Chapter Application Portfolio

7/31/2019 Chapter Application Portfolio

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CHAPTER 7

Managing theApplication Portfolio


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Managing the ApplicationsPortfolio

Set of known requirements and potentialApplications portfolio concept is a means

of bringing together existing, planned andpotential Information Systems and theirbusiness contribution

Usefulness of Matrix approach is borneout by the ease with which management iswilling and able to categorize systems inthis way


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Managing the ApplicationsPortfolio

Conclusions from Various Matrices andModels 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, evenconvergent

More recent versions of the matrix devised to addressdevelopments in the 1990s are also very similar -terminology is different

Composite matrix - see fig. 7.1 pg. 301


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Composite Matrix

Composite Matrix based on:

The Sullivan matrix considered a range of IS/ITmanagement issues that depend on the

combination of infusion and diffusion of IS/IT inthe organisation

Infusion is the degree to which IS/IT haspenetrated a company in terms of importance,

impact or significance Diffusion is the degree to which IS/IT has been

disseminated or scattered throughout thecompany


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Sullivan matrix


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Sullivan matrix

Identifies need for new, demand-drivendecentralised approaches to improve

management of strategic and highpotential quadrants


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ITAA Matrix

Information technology Assessment andAdoption Matrix ITAA (Munro and Huff) considers how organisations have adopted

IS/IT as a competitive weapon based onpremise that most organisations are either:

technology-driven looking for ways ofdeploying new technology to advantage

Issues-driven looking for new businessopportunities within known possibilities ofexisting technology


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ITAA Matrix

TechnologyDriven

NormativeIdeal

Opportunistic Issue Driven

High

High

Low

Low

TechnologyEmphasis

Issue

Emphasis


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ITAA Matrix Opportunistic: Neither issues nor technology. The firm

acquires technology as it seed opportunities to matchtechnology and new opportunities

Technology driven: the firm devotes considerableresources to scanning new technologicaldevelopments and the identification of a new

technology deemed to be of some potential relevancetriggers a search for areas in the firm in which to applythe technology.

Issue driven: identify the issues or problem areas thatmight be addressed by new technology

Normative/complete: refers to an organization whichboth expends sufficient resources to monitor in amajor way all information technology change, whiledevoting considerable time and energies to the

generation of issues.


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Ives and Learmonth and GalliersMatrix

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 andmanaged

Show how a vision of what is possible plus

strength of resources is essential if IS/IT is tobe used as an offensive (strategic) weaponand how the two are often interrelated


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Hartman and Sifonis Matrix

Hartman and Sifonis Matrix More recent matrices e-business value

matrix devised to help managementaddress e-business options

Axes of core matrix are business criticalityand practice innovation and four resultingsegments equate closely with those of theapplications portfolio

Not all ideas from these matrices mapprecisely onto the applications portfolio


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Hartman and Sifonis Matrix

BreakthroughStrategies

OperationalExcellence

Rational

Experimental

New

Fundamentals

High

High

Low

Low

Businesscriticality

Innovation


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Application Portfolios in Different IS/ITEnvironments

St

KO Su

HP St

KO Su

HP

Su

St

SuKO

Portfolio Portfolio

PortfolioPortfolio

Applications Applications

ApplicationsApplications

ComplexOpportunistic

BackboneTraditional

HIGH

LOW

LOW HIGH

Diffusion(Development)

Infusion

(Impact)

Comprehensive

applicationportfolio

Balance ofcontrol

Enable business

creativity

Centralized ITLack of

perception inthe businessof what canbe achieved

DecentralizedIT control

Not seen ascritical tobusiness

Centralized ITPredominance ofsupportapplications


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Classifying Applications inthe Portfolio

Understanding the role and value ofexisting application set

Some applications may be obsolete and no

longer required

Some may need significant investment toavoid future business problems

Some may be under-exploited Some may be consuming undue amounts of

resources in relation to their business value


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Analysing the applications in theportfolio (SWOT)

Exploit strengths

High future potential, currently under-exploited

Can be extended, enhanced to be of morevalue

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


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Analysing the applications in theportfolio (SWOT)

Exploit Strengths cont. Must be enhanced to meet changed and

future business needs

System required, but needs to be re-implemented to absorb less resources orovercome 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


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Reconciling Demand & Supply Issuesin the Application Portfolio

Driving Forces Critical RequirementsHighpotential

New business ideas ortechnological opportunity

Individual initiative- owned bya product champion

Need to demonstrate thevalue or otherwise of the idea

Rapid evaluation of prototypesand avoid wastingeffort/resources on failures

Understand the potential benefit

in relation to business strategyIdentify the best way to proceed

Strategic Market requirements,competitive pressures or

other external forcesBusiness objectives, successfactors and vision of how toachieve them

Obtaining an advantage andthen sustaining it.

Rapid development to meet thebusiness objectives and realize

benefits within the window ofopportunity

Flexible system that can beadapted in the future as thebusiness evolves

Link to an associated business

initiative to sustain commitment


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Reconciling Demand & SupplyIssues in the Application Portfolio

Driving Forces Critical Requirements

Keyoperational

Improving the performanceof existing activities

Integration of data &

systems to avoidduplication, inconsistency,and misinformation

Avoiding a businessdisadvantage or allowing a

business risk to becomecritical/comply withindustry legislation

High-quality, long-lifesolutions & effective datamanagement

Balancing costs withbenefits & business risksidentify the best solution

Evaluation of optionsavailable by objective

feasibility study


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Reconciling Demand & SupplyIssues in the Application Portfolio

Driving Forces Critical Requirements

Support Improvedproductivity/efficiency ofspecific business tasks

General legislation

Most cost-effective use ofIS/IT funds and resourcesavailable

Low-cost, long-termsolutions often packagedsoftware to satisfy most

needs

Compromise the needs tothe software available

Objective cost/benefitanalysis to reduce financial

risk and then control costscarefully

K Q i h A li i


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STRATEGIC HIGH POTENTIAL

KEY OPERATIONAL SUPPORT

WHY Do we want to do it instrategic terms?

WHAT does the system need todo to gain the advantage?

HOW best to do it?

WHY? Not clear

WHAT? Not certain and/or

HOW? Not yet known

WHY to improve performanceand avoid disadvantage?

WHAT actually has to improveand by how much?

HOW best to do it?

WHY to reduce costs byimproving efficiency

WHAT of existing necessary

tasks?

HOW best to do it?

WHY = efficiency

Key Questions on the ApplicationsPortfolio

WHAT = need to be improved HOW = to do that successfully(cost-effective use of IT)


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Generic ApplicationManagement Strategies

No single implementation approach likely to dealeffectively with the range of issues involved

Equally, adopting a unique approach to each and

every new development will lead to a degree ofchaos and may result in failure

Parsons (1983) describes five strategies that areprevalent in organisations linking strategies

Guide opportunities for IT identified, IT resourcesdeveloped, rate at which technologies areadopted, level of impact within the firm etc.

(See table 7.3 page 313)


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Generic Application ManagementStrategies

Strategies define different roles andresponsibilities for the three key parties involved inenabling 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 orin business units) or external


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Generic Application ManagementStrategies: 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 byworking 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


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Generic Application ManagementStrategies: Leading Edge

Management rationale Technology can create business advantages and

risks are worth taking


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

IT role

Push forward boundaries of technology use on allfronts

Line managers and users role Use the technology and identify the advantages it

offers


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Generic Application ManagementStrategies: 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


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Generic Application ManagementStrategies: Monopoly

Management rationale Information is a corporate good and an integrated

resource for users to employ


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 non-directive in terms of the uses of IS/IT

Line managers and users role Understand needs and presents them to central utility

to obtain resources


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Generic Application ManagementStrategies: Scare Resource

Management rationale Information is a limited resource and its development

must be clearly justified


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


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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 highpotential box

free market most effective for supportapplications 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


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DEMAND

SUPPLY

CENTRALISED DECENTRALISED

Centrally planned

Leading edge

Free market

Monopoly

Free market

Scarce resource

Relationship of applications portfolio and generic IS strategies


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Relationship between generic strategiesand styles of management proposed bySimon (1995):

Boundary control - appropriate whenobjectives and constraints are clear allowsproject team discretion about how best to

achieve required outcome correlates withaspects of free market and scarce resourcing


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Generic strategies have primarily two uses inIS/IT strategy development:

Diagnostic way of assessing current

strategies being used clear way ofexpressing how IS/IT applications &investments are actually being managed

Formulative - used to identify a migration

path toward the mix of approaches requiredin the future attractive when centralplanning is needed


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Relating approaches to IS strategyformulation & generic implementationstrategies

Should be a logical relationship betweenHOW an organisation plans its IS investmentsand approach it adopts for implementation

Correlation is not perfect and there are someanomalies


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Relating approaches to IS strategy formulation &generic implementation strategies cont.

Organisation led - implies cross-functional views of

IS to ensure investments are targeted on businessobjectives and key themes implied by the objectives(follows centrally planned approach)

Business led - IS investments driven by plans forparticular business areas, should lead to uncoveringhigh potential & in due course strategic applications(aligns with free market strategy)


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Relating approaches to IS strategy formulation & generic

implementation strategies cont.

Administrative approach - main objective is budgetarycontrol 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 prioritiesfor investment (monopoly)

Technology led - and leading edge are very similar butanomalous when placed in portfolio context. Differenceis one of perception and time. Implies incrementaladoption of technology as available and proven toenable technology efficiency

Portfolio Planning and Generic


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Portfolio, Planning and GenericStrategies Evolution

(alternative strategy)High PotentialStrategic

Key Operational Support

5 ORGANIZATIONALand Central Planning

3 ADMINISTRATIVE LEDand Monopoly and ScareResource

2 METHOD LEDand Monopoly

1 TECHNOLOGY LEDand Scare Resource(Free Market) or evenMonopoly

4 BUSINESS LEDand Free market (orLeading Edge

technology)


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Staged Approach Many organisations develop or evolve their mix of

planning and implementation strategies using astaged 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 methoddriven planning used to avoid systems ineffectiveness

Stage 3: combination of monopoly and scarceresourcing to provide necessary controls ofimplementation & costs in line with emphasis onbudget


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Staged Approach

Stage 4: users pursuing localisedopportunities opens up free market activities.Emerging new technologies provide

opportunity to innovate in creating newbusiness processes or radically changeexisting ways of working

Stage 5: use of centrally planned strategy

occurs for implementation of strategicapplications as the organisation identifies linksbetween strategic themes and the role of IS/IT


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Portfolio Management PrinciplesApplied to Applications Portfolio

Products and IS/IT applications must bemanaged according to their contribution to thebusiness 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 morepertinent as IS/IT becomes integral to products,services and relationships with customers andsuppliers

Th B i /S P f li


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STRATEGIC (STARS) HIGH POTENTIAL (WILDCATS)

KEY OPERATIONAL

(CASH COWS) SUPPORT (DOGS)

Continuous innovation

Vertical integration

High value-add

Process research and design

Minimal integration

Cost control

Defensive innovation

Effective resource utilisation

High quality

Disinvest/rationalise

Efficiency

Sustained quality

The Business/Systems PortfolioMatrix

Application Management Styles:


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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 findout how the organization, and/or its trading partners, can benefit

most from a new use of IT, not to discover all that the technologycan do

Minimal integration: While being evaluated, risky ventures should be separated from

mainline activities.

Should they fail, aspects of the business should not have becomedependent on them and, at low cost, the prototype can beaborted.

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&Dproject.

A li ti M t St l


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Application Management Styles:Strategic (Star)

Approaches to management Continuous innovation:

What the system does and how it does it, to increaseits 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 thenhave the capability to make further changes toincrease the value created, or improve processperformance.

The process of systems management should bevertically integrated with the business unitmanagement to obtain max. strategic leverage from

the systems or the information it delivers.


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Application Management Styles:Key Operational (Cash Cows)

Approaches to management Defensive innovation

The system should only be enhanced or redevelopedin response to changes in the business that threaten

to put the business at risk through a reduction ofcompetitive 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 keyoperational systems and databases as well as relatedprocesses and procedures

Effective resource utilization Sharing resources and expertise to reduce the costs


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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 competitiveadvantage

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


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Key Issues in Managing the Evolutionof an Application over Time


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


Lose: Individual ownershipand freedom

Fully integrated

with otherapplications foreffectiveness

Re-engineer forlong-term use

Re-evaluatebenefits & costs

Return tostandards

Evaluate lower-costoptions to meet coreneeds


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Nature of these management styles reflectgeneric strategies required to manage thevarious 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 achieveresults

A controller is a monopolist, uncomfortable withanything outside his or her control

A caretaker is a scarce resourcer, providing that he orshe can achieve as much with less

Application Management Styles


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Management Styles


DEVELOPER

- organization goal seeker

- risk accommodating- 'Central Planner'


CONTROLLER

- long term/quality

solutions - stability

- risk reducing

- 'Monopolist'

ENTREPRENEUR

- personal achiever

- risk taking- 'Free Marketeer'

CARETAKER

- immediate/efficient

solution

- risk avoiding

- 'Scarce Resourcer'

Managing Applications Portfolio


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Managing Applications Portfolioin Multi-Unit Organizations

CORPORATE BUSINESS UNIT

BUSINESS UNIT 3

BUSINESS UNIT 2

BUSINESS UNIT 1



Evaluate howadvantages gained

in 1 SBU can beobtained in others

CAPITALIZE

Share ideas and resultsof evaluations and

prototypes

COMMUNICATE

Transfer experience inuse of applications and

technology across units.Reduce duplication of IS

and IT effort

CONTROL

Achieve economies bysharing non-critical

systems and standardizingon technologies and

resources used

CONSTRAIN

M i A li ti P tf li


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Managing Applications Portfolioin Multi-Unit Organizations

Constrain

Corporate scare resourcingfor applications that are notunique in any of the units

Control To reduce unnecessary

diversity over time toenable both reduction incosts through effective

resource use To develop and sustain

expertise in applicationoperation and use

Capitalizing

Requires some centralplanning across the units todetermine whether andhow the same benefits canaccrue across theorganization

Communication

Sharing knowledge of new

technology, its capabilitiesand limitations

Could increase the speedof exploitation and reducewasted effort

Documents

Chapter Application Portfolio