By Minda Zetlin

Alignment of IT and the business is a phrase most IT executives hear and read about on a daily basis. Yet many CIOs continue to report that achieving alignment remains their most important challenge. An emerging best practice called Service Portfolio Management promises to address that challenge by making IT-business integration a repeatable, standardized discipline.

Traditionally, achieving business-IT alignment was seen as a function of project management, so it was usually overseen by a project management office (PMO). That was a fundamental problem, says Alex Cullen, VP and Research Director at Forrester Research. In most organizations, he points out, less than a third of the IT budget is spent on projects. Two-thirds or more is allotted to what Forrester calls MOOSE, short for Maintain and Operate the Organization, Systems and Equipment. (See chart, "Where the IT Dollar Goes,") "You can't gain a good understanding of something by focusing on less than a third of its overall budget," Cullen says.

Enter Service Portfolio Management (SPM) as a way for IT executives to organize IT's financial, technical and human resources around business value. Recently introduced as part of ITIL' version 3, SPM is an IT management discipline. It focuses on the services IT provides to the business as a means of delivering value, rather than focusing on completing projects or providing technology resources such as processing power or storage. "Implementing SPM helps CIOs align IT resources with business services that can then be linked to business value," says Peter Waterhouse, an Advisor at CA. "IT's position within the organization transforms. IT becomes a value-added service provider with transparency into its operations and spending."

Why is this such a powerful way to bring IT into alignment with business? Here are three of its most important benefits:

1. Business gains a better understanding of technology's true cost.
Business alignment is achieved when service from IT is balanced across business requirements in four dimensions: The function of the service, the quality of the service, the total cost of providing the service and the ultimate business benefit it provides. "Sometimes people talk about business value when what they really mean is business 'benefit,' " says David Wilt, Director of Product Marketing at CA. "To understand value, you need a sense of what something costs. A service that brings the business only a small benefit but at a high cost is of low value," he says. A central element of this new management discipline is a service catalog, which is a menu of services that business executives can choose from. The catalog should ultimately include the cost for different levels of service and a notation of whether or not IT will actually be charging for those services. "If there's an option for employees to have expanded mailbox storage of 3 gigabytes upon request, everyone will ask for it," Wilt of CA says. "But they might not be so quick to request it if they understood that each expanded mailbox creates an added expense of $500."