How Can a Firm Select the Most Qualified IT Portfolio under Various Risk Tolerance Levels?

Among all aspects of IT Portfolio Management (ITPM), we find the key concept of efficient frontier to be the most applicable illustration for managing IT resources as multiple heterogeneous IT portfolios. To better assist decision-makers (e.g., senior executives) in selecting the most qualified IT portfolio choice, we propose a new IT Portfolio Efficient Frontier model that incorporates decision-maker’s risk tolerance levels. Through three scenarios, our findings show that the IT portfolio efficient frontiers derived from both an Even distribution-based IT portfolio and an Uneven distribution-based IT portfolio have a positive linear relationship between IT portfolio risk and return. Moreover, the IT portfolio efficient frontier derived from a Dominant IT portfolio resembles a concave curve. Thus, if IT investments are similar to the Dominant IT portfolio, it would be advisable for decision-makers to implement a more conservative investment strategy after reaching the turning point of the IT efficient frontier.