CHAPTER 7 Managing the Application Portfolio

Managing the Applications Portfolio

Set of known requirements and potential Applications portfolio concept is a means of bringing together existing, planned and potential Information Systems and their business contribution Usefulness of Matrix approach is borne out by the ease with which management is willing and able to categorize systems in this way

Managing the Applications Portfolio

Conclusions from Various Matrices and Models
A number of matrices developed to help management decision making with respect to IS/IT planning, utilisation and resourcing Ideas and concepts are generally complementary, even convergent More recent versions of the matrix devised to address developments in the 1990s are also very similar terminology is different Composite matrix - see fig. 7.1 pg. 301

Composite Matrix
Composite Matrix based on:
The Sullivan matrix considered a range of IS/IT management issues that depend on the combination of infusion and diffusion of IS/IT in the organisation Infusion is the degree to which IS/IT has penetrated a company in terms of importance, impact or significance Diffusion is the degree to which IS/IT has been disseminated or scattered throughout the company

Sullivan matrix

Sullivan matrix
Identifies need for new, demand-driven decentralised approaches to improve management of strategic and high potential quadrants

ITAA Matrix
Information technology Assessment and Adoption Matrix ITAA (Munro and Huff)
considers how organisations have adopted IS/IT as a competitive weapon based on premise that most organisations are either: technology-driven looking for ways of deploying new technology to advantage Issues-driven looking for new business opportunities within known possibilities of existing technology

ITAA Matrix
Technology Driven Normative Ideal

High Technology Emphasis

Low

Opportunistic

Issue Driven

Low

Issue Emphasis

High

ITAA Matrix
Opportunistic: Neither issues nor technology. The firm acquires technology as it seed opportunities to match technology and new opportunities Technology driven: the firm devotes considerable resources to scanning new technological developments and the identification of a new technology deemed to be of some potential relevance triggers a search for areas in the firm in which to apply the technology. Issue driven: identify the issues or problem areas that might be addressed by new technology Normative/complete: refers to an organization which both expends sufficient resources to monitor in a major way all information technology change, while devoting considerable time and energies to the generation of issues.

Ives and Learmonth and Galliers Matrix

Ives and Learmonth and Galliers Matrixes
Consider how the value adding potential of IS/IT in the business and the quality of resources affect how IS/IT is deployed and managed Show how a vision of what is possible plus strength of resources is essential if IS/IT is to be used as an offensive (strategic) weapon and how the two are often interrelated

Hartman and Sifonis Matrix

Hartman and Sifonis Matrix
More recent matrices e-business value matrix devised to help management address e-business options Axes of core matrix are business criticality and practice innovation and four resulting segments equate closely with those of the applications portfolio

Not all ideas from these matrices map precisely onto the applications portfolio

Hartman and Sifonis Matrix

Breakthrough Strategies Operational Excellence

High Business criticality

Low

Rational Experimental

New Fundamentals

High

Innovation

Low

Application Portfolios in Different IS/IT Environments

HIGH Opportunistic Complex Applications

Decentralized IT control Not seen as critical to business

Diffusion (Development)

Applications

St

HP

St

HP

KO Su Portfolio Applications

KO Su Portfolio Applications St

Comprehensive application portfolio Balance of control Enable business creativity

Su

KO Su Portfolio

Centralized IT Predominance of support applications

Portfolio LOW Traditional LOW Infusion (Impact)

Backbone
HIGH

Centralized IT Lack of perception in the business of what can be achieved

Classifying Applications in the Portfolio

Understanding the role and value of existing application set
Some applications may be obsolete and no longer required Some may need significant investment to avoid future business problems Some may be under-exploited Some may be consuming undue amounts of resources in relation to their business value

Analysing the applications in the portfolio (SWOT)

Exploit strengths
High future potential, currently underexploited Can be extended, enhanced to be of more value Could be more valuable if integrated more effectively or used more extensively Needs to be developed to meet current and future business needs Critical to business, but data quality is poor

Analysing the applications in the portfolio (SWOT)

Exploit Strengths cont.
Must be enhanced to meet changed and future business needs System required, but needs to be reimplemented to absorb less resources or overcome technology obsolescence System no longer of value should be discontinued System will be less important in the future needs to be simplified/reduced to real needs Then overcome weaknesses

Reconciling Demand & Supply Issues in the Application Portfolio

Driving Forces
High potential New business ideas or technological opportunity Individual initiative- owned by a product champion Need to demonstrate the value or otherwise of the idea
Market requirements, competitive pressures or other external forces Business objectives, success factors and vision of how to achieve them Obtaining an advantage and then sustaining it.

Critical Requirements
Rapid evaluation of prototypes and avoid wasting effort/resources on failures Understand the potential benefit in relation to business strategy Identify the best way to proceed
Rapid development to meet the business objectives and realize benefits within the window of opportunity Flexible system that can be adapted in the future as the business evolves Link to an associated business initiative to sustain commitment

Strategic

Reconciling Demand & Supply Issues in the Application Portfolio

Driving Forces
Key operational Improving the performance of existing activities Integration of data & systems to avoid duplication, inconsistency, and misinformation Avoiding a business disadvantage or allowing a business risk to become critical/comply with industry legislation

Critical Requirements
High-quality, long-life solutions & effective data management Balancing costs with benefits & business risks identify the best solution Evaluation of options available by objective feasibility study

Reconciling Demand & Supply Issues in the Application Portfolio

Driving Forces
Support Improved productivity/efficiency of specific business tasks General legislation Most cost-effective use of IS/IT funds and resources available

Critical Requirements
Low-cost, long-term solutions often packaged software to satisfy most needs Compromise the needs to the software available Objective cost/benefit analysis to reduce financial risk and then control costs carefully

Key Questions on the Applications Portfolio

STRATEGIC
WHY Do we want to do it in strategic terms? does the system need to do to gain the advantage? best to do it?

HIGH POTENTIAL
WHY? Not clear

WHAT

WHAT?

Not certain and/or

HOW

HOW?

Not yet known

WHY

to improve performance and avoid disadvantage? actually has to improve and by how much? best to do it?

WHY

to reduce costs by improving efficiency of existing necessary tasks?

WHAT

WHAT

HOW

HOW

best to do it?

KEY OPERATIONAL
WHY = efficiency WHAT = need to be improved

SUPPORT
HOW = to do that successfully (cost-effective use of IT)

Generic Application Management Strategies

No single implementation approach likely to deal effectively with the range of issues involved Equally, adopting a unique approach to each and every new development will lead to a degree of chaos and may result in failure Parsons (1983) describes five strategies that are prevalent in organisations linking strategies Guide opportunities for IT identified, IT resources developed, rate at which technologies are adopted, level of impact within the firm etc. (See table 7.3 page 313)

Generic Application Management Strategies

Strategies define different roles and responsibilities for the three key parties involved in enabling successful implementation Executive management Line management: functional or process managers and users of the systems IS/IT specialists: whether or not they are internal to the organisation (centrally located or in business units) or external

Generic Application Management Strategies: Centrally Planned

Management rationale
Central coordination of all requirements will produce better decision making

Organizational requirements
Knowledgeable and involved senior management Integrated planning of IS/IT within the business planning process

IT role
Provide services to match the business demands by working closely with business managers

Line managers and users role

Identify the potential of IS/IT to meet business needs at all levels of the organization

Generic Application Management Strategies: Leading Edge

Management rationale
Technology can create business advantages and risks are worth taking

Organizational requirements
Commitment of funds and resources Innovative IS/IT management Strong technical skills

IT role
Push forward boundaries of technology use on all fronts

Line managers and users role

Use the technology and identify the advantages it offers

Generic Application Management Strategies: Free Market

Management rationale
Market makes the best decisions and users are responsible for business results Integration is not critical

Organizational requirements
Knowledgeable users Accountability for IS/IT at business or functional level Willingness to duplicate effort Loose IT budget control

IT role
Competitive and probably profit centre- intended to achieve a return on its resources

Line managers and users role

Identify, source and control IS/IT developments

Generic Application Management Strategies: Monopoly

Management rationale
Information is a corporate good and an integrated resource for users to employ

Organizational requirements
User acceptance of the philosophy Policies to force through single sourcing Good forecasting of resource usage

IT role
To satisfy users requirements as they arise, but nondirective in terms of the uses of IS/IT

Line managers and users role

Understand needs and presents them to central utility to obtain resources

Generic Application Management Strategies: Scare Resource

Management rationale
Information is a limited resource and its development must be clearly justified

Organizational requirements
Tight budgetary control control of all IS/IT expenses Policies for controlling IS/IT and users

IT role
Make best use of a limited resource by tight cost control of expenses and projects Justify capital investment projects

Line managers and users role

Identify and cost-justify projects Passive unless benefits are identified

Generic Application Management Strategies

Strategies include:
Centrally planned most appropriate for strategic systems leading edge while technology is brand new to the organisation it should be confined to the high potential box free market most effective for support applications but also many high potential applications Monopoly opposite of free market key operational applications scarce resource financial strategy that controls spend on IT support but also some high potential

STRATEGIC

HIGH POTENTIAL

Leading edge Centrally planned Free market

DEMAND

Free market Monopoly Scarce resource

SUPPLY

KEY OPERATIONAL SUPPORT CENTRALISED DECENTRALISED

Relationship of applications portfolio and generic IS strategies

Generic Application Management Strategies

Relationship between generic strategies and styles of management proposed by Simon (1995):
Boundary control - appropriate when objectives and constraints are clear allows project team discretion about how best to achieve required outcome correlates with aspects of free market and scarce resourcing

Generic Application Management Strategies

Styles of management cont. Diagnostic control - implies clear, prescriptive control based on sound knowledge of what has to be done to achieve performance targets appropriate for key operational projects - monopoly Interactive control appropriate where there is a vision of the potential end point but much to learn in order to define, scope and develop appropriate solution similar to concept of central planning Belief system project team is expected to create a new and innovative application that will be closely congruent with business strategy and relate to needs of strategic investment also similar to central planning

Generic Application Management Strategies

Generic strategies have primarily two uses in IS/IT strategy development: Diagnostic way of assessing current strategies being used clear way of expressing how IS/IT applications & investments are actually being managed Formulative - used to identify a migration path toward the mix of approaches required in the future attractive when central planning is needed

Generic Application Management Strategies

Relating approaches to IS strategy formulation & generic implementation strategies
Should be a logical relationship between HOW an organisation plans its IS investments and approach it adopts for implementation Correlation is not perfect and there are some anomalies

Generic Application Management Strategies

Relating approaches to IS strategy formulation & generic implementation strategies cont.
Organisation led - implies cross-functional views of IS to ensure investments are targeted on business objectives and key themes implied by the objectives (follows centrally planned approach) Business led - IS investments driven by plans for particular business areas, should lead to uncovering high potential & in due course strategic applications (aligns with free market strategy)

Generic Application Management Strategies

Relating approaches to IS strategy formulation & generic implementation strategies cont. Administrative approach - main objective is budgetary control of IS/IT which can result in a scarce resource approach to implementation Method driven - involves highly analytical and structured approach to determining needs and priorities for investment (monopoly) Technology led - and leading edge are very similar but anomalous when placed in portfolio context. Difference is one of perception and time. Implies incremental adoption of technology as available and proven to enable technology efficiency

Portfolio, Planning and Generic Strategies Evolution (alternative strategy)

Strategic
5 ORGANIZATIONAL and Central Planning

High Potential
4 BUSINESS LED and Free market (or Leading Edge technology)

3 ADMINISTRATIVE LED and Monopoly and Scare Resource 1 TECHNOLOGY LED and Scare Resource (Free Market) or even Monopoly

2 METHOD LED and Monopoly

Key Operational

Support

Staged Approach
Many organisations develop or evolve their mix of planning and implementation strategies using a staged approach
Stage 1: no coherent strategy mix of free market, monopoly and scarce resource bottom up approach & only planning is of technology supply Stage 2: monopolistic strategy prevails linked to need for structure and integration related to method driven planning used to avoid systems ineffectiveness Stage 3: combination of monopoly and scarce resourcing to provide necessary controls of implementation & costs in line with emphasis on budget

Staged Approach
Stage 4: users pursuing localised opportunities opens up free market activities. Emerging new technologies provide opportunity to innovate in creating new business processes or radically change existing ways of working Stage 5: use of centrally planned strategy occurs for implementation of strategic applications as the organisation identifies links between strategic themes and the role of IS/IT

Portfolio Management Principles Applied to Applications Portfolio

Products and IS/IT applications must be managed according to their contribution to the business over an extended life cycle Determined by both internal and external factors In the case of IS/IT external market-driven factors becoming increasingly important Lessons from other portfolios have become more pertinent as IS/IT becomes integral to products, services and relationships with customers and suppliers

The Business/Systems Portfolio Matrix

STRATEGIC (STARS) HIGH POTENTIAL (WILDCATS)

Continuous innovation Vertical integration High value-add

Process research and design

Minimal integration
Cost control

Defensive innovation

Disinvest/rationalise

Effective resource utilisation

High quality
KEY OPERATIONAL (CASH COWS)

Efficiency Sustained quality

SUPPORT (DOGS)

Application Management Styles: High Potential (wildcats products )

Approaches to management Process R&D:
satisfying the technical professional, not the user Using prototyping or pilot implementation of an application to find out how the organization, and/or its trading partners, can benefit most from a new use of IT, not to discover all that the technology can do

Minimal integration:
While being evaluated, risky ventures should be separated from mainline activities. Should they fail, aspects of the business should not have become dependent on them and, at low cost, the prototype can be aborted.

Cost control:
Restricting the time allowed for evaluation, even though it is difficult to predict how long it will take when it is a unique R&D project.

Application Management Styles: Strategic (Star)

Approaches to management Continuous innovation:
What the system does and how it does it, to increase its value-added as an integral part of the business

High value-added and vertical integration

The business manager has to understand how the system can enhance the business process and then have the capability to make further changes to increase the value created, or improve process performance. The process of systems management should be vertically integrated with the business unit management to obtain max. strategic leverage from the systems or the information it delivers.

Application Management Styles: Key Operational (Cash Cows)

Approaches to management Defensive innovation
The system should only be enhanced or redeveloped in response to changes in the business that threaten to put the business at risk through a reduction of competitive capability

High quality
The low cost of support depends on professional quality management data and processing integrity and accurate integration of the system with other key operational systems and databases as well as related processes and procedures

Effective resource utilization

Sharing resources and expertise to reduce the costs

Application Management Styles: Support (Dogs)

Approaches to management Disinvest/rationalize
Using software packages and/or outsourcing their operation and support b/c they offer no competitive advantage

Sustained quality and efficiency

The quality of the system should be maintained in proportion to the costs of failure The system should not be enhanced unless there is a very demonstrable economic case

Key Issues in Managing the Evolution of an Application over Time

STRATEGIC HIGH POTENTIAL
Lose: Individual ownership and freedom

Gain: Senior mgt. ownership : IT involvement : Project mgt.

Fully integrated with other applications for effectiveness

Re-engineer for long-term use

Re-evaluate benefits & costs Evaluate lower-cost options to meet core needs

Return to standards

KEY OPERATIONAL

SUPPORT

Application Management Styles

Nature of these management styles reflect generic strategies required to manage the various components of the portfolio
An entrepreneur is a free marketer, who pays little attention to established procedure A developer is a central planner, close to the organisational goals, who builds resources to achieve results A controller is a monopolist, uncomfortable with anything outside his or her control A caretaker is a scarce resourcer, providing that he or she can achieve as much with less

Management Styles
STRATEGIC DEVELOPER - organization goal seeker - risk accommodating - 'Central Planner' CONTROLLER - long term/quality solutions - stability - risk reducing - 'Monopolist' KEY OPERATIONAL HIGH POTENTIAL ENTREPRENEUR - personal achiever - risk taking - 'Free Marketeer' CARETAKER - immediate/efficient solution - risk avoiding - 'Scarce Resourcer' SUPPORT

Managing Applications Portfolio in Multi-Unit Organizations

CORPORATE BUSINESS UNIT BUSINESS UNIT 3 BUSINESS UNIT 2 BUSINESS UNIT 1 STRATEGIC
Evaluate how advantages gained in 1 SBU can be obtained in others CAPITALIZE

HIGH POTENTIAL
Share ideas and results of evaluations and prototypes COMMUNICATE

Transfer experience in Achieve economies by use of applications and sharing non-critical technology across units. systems and standardizing Reduce duplication of IS on technologies and and IT effort resources used CONTROL CONSTRAIN

KEY OPERATIONAL

SUPPORT

Managing Applications Portfolio in Multi-Unit Organizations

Constrain
Corporate scare resourcing for applications that are not unique in any of the units

Capitalizing
Requires some central planning across the units to determine whether and how the same benefits can accrue across the organization

Control
To reduce unnecessary diversity over time to enable both reduction in costs through effective resource use To develop and sustain expertise in application operation and use

Communication
Sharing knowledge of new technology, its capabilities and limitations Could increase the speed of exploitation and reduce wasted effort