How to Build an IT Service Portfolio (and Why You Should)

Written by David Crouch

People often use the terms IT Service Portfolio, Project Portfolio, Service Catalog, Service Pipeline, Application Portfolio, and Customer Portfolio interchangeably without understanding the real meaning behind each. While all these portfolios are important, the IT Service Portfolio helps IT to define its value to the business and relationships to other aspects of your organization.

What is IT Service Portfolio Management and What is the IT Service Portfolio?

According to ITIL, an IT Service Portfolio is “the complete list of services that are managed by a service provider. The service portfolio is used to manage the entire lifecycle of all services.” To put it simply, IT Service Portfolio Management is the process that helps IT understand how it can best support the underlying business. CIO Magazine rightly suggests that effective service portfolio management helps IT become a business in its own right. The IT Service Portfolio, in turn, is where information about all the services that IT plans to offer, currently offers, or used to offer is stored.

In part, the IT Service Portfolio confuses organizations because too many IT shops engage in what we call “the stuff IT does.” In other words, many IT organizations behave (and even think of themselves) as order takers. They give customers desktops, and laptops, and software, and telephones, and the list goes on. But they do not define the end-to-end service. Moreover, not all IT service providers consistently work with their customers to define value from the business’ perspective. IT Service Portfolio Management helps IT to move out of the metaphorical basement and become a trusted advisor to the business.

What is an IT Service?

It only becomes possible to build an IT Service Portfolio once an organization understands what an IT service is and defines a set of services. We provide a more detailed discussion of IT Services in our blog, What Is an IT Service. For now, think about the difference between a supermarket and a restaurant. They both provide food, but the supermarket only sells the raw ingredients, which you need to prepare and cook before you can eat the meal (OK, pop tarts excepted). The restaurant, on the other hand, takes your reservation, seats you at a table, presents the food items to you in menu form, cooks the meal, offers wine pairings (my favorite), and cleans up after you leave. They also provide ambiance (at least, we hope). In short, the restaurant provides an end-to-end service.

How does this translate to IT?  A grocery store or “order taker” IT shop simply provides a telephone (not a service). A true IT Service Provider, in addition to providing a telephone, offers installation services, dial-tone, moves, adds, changes, voicemail, and conferencing services, all of which could be rolled-up into Telecommunications Services. Other typical IT services include E-mail and Collaboration, Desktop Services, Security, and Virtual Machine Hosting. What is important is that the IT Service Provider needs to work with the customer to define which services are most valuable.

What is the Difference Between the IT Service Portfolio and the Project Portfolio?

A common misconception is that the IT Service Portfolio is equivalent to the Project Portfolio managed by the Project Management Organization (PMO). While they should certainly be related, they are not the same. In fact, the IT Service Portfolio is larger than the project portfolio. While the IT Service Portfolio represents all the services that the IT shop offers, the project portfolio is a listing of all the projects that the organization has chartered. Many of the services contained in the IT Service Portfolio may be associated with projects in the project portfolio to develop, enhance, or even retire existing services. In a recent article, the IT skeptic even goes so far as to suggest that Service Portfolio Management is even more important than program and project management.

What is Agile Portfolio Management?

Speaking of project management methodologies, over the past five or so years there has been talk about agile portfolio management, but few seem to really understand what that means, especially when it comes to service management and IT strategy. Agile portfolio management links the domains of IT Strategy, IT Service Management, and project management. Broadly speaking, agile portfolio management recognizes that, for many industries, gone are the days when the annual plan stays set for an entire year. It is more likely that the consumer market, customer base, competition, and regulatory environment change so quickly over the course of a year as to render long-term plans obsolete. Instead, agile portfolio management, much like agile project management, borrows concepts from the Agile Manifesto. For example, agile portfolio management values working closely and frequently with customers and the business to define which services are needed and which are just consuming resources without providing value. There is a willingness to change the services that are being offered even outside of normal annual strategic planning cycles.

What is the Relationship Between the IT Service Portfolio and DevOps?

Just as Agile Portfolio Management sits at the intersection of IT Strategy, services, and projects, DevOps connects the IT Service Portfolio to IT Strategic Planning and ongoing operations. DevOps gathers employees from various parts of the business (IT, Sales, Marketing, Software Development, etc.) to discuss ways to add value and then to prioritize and build the most promising ideas. The IT Service Portfolio, Agile Portfolio Management, and DevOps go hand-in-hand-in-hand.

How Does the IT Service Portfolio Relate to the Applications Portfolio?

Applications and Services are not the same thing, and multiple applications in your applications portfolio may need to come together to make up any given service in the service portfolio.

How Does the IT Service Portfolio Relate to the Customer Portfolio, Customer Agreements, Service Level Agreements (SLAs), and Underpinning Contracts?

All services in the IT Service Portfolio should be linked to the Customer Portfolio, Customer Agreement Portfolio, Service Level Agreements (SLAs) and underpinning contracts. This line-of-sight between services in the portfolio and customers who use the services keeps customer value at the forefront. If a service is no longer valuable to the customer or if few customers are using a service, it becomes a good candidate for retirement.

What are the Components of an IT Service Portfolio?

The IT Service Pipeline is the part of the IT Service Portfolio that lists all future services. The service pipeline does not represent a virtual suggestion box of good ideas. Instead, services in the pipeline are those that have been discussed and vetted between the business customer and IT, and a conscious decision has been made to charter a project to develop these services.

What is the IT Service Catalog?

This IT Service Catalog contains all the current (live) and operational services that the IT Service Provider offers to the customer. The IT Service Catalog is the customer-visible portion of your portfolio. Think of the Service Catalog as the restaurant menu or the department store catalog. (For more information, we have a treasury of articles on service catalogs).

What are Retired IT Service Portfolio Services and Why do we Need to List Them?

Retired Services comprise the third component of the IT Service Portfolio. Retired services are exactly what they sound like – services that the IT Service Provider used to offer but no longer does. Sometimes people ask why even bother to list retired services? Aside from having a historical record, storing information about retired services also prevents reinventing the wheel when a customer suggests an idea to develop a “new” service when in fact the service provider has previously retired the service since it offered little value.

How Many Types of IT Portfolios Should my Organization Have?

The ITIL Service Strategy Publication suggests having the following portfolios at a minimum: IT Service Portfolio, Project Portfolio, Customer Portfolio, Customer Agreement Portfolio, and Application Portfolio. However, there is no set number as to how many portfolios an organization should have. For example, in addition to the portfolios above, a university-hospital we worked with organized separate portfolios by domain or line of business such as Clinical Applications and higher education services. Regardless of the number or type of portfolios, it is important that a governance process exists to ensure that portfolios do not duplicate services and that no key customer services are excluded.

Who Should Manage the IT Service Portfolio?

In most organizations, the IT Service Portfolio is managed by the CIO and senior IT executives. Normally, the IT Service Portfolio is managed in conjunction with other business and investment portfolios managed by executives outside of IT.

What is a Service Management Organization (SMO)?

A Service Management Organization (SMO) serves as the manager of the IT Service Portfolio and serves as the ultimate gatekeeper and maintainer of all IT services. The SMO ensures that adequate processes are in place to gather feedback from customers and puts in place mechanisms to filter, prioritize, and ultimately funnel services into the pipeline. Likewise, the SMO routinely evaluates to ensure that services in the pipeline are developed into live services and are offered (and made customer visible) in the service catalog. The SMO also creates and enforces process regarding service retirement decisions. In organizations with fully developed SMOs, the organization may also broker shared resources (budget, staff, equipment), provide templates, and even service management training.

What is the Difference Between an SMO and a Project Management Organization (PMO)?

The Service Management Organization (SMO) and Project Management Organization (PMO) are similar concepts; the SMO manages the IT Service Portfolio and the PMO manages the IT Project Portfolio. Although the SMO and PMO do not necessarily interact on a daily basis, there should be a close relationship and routine touchpoints between both organizations since typically one or more projects support services controlled by the SMO.

How to Build an IT Service Portfolio?

Building an IT Service Portfolio is no small accomplishment, and portfolio architecture and management is the focal point of many continual service improvement initiatives. In truth, the IT Service Portfolio is never complete since it needs to be maintained and developed over time. Focus on consistent progress and incremental change. Follow the five steps below to build your portfolio.

Define and Review IT Services

If you have not done so already, define IT services (not just the “Stuff IT does”) and review services with key customer focus groups. If you already have IT services defined, the beginning of an IT Service Portfolio initiative is still a good time to review services and groom your services and offerings. You may be surprised to find that some of your newer offerings are not listed anywhere or that some retired services are still lingering in active service listings.

Agree on What Information to Include

This is likely going to be difficult since you need to get agreement on which information and service attributes to include. Keep in mind that the more you capture, the more you have to maintain going forward. A good way to strike a balance is to make a list of decisions you would like to be able to make (be able to better manage resources and prepare for changes, provide a list of upcoming services to prospective or current customers, understand where capabilities and gaps are, etc.). Include information that helps answer these questions.

Create a Service Catalog or Build from What you Currently Offer

Customers care most about what they are currently using, so it is usually best to start with creating a service catalog. We have a number of detailed articles that can help you. Going through the exercise of building a service catalog will also get your teams to agree on what constitutes a service, which can be a difficult concept for folks to digest for the first time.

Build out the IT Service Pipeline

Work with service owners and the PMO (or your organization’s equivalent) to create the pipeline of services that are in development but are not yet being offered to customers. It is likely that much of this information will come from the project management function in your organization.

List Retired IT Services

Finally, list all your retired IT services. It is tempting to skip this step. But any organization that has unintentionally chartered a project to offer a service that was consciously retired can speak to the benefits of documenting retired services.

What are Challenges to Creating an IT Service Portfolio?

There are a number of challenges to creating an IT Service Portfolio, the biggest of which is that many organizations consider portfolio creation and maintenance as overhead and simply do not want to invest the time. Another challenge is that organizations do not know where to start or struggle with understanding the concept of services. In creating the initial portfolio, consultants can help to guide you in the process, and the money spent is normally well worth the effort and has a short return on investment. Longer term, it can be a challenge to keep the portfolio up-to-date.

Keep it Current!

Maintaining the IT Service Portfolio is critical since Leadership will use the information in it to make critical decisions (what to keep, what to cut, etc.). Although this involves some “overhead,” it does not have to be onerous or overly time-consuming. Look for ways to automate the information and save your IT Portfolio Manager as much time as possible. Also, be sure to get feedback from customers on ways to improve the portfolio.

Version one of your service portfolio may be an Excel spreadsheet – and that’s ok. However, over time, you’ll want to look for ways to better communicate this information. An excellent option is an online portal that can be viewed by everyone in real time.

What are the Best IT Service Portfolio Management Tools and Software?

Although a plethora of IT Service Portfolio Management tools and software exists, we recommend Cherwell, a leading IT service management software vendor. There is value to using the same tool to host your IT Service Portfolio and various other portfolios and service management artifacts (e.g., incidents, change management records, problem management, etc.)

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Originally published January 01 2018, updated January 01 2019