Strategic alignment and value maximization for IT project portfolios

Managing project portfolios has been a challenge to many IT organizations due to the size and complexity of their initiatives that are often cross‐functional, fast changing, and transformational in nature. A governance process on project solicitation, evaluation, and monitoring is thus essential to ensure the resulting portfolio creates tangible values, balances across priorities, and supports business objectives. An optimization model to streamline the decision processes for IT portfolios and programs is proposed. We consider project characteristics such as the extent of strategic alignment, expected benefit, development cost, and cross‐project synergy to maximize the portfolio value. We also consider team proficiency and resource availability to determine a project portfolio that could be implemented within the overall development time. The multi‐objective model identifies the optimal mix among project types and the solution procedure efficiently produces recommendations that are superior to those found with current empirical techniques. We also describe an evolutionary algorithm to find approximate solutions to the optimization model. Possible extensions on how the optimization procedure can go beyond projects to also streamline decisions such as the renewal or replacement of in‐flight applications is discussed.