To substantiate or justify the existence of the investments in the portfolio plan, rationalize them. For example, you can link the investments to specific high priority corporate goals or business alignment factors to justify their current priority.
Example: Rationalizing Investments Based on Current Priorities
The board of directors reviews the updated portfolio plan and provides feedback. For tax purposes, the company must recognize as little expense as possible. Therefore, the higher capital dollar amount must be considered. To incorporate this feedback, Raj creates Plan 2 from Plan 1 and reworks the waterline view manually. He drags the investments with higher capital costs to the top of the list to rank them higher.
The following table shows the Plan 2 version of the portfolio:
|
Investment |
Duration (Months) |
Goals |
Cost |
Benefit |
Capital Cost |
Operating Cost |
Resources |
Cost Accumulator |
|---|---|---|---|---|---|---|---|---|
|
Back Office Financial |
9 |
Improve Office Efficiencies |
750,000 |
1,000,000 |
675,000 |
75,000 |
15 |
750,000 |
|
Interface to Material Supplier |
9 |
Reduce Costs |
700,000 |
2,500,000 |
600,000 |
100,000 |
30 |
1,450,000 |
|
Enterprise Time and Attendance |
5 |
Improve Office Efficiencies |
450,000 |
700,000 |
400,000 |
50,000 |
12 |
1,900,000 |
|
HR System Upgrade |
6 |
Reduce Costs |
300,000 |
100,000 |
275,000 |
25,000 |
12 |
2,200,000 |
|
Federated Security |
2 |
Better Align Technologies |
300,000 |
3,000,000 |
275,000 |
25,000 |
5 |
2,500,000 |
|
Administrative Expense System |
3 |
Improve Office Efficiencies |
250,000 |
20,000 |
200,000 |
50,000 |
5 |
2,750,000 |
|
JIT (Just in Time) System Upgrade |
5 |
Improve Office Efficiencies |
100,000 |
2,000,000 |
25,000 |
75,000 |
6 |
2,850,000 |
|
Cloud Based Order Intake |
3 |
Increase Sales |
100,000 |
750,000 |
|
100,000 |
3 |
2,950,000 |
|
Database Upgrades- Oracle 3 |
3 |
Better Align Technologies |
200,000 |
100,000 |
|
200,000 |
6 |
3,150,000 |
|
GUI Redesign- Supplier Internet System |
4 |
Better Align Technologies |
50,000 |
60,000 |
|
50,000 |
1 |
3,200,000 |
After investment reviews, the board and the legal department weigh in and make the following recommendations for the plan:
Raj configures the Plan 2 waterline view to display an extra Mandatory field on the view to flag the mandatory investments. The following table shows the extra Mandatory field for the investments:
|
Investment |
Duration (Months) |
Mandatory |
Goals |
Cost |
Benefit |
Capital Cost |
Operating Cost |
Resources |
Cost Accumulator |
|---|---|---|---|---|---|---|---|---|---|
|
Federated Security |
2 |
X |
Better Align Technologies |
300,000 |
3,000,000 |
275,000 |
25,000 |
5 |
300,000 |
|
Database Upgrades- Oracle |
3 |
X |
Better Align Technologies |
200,000 |
100,000 |
|
200,000 |
6 |
500,000 |
|
Back-Office Financial System |
9 |
|
Improve Office Efficiencies |
750,000 |
1,000,000 |
675,000 |
75,000 |
15 |
1,250,000 |
|
Interface to Material Supplier |
9 |
|
Reduce Costs |
700,000 |
2,500,000 |
600,000 |
100,000 |
30 |
1,950,000 |
|
Enterprise Time and Attendance |
5 |
|
Improve Office Efficiencies |
450,000 |
700,000 |
400,000 |
50,000 |
12 |
2,400,000 |
|
HR System Upgrade 6 |
6 |
|
Reduce Costs |
300,000 |
100,000 |
275,000 |
25,000 |
12 |
2,700,000 |
|
Administrative Expense System |
3 |
|
Improve Office Efficiencies |
250,000 |
20,000 |
200,000 |
50,000 |
5 |
2,950,000 |
|
JIT (Just in Time) System Upgrade |
5 |
|
Improve Office Efficiencies |
100,000 |
2,000,000 |
25,000 |
75,000 |
6 |
3,050,000 |
|
Cloud Based Order Intake |
3 |
|
Increase Sales |
100,000 |
750,000 |
|
100,000 |
3 |
3,150,000 |
|
GUI Redesign- Supplier Internet System 4 |
4 |
|
Better Align Technologies |
50,000 |
60,000 |
|
50,000 |
1 |
3,200,000 |
After reviewing the latest investments list in the portfolio plan, Lauren makes the following observations:
Raj creates Plan 3 from Plan 2 and incorporates the feedback into the Plan 3 to come up with the final rationalized list of investments. The following table shows the final list of approved and unapproved investments that are based on the latest priorities and budget constraint of $2,600, 000. The waterline for funded investments is drawn at the JIT System Upgrade initiative where the portfolio runs out of funds.
|
Project |
Duration (Months) |
Mandatory |
Goals |
Cost |
Benefit |
Capital Cost |
Operating Cost |
Resources |
Cost Accumulator |
|---|---|---|---|---|---|---|---|---|---|
|
Federated Security |
2 |
X |
Better Align Technologies |
300,000 |
3,000,000 |
275,000 |
25,000 |
5 |
300,000 |
|
Database Upgrades- Oracle |
3 |
X |
Better Align Technologies |
200,000 |
100,000 |
|
200,000 |
6 |
500,000 |
|
Back Office Financial System |
9 |
|
Improve Office Efficiencies |
750,000 |
1,000,000 |
675,000 |
75,000 |
15 |
1,250,000 |
|
Interface to Material Supplier |
9 |
|
Reduce Costs |
700,000 |
2,500,000 |
600,000 |
100,000 |
30 |
1,950,000 |
|
Enterprise Time and Attendance |
5 |
|
Improve Office Efficiencies |
450,000 |
700,000 |
400,000 |
50,000 |
12 |
2,400,000 |
|
Cloud Based Order Intake |
3 |
|
Increase Sales |
100,000 |
750,000 |
|
100,000 |
3 |
2,500,000 |
|
JIT (Just in Time) System Upgrade |
5 |
|
Improve Office Efficiencies |
100,000 |
2,000,000 |
25,000 |
75,000 |
6 |
2,600,000 (Funding cut off) |
|
HR System Upgrade |
6 |
|
Reduce Costs |
300,000 |
100,000 |
275,000 |
25,000 |
12 |
2,900,000 |
|
Administrative Expense System |
3 |
|
Improve Office Efficiencies |
250,000 |
20,000 |
200,000 |
50,000 |
5 |
3,150,000 |
|
GUI Redesign- Supplier Internet System |
4 |
|
Better Align Technologies |
50,000 |
60,000 |
|
50,000 |
1 |
3,200,000 |
|
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