A decision-making framework for justifying a portfolio of IT projects

Abstract This paper presents a comprehensive decision-making framework for evaluating a portfolio of IT projects. A problem of IT project selection with and without project interdependencies is considered. The problem is subject to maximum project funding budget constraint. When IT project portfolio contains independent projects, a dynamic programming (DP) solution procedure is proposed to efficiently solve the portfolio of IT projects' problem. However, when IT project portfolio contains project interdependencies, a mixed integer programming (MIP) approach is needed to solve the problem optimally. Experiments and results using simulated data using Monte Carlo simulation are provided. The results indicate that a large set of project selection problems containing up to 60 projects can be solved easily using the proposed decision-making framework.

[1]  Parag C. Pendharkar,et al.  Information technology capital budgeting using a knapsack problem , 2006, Int. Trans. Oper. Res..

[2]  Alexander Kock,et al.  An empirical investigation on how portfolio risk management influences project portfolio success , 2013 .

[3]  Jianyue Ji,et al.  The Portfolio Selection Model of Oil/Gas Projects Based on Real Option Theory , 2007, International Conference on Computational Science.

[4]  Marvin D. Troutt,et al.  Objective comparisons of the optimal portfolios corresponding to different utility functions , 2009, Eur. J. Oper. Res..

[5]  Sinan Aral,et al.  Generating Premium Returns on Your it Investments , 2006 .

[6]  Alexander Kock,et al.  Behavior of internal stakeholders in project portfolio management and its impact on success , 2013 .

[7]  N. Rosati.  Decision analysis and drug development portfolio management: uncovering the real options value of your projects , 2002, Expert review of pharmacoeconomics & outcomes research.

[8]  M. Jeffery,et al.  Best Practices in IT Portfolio Management , 2004 .

[9]  Catherine P. Killen,et al.  Evaluation of project interdependency visualizations through decision scenario experimentation , 2013 .

[10]  B. Santos.  Justifying investments in new information technologies , 1991 .

[11]  Martin Voss,et al.  Impact of Relationship Value on Project Portfolio Success - Investigating the Moderating Effects of Portfolio Characteristics and External Turbulence , 2013 .

[12]  Gerhard J. Woeginger,et al.  The quadratic 0-1 knapsack problem with series-parallel support , 2002, Oper. Res. Lett..

[13]  M. Martinsuo.  Project portfolio management in practice and in context , 2013 .

[14]  Mark Keil,et al.  Portfolio Theory Approach For Selecting and Managing IT Projects , 1995 .

[15]  P. Hammer,et al.  Quadratic knapsack problems , 1980 .

[16]  Kenneth L. Kraemer,et al.  Note: An Economic Analysis of IS Budgets , 1997 .

[17]  Peter Weill,et al.  Assessing The Health of An Information Systems Applications Portfolio: An Example From Process Manufacturing , 1999, MIS Q..

[18]  Donald L. Kreher,et al.  Combinatorial algorithms: generation, enumeration, and search , 1998, SIGA.

[19]  Parag C. Pendharkar.  Valuing interdependent multi-stage IT investments: A real options approach , 2010, Eur. J. Oper. Res..

[20]  Robert D. Austin,et al.  Corporate Information Strategy and Management: The Challenges of Managing in a Network Economy (Paperback version) , 2002 .

[21]  Michel Benaroch,et al.  Option-based management of technology investment risk , 2001, IEEE Trans. Engineering Management.

[22]  Andrew A. Toole,et al.  The R&D investment-uncertainty relationship: Do strategic rivalry and firm size matter? , 2013 .

[23]  F. W. McFarlan,et al.  Portfolio approach to information systems , 1989 .