensure an organization's overall portfolio of IT-enabled investments is aligned with and contributing optimal value to the organization's strategic objectives."

"IT's ability to partner with the business to maintain alignment and maximize return from IT investments."

In neither of those two statements is the word "cost" used. Instead, you find the word "value" in the first statement, and the words "maximize return from IT investments", which is another way of saying value.

This is not to say cost is not a consideration. In fact, I can't begin to calculate value or return on investment without an accurate understanding of cost. Cost is a major component of value. But too many organizations focus almost solely on cost, especially in a down economy. Why?

Because few organizations have t he processes and relationships in place to estimate, measure, and determine value. They lack the appropriate IT Governance, and more specifically, the PPM processes to enable the successful valuation of IT investments. In lieu of these processes they fall back on the age-old practice of managing cost. They do their best to set cost-cutting goals, but these are frequently arbitrary targets due to their inability to accurately determine the value of investments.

Enterprises with sound IT Governance and PPM processes are able to appropriately respond to downturns in the economy. They have the mechanisms in place to adjust investment decision-making criteria and measure the potential and actual value of investments. This ability enables these organizations to ensure their constrained resources (including capital investment and expenses) are allocated to the highest value initiatives. Cost is a factor, not the aim.

What is the situation in your company, a focus on cost or attention to value?

Steve Romero, IT Governance Evangelist