COM333 – IS3

Applications portfolio analysis

Applications portfolio analysis

• Derived from– BCG (Boston Consulting Group) matrix – Product Life Cycle

• The BCG grid is a simple matrix that can be used anywhere where it is possible to compare two measurable variables against each other

low high

low

high

• The product life cycle is based on the concept that the cash flow from any product (service) follows a similar pattern.

Emerging

Growth

Mature

Decline

• Wild cat stage - Emerging– At the start of its life, the product is being

designed, developed, launched and promoted;

– Net cash flow is likely to be negative: • High investment, • Low rate of return.

– There is no guarantee that the product will become successful

• Jump in any direction.

• Star stage - Growth– If the product is successful, its growth

potential is greatest at the next stage– Net cash flow shoots up. – Still a high cash injection is needed,

• Marketing of the product– Establish the product’s market share– This is the shooting star

• shoots upwards.

• Cash cow - Mature– Product is established– Generates income without the need for further

cash injection. – It is the company’s breadwinner, earning

income and allowing investment in other areas.

– Keep the cash cow for as long as possible so that it can be milked.

• Dog Stage - Decline

– Declining cash flow

• New products from competitors

• Fashion or economic trends

• An injection of cash is needed to boost the declining cash flow.

• Or the company will wish to divest itself of the product.

high Wild cat

Star

Market growth Dog

Cash cow

low Market share

low high

• The principle can the then be applied to a mapping of the strategic importance of current IS applications versus the strategic importance of planned IS applications.

high

Turnaround (or High potential)

Strategic

Strategic importance ofplanned IS

Support

Factory (or Key operational)

low Strategic importance of current IS

low high

Importance refers to business importance

not on technological complexity or newness

• Turnaround (High potential) systems – Systems that are of low importance now, but are predicted to be

critical in the future.

• Strategic systems – Are those on which the organisation depends now, and will do in

the future.

• Factory (Key operational) systems – Are of high current value

• keep the business running

– Are predicted to fall in value to the business.

• Support systems – Are of low importance now, and are expected to continue so.

Sample portfolio(Manufacturing Company)

STRATEGIC

1. ORDER MANAGEMENT

2. LINKS TO SUPPLIERS (JIT)

3. SALES FORECAST & MARKET ANALYSIS

4. PRODUCT PROFITABILITY ANALYSIS

HIGH POTENTIAL1. EDI WITH WHOLESALERS

2. MANPOWER PLANNING

3. DECISION SUPPORT

4. DOCUMENT PROCESSING

1. BILL OF MATERIALS DB

2. INVENTORY MANAGEMENT

3. SHOP FLOOR CONTROL

4. PRODUCT COSTING

5. MAINTENANCE SCHEDULING

6. EMPLOYEE DB

7. CAD (PRODUCT DESIGN)

8. CUSTOMER DB

9. RECEIVABLES/PAYABLES

KEY OPERATIONAL

1. TIME RECORDING

2. BUDGETARY CONTROL

3. EXPENSE REPORTING

4. GENERAL ACCOUNTING

5. MAINTENANCE COSTING

6. CAD FOR LAYOUT DESIGN

7. PAYROLL

SUPPORT

• Given that the objectives of IS applications development are to– Deliver cost-effective applications with sustainable value to the business– Provide a faster development process– Build less prescriptive and more flexible applications– Establish a style for applications development that matches the

business style– Enable users to participate more and take more direct control– Support team working or dispersed work groups– Enable more customer contact– Enable more informed decision-making– Increase the value delivered by legacy applications– Maximise re-use of existing applications material– Exploit the useful potential in current technology and tools– Provide a range of information delivery methods and tools

• High potential (turnaround) systems– Prototyping, New technology or new development

tools– Evaluate technology or business idea– Independent – integration and data management are

not appropriate– Rapid low cost iterative development– Business Champion– End-user development or user/IS team– New skills/skills transfer– Focussed pilots/broad potential

• Strategic systems– Sophisticated application generators, Prototyping, Advanced

database technology– Based on the corporate model– Fast and flexible development approach– Close partnership between users and IS professionals/new skills– Complex applications built up in increments, sometimes on top

of Key Operational (Factory) systems– Evolving or creating a new business process– External links– Good inter-connectibility with Key Operational (Factory) systems

and external data– Executive support– Limited package availability

• Key operational (factory) systems– Systems development life cycle, Software

engineering, Corporate data management, Industry-specific application packages, Application generators/CASE/IPSE, Re-engineering

– Well designed– Efficient, robust, long life– Complex and integrated, based on corporate model– Strict change control procedures– IS and users’ skills and knowledge high during

development, package integration and ongoing support

• Support systems– Standard packages, Disinvestment/third party support– Minimum intervention– Minimum maintenance– Skills – package selection and

implementation/essential interfaces/vendor management

– Compromise business needs rather than modify package

– Integration not vital– Efficient/low risk

• How to carry out applications portfolio analysis?– Begin with a grid illustrating the current

portfolio, you should end up with a grid showing the desired portfolio.

1. List the current applications2. Allocate the applications to the appropriate

boxes using the criteria on the axes of the grid3. Ask “Is the grid balanced?”

• Think• There is a need to know why certain boxes may be

empty or nearly empty, and why some boxes are full.

4. Consider what is required to balance the portfolio.

• Better use or management of some IS applications • Introduction of new applications (investment).