Question: How should we assess and set priorities for our IT project portfolio?

Our advice: There are three key players in the IT priority-setting process:

The CEO -- It's critical that you understand the role the CEO has played heretofore, and the role he or she would prefer going forward. Dispensing IT priority has often been part of a CEO's power mechanism. Tread carefully. Look at the business strategy-setting process. If the CEO permits an open debate in strategy setting, with decisions driven by data and decision rules, you can propose a similar approach to IT priorities. If the CEO dictates strategy, anticipate dictation for IT priorities. Then talk to the CEO privately.

The Executive Committee -- These will be the participants in the debate if you're able to build an open process for setting priorities. These also are the managers who will have to support application installation, whether or not they got to pick priorities. And sometimes these people will have to wait their turn.

The IT Staff -- The IT staff shouldn't be setting the priorities, but should provide cost, schedule, and technical viability input for the process.

Principles For IT Priority Setting
Whether the priority-setting process is a one-on-one with the CEO, or a structured, open process, there are some principles you can push for:

• Every project considered should have a written evaluation of its fit with corporate strategy.
  
  
• Every project considered should have a written project cost estimate, a schedule estimate, and a business-impact estimate.
  
  
• Business impact doesn't always mean cost reduction. Value as perceived by the customer outweighs administrative cost reduction in today's business environment. (As an example, if your company were a book distributor, your priority 15 years ago might have been to reduce IT and administrative cost per sales order line from 25 cents to 10 cents. Today the priority might be offering at least as good a Web site and order fulfillment as Amazon.) Reducing time in key functions (sourcing, engineering, distribution, service response) can have a greater impact on operating profit that expense reduction.
  
  
• Technology offers new ways of doing business. Such opportunities should be favored for high priority.
  
  
• If you're disciplined about it, there are ways to have more than one "highest priority." You can install an unmodified application package. You can outsource an application completely. Finally, you can parse applications into bite-sized phases, and work on "bites" for multiple-user organizations rather than on one elephant for one organization. (If you're lucky, you'll find applications where half the benefit comes with the first bite.)
  
  
• IT priorities should be reviewed quarterly.

Project Monitoring
It's critical for IT to provide project monitoring that's accessible to users. Users awaiting a high-priority project know they're getting what they asked for and can plan when they'll be affected. Organizations that are waiting will have more patience if they believe that "when my turn comes, I'll be taken care of."

-- Wes Melling