How do you prioritize your IT portfolio of initiatives in this economy?

If you’re like most enterprises, you have a backlog of IT initiatives lined-up on the heels of your work-in-progress.  You may also have some new pressure to take a harder look at costs and potentially trim or re-prioritize your WIP and your backlog.

So how do you decide what stays and what gets put on hold (or cancelled)?  And for what stays, how do you re-order your efforts to make sure IT is delivering the best return on investment?

As we mention here, ROI (including TCO) analysis is a good acid test for IT projects, but it’s not the only ingredient nor the primary consideration for green-lighting or keeping an initiative – especially a Strategic Systems initiative (one that will give you a competitive advantage in the market).

Here are some of those other ingredients that you should use:

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1.    Show how the initiative helps drive strategic objectives.   
Drive is the operative word here.  Many systems will help you measure strategic objectives – Balanced Scorecards for instance – but they may not pass the “so what” test.  You have to not only measure the objective, but also analyze why the measurement came out the way it did (cause & effect) AND update your models & scenarios with that new learning AND flow that into your revised or rolling forecasts.  Ultimately helping managers make a decision and take some action that will move you closer to the objective.

2.    Show the materiality of the initiative.
Priority should be given to those initiatives that have the most material impact on the business.  You could be working on a reporting rationalization and consolidation initiative that would save the company 5% of SG&A expense – great stuff!  But if you also had an initiative on deck to show product, customer, and channel profitability that will allow sales and marketing managers to sell more profitable products and services as well as cross-sell and up-sell that would increase revenue growth by 5%, which would have a higher priority?  (This is a trick question, by the way – the CFO will have you do both!  Hopefully displacing projects that aren’t as material).

3.    Show how the initiative improves visibility into the business and collaboration across business-functions.
Among other things, organizational effectiveness is grounded in fact-based decisions, accountability for those decisions (and results), and every person having line of site that shows how what they’re working on impacts the bottom-line.  Breaking down functional silos is key to improving collaboration and sharing of information – if your initiative can improve visibility and collaboration, it will probably lead to #1 and #2 above.

So what other ingredients do you use to prioritize your IT portfolio?