Candidate diversity and granularity in IT portfolio construction
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Candidate diversity and granularity in IT portfolio construction Yu‑Ju Tu1 · Yu‑Hsiang Huang2 · Troy J. Strader3 · Ramanath Subramanyam4 · Michael J. Shaw5
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract The construction of a superior IT portfolio remains an open research question in prior literature. For addressing this gap, we investigate two unique characteristics of IT investment projects that may make it more or less likely to construct a superior IT portfolio in this study. We are mainly grounded on the modern portfolio theory to develop propositions regarding the relationships among such characteristics and their impacts on IT portfolio construction performance. Our methodology combines optimization modeling, real-world data, numerical simulation (Monte Carlo), and computational experiment. One main finding shows that, for any set of candidate IT investment projects, their attribute diversity and investment granularity could jointly influence the resultant IT portfolio construction performance. Even when a very tight budget is provided, a set of candidate IT investment projects with higher diversity and granularity would still generate a superior IT portfolio. In other words, the diversity and granularity of IT portfolio construction candidates can positively affect portfolio performance, although budget limits can impose a negative impact on the performance. Keywords IT portfolio · Diversity · Granularity · Budget · Simulation · Computational experiment
1 Introduction An IT portfolio is essentially a select set of IT investments. As IT continues to change the world, from barcodes to RFID and the internet of things (IoT), firms inevitably must consider investing in many IT projects to implement various initiatives [1]. Thus, considerable IT investment projects are proposed to meet infrastructural, informational, transactional, or strategic goals by acquiring and developing software, hardware, devices, networks, data centers, enterprise platforms, systems, applications and * Yu‑Ju Tu [email protected] Yu‑Hsiang Huang yu‑[email protected] Troy J. Strader [email protected] Ramanath Subramanyam [email protected] Michael J. Shaw [email protected] 1
Department of Management Information Systems, National Chengchi University (NCCU), No. 64, Sec. 2, Zhi‑Nan Rd., Wenshan District, Taipei City 11605, Taiwan, ROC
services. In addition, the current trend indicates that firms need to govern IT investments at the portfolio level, as urged by government polices such as the Cohen Act [2] and the Sarbanes–Oxley Act [3], as well as prompted by industry practices such as control objectives for information and related technologies (COBIT) [3]. Thus, it is generally suggested that IT investments be managed as a portfolio of assets, similar to a financial portfolio [4–11], in order to maximize their overall business value. However, IT portfolio construction is different from financial portfolio construction. For example, many IT investment 2
College of Business and Public
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