P E T E R  S. C O H A N  &  A S S O C I A T E S
TECHNOLOGY PORTFOLIO EVALUATION MATRIX

During the latter half of the 1990s many companies kicked off technology initiatives.  Such initiatives included building e-commerce capabilities and installing customer relationship management (CRM), electronic procurement, supply chain management, and other systems.  As economic growth stalled in 2001, executives looked for ways to cut costs -- bringing IT budget growth to an abrupt halt.  Despite tentative indications of recovery in 2002, executives are not likely to open the IT budget spigots in the near future.  In fact, executives need a strategic way to rank technology initiatives so they can decide which to fund and which to cut.
                                                
TECHNOLOGY PORTFOLIO EVALUATION MATRIX












The technology portfolio evaluatio matrix helps managers solve this problem.  Working with a team of department heads, senior executives should follow these five steps:

1. Develop a list of criteria on which to evaluate the projects. As the figure suggests, these criteria should be related to business objectives such as increasing stock price, cutting costs, increasing market share, minimizing business risk, and enhancing customer service. 

Executives must evaluate the business risk of contention for scarce resources among  technology project teams.  When budgets are cut, project teams spend so much  time contending for people, technical resources, and capital that project team effectiveness suffers.  Executives should consider this business risk when weighing whether to provide full funding for a reduced number of projects or to maintain partial funding for a larger number of projects.

2. Rank and weight the criteria. Next the team should rank the criteria in descending order of importance.  Then the team should allocate 100 points among the criteria to reflect their relative importance to the organization.

3. Score each project on the criteria. The team should then assess the relative performance of each technology initiative relative to each criterion.  For example, in the figure above there are three projects and three criteria.  Each project is rated from 3=best to 1=worst on each criterion.  Project A is ranked the best on each of the criteria (e.g., it gets a three on 'raise stock', 'reduce risk', and 'boost service'). 

4. Calculate a weighted average score for each project.  To calculate the score reflected above, the score is multiplied by the criterion weight.  For example, Project A's weighted average score of 150 is calculated by multiplying the criterion weight of 50 by the project's score of 3.  By adding the weighted average scores for each criterion, the teams can calculate a weighted average score for each project.

5. Rank the projects in descending order.
Finally, the team can rank the projects in descending order of the weighted average score as in the figure.  While this method essentially quantifies human judgment it is a useful way to encourage groups to incorporate available information and analysis in a rigorous fashion in making resource allocation decisions. 

H
OME
S
ERVICES
C
ORE CONCEPTS
P
UBLICATIONS AND EXPERIENCE
TV
, RADIO AND CONFERENCES
P
RESS
N
EW VENTURE DEVELOPMENT
CONTACT
Raise Stock
WEIGHT               50                                  30                                  20                             100
Reduce Risk
Boost Service
TOTAL
WEIGHT               50                                  30                                  20                             100
WEIGHT               50                                  30                                  20                             100
Project A             150                                  90                                  60                             300
Project B             100                                  30                                  40                             170
Project C              50                                   60                                  20                             130