IT Portfolio Management Step-by-Step: Unlocking the Business Value of Technology

MANAGING DEMAND ON IT

While Xcel Energy's leadership believed that effective management of its strategic IT project portfolio was essential to growing and transforming its business, they believed they needed to go farther. The percentage of the overall IT budget spent on routine, "keep-the-lights-on" activities was almost twice as high as the spending on strategic IT projects in 2002—63% to 37%, according to Mike Carlson. At this level, Xcel Energy was actually toward the positive end of the spending-split spectrum. Numerous surveys in recent years show that in most companies the ratio between routine and strategic IT spending is generally between 4 to 1 and 2 to 1.

Even at a 63–37 split, Xcel Energy was spending $135 million annually in routine IT operating and maintenance costs, with limited end-to-end visibility or control. IT services were requested and delivered differently in each Business Unit through disparate, nonintegrated systems, some of which were informal and marginally documented. Xcel Energy's IT leadership saw both an opportunity and a requirement to control these costs: an opportunity to improve service delivery, gain insight into spending trends, and increase the business value provided; and an imperative to drive down these "keep-the-lights-on" costs to free more funding for strategic projects.

At the beginning of 2004, Xcel Energy implemented a unified system to manage demand used by 8,000 employees and contractors. All requests for IT services now had to ...