Unleashing Value Through Portfolio Analysis A Netsession hosted by Cognizant Technology Solutions

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Unleashing Value Through Portfolio AnalysisA
Netsession hosted by Cognizant Technology
Solutions

• December 11, 2003
• 100 - 200 PM EST
• AGENDA
• 100-125 Phil Murphy, Director, Forrester
  Research, Inc., Rationalizing Application
  Portfolios with Portfolio Management
• 125-150 Kaushik Bhaumik, Vice President,
  Cognizant Technology Solutions, Unleashing Value
  Through Portfolio Analysis
• 150-200 QA

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Rationalizing Application Portfolios

• Saving Money, Repairing the Rift Between IT and
  the Business Using Application Portfolio
  Management

Phil Murphy Kaushik Bhaumik Director ,
Cognizant Forrester Research
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Business Justification Why Are We Here?

• IT is under siege headlines say it all
• Tech-budget cuts gut IT headcounts, salaries
• Biz units new task Prove value of IT
• CIOs Stop begging for IT funding and start
  showing value

Source Computerworld
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IT Spend - How Much Money Is At Stake?

• Average Fortune 500 company
• 370 million / 3.8 of revenue
• Average Fortune 501-1000 company
• 90 million / 5 of revenues ( Avg. 2B revenue)
• Average Fortune 1001-2000 company
• 56 million / 7 of revenue (Avg 0.8B revenue)

Source Forrester
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IT Spending Where Does It All Go?
Computers and Peripheral Equipment
IT Salary Benefits
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CommunicationsEquipment
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11
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Software
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Services andOutsourcing
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IT Counts Techie Things Well
Computers and Peripheral Equipment

• We count in ways that arent very meaningful to
  the business
• Thousands of MIPS
• Terabytes of DASD
• Licenses, records
• CPUs, Mhz, MB

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CommunicationsEquipment
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Software
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Salaries The Black Hole of IT Budgets
IT salaries svcs outsourcing 53 of IT SPEND
IT Salary Benefits
30
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Services andOutsourcing
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Maintenance The Black Hole of IT Salaries
Maintenance Efforts
New Projects
80
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15 - 35
PPM
APM
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We Need Business Facing Metrics
Business Goals
CxO
Strategic Plans
Line of Business/ IT Director
Projects
Applications
Business Facing
Operating Systems
IT Facing
Networks
Performance Monitoring
Security
Hardware
Operations
Desktops
Servers
Job Schedulers
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APMs Goal A More Business-like Approach

• Money
• What does this application cost this year / next?
• Rank applications by annual cost
• Resources
• Which applications are the resource hogs? Why?
• How do we free more resources for new projects?
• Time
• How do we do a better job scoping enhancements?
• How can we do more with what we have / faster?

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APM Benefits Outsourcers and Clients

• Pre-agreement
• What are all the parts of this application?
• How complex is it? Effort to maintain?
• Right cost parameters objective 3rd party
  opinion
• Post agreement
• Application getting better or worse?
• Defects, complexity, failures
• SLA achievement against improvement
• Objective, 3rd party opinion
• Benchmarking new service?
• Avg. cost by appl. type?
• Benefit individual companies AND outsourcer

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Application Metrics Enable Better Management

• Application Mining
• Where is this artifact used?
• How does this application work?
• Impact of potential changes
• Faster debugging
• Better enhancement scoping

• IT Portfolio Mgmt.
• What systems do we have?
• Will they support initiatives?
• Which projects to fund?

APM repository
Mining builds repository
Metrics enables analysis
APM develops metrics

• Application Portfolio Mgmt.
• Expense by business unit
• Operational improvements
• What-if analysis
• Keep / retire / outsource, rewrite?
• Application metrics and trends

• Project Portfolio Mgmt.
• Enterprise view of projects
• Resource allocation / control
• Measurement, balance, reporting

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Impact Analysis Builds Source of Truth
3) Add application information (business-owner,
labor, etc.
Create a trusted source of application truth
APM Repository
Dev.
Source Code Mgmt.
Test
Prod

• Initial load of all application artifacts(read
  source code)

2) Updates from production, keepit up-to-date
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APM Add Information Create New Value

• Designate application owners, track labor against
  appls.
• Cockpit-style views of application metrics,
  combined with business information
• Role based
• Programmer labor cost and effort, complexity,
  defects, failures
• Trending over time getting better or worse?
• Size, of portfolio
• One-stop-shopping for application knowledge
• Analysts, programmers understand faster, fix bugs
  faster, scope enhancements faster and with more
  accuracy

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Business Uses of APM Alitalias Decentralization
Alitalia Express (Regional airline)
PL/I source

Cobol source
Alitalia Team (Low-fare airline)

JCL
Atitech (Maintenance)
HAL KS DB2 Repository
CICS/IMS def
Eurofly (Domestic charter)

SMF data
DASD/TAPE usage
Italiatour (Tour promotion)
Other lines of business
Lines of Business
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Business Uses of APM Merrill Lynch Goes Wild
WEB Reports (Standard reports)
JCL
Nightly Delta Process
DSN
BI/WEB (Adhoc reports)
OS/390 Data Repository Warehouse
Control Cards
MyReports (Scheduled reports)
Change management
OLAP COGNOS (What-if analysis)
SMF
Nightly Collection Purge Process
Scheduling
ODBC Access
DASD/TAPE usage
Create analytical cubes
TSO
HR
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APM Netting It Out

• Significant increase in available knowledge
• Fortune 2000 savings on maintenance measured in
  millions of dollars (US)
• Faster, more accurate scoping, break-fix,
  enhancements and new (integrated) projects
• Puts management back into IT Management
• CIO Magazine
• APM Benefits Both Sides of the Outsourcing
  Contracthttp//www2.cio.com/analyst/report1730.ht
  ml (Sept 10th)
• APM Offers a Cure for the CIO/CXO
  Rifthttp//www2.cio.com/analyst/report1894.html
  (Nov 5th)

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Agenda

• What is Portfolio Analysis?
• Drivers of PA
• PA methodology
• Components of PA
• Maturity model
• Value model
• Transition model
• Cost savings analysis
• Suitability Analysis A multi dimensional
  statistical approach
• Implementation road map
• Benefits

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What is Portfolio Analysis?

• A unique, short-term, high-value assessment to
  lower development maintenance costs and
  increase quality of IT service

Transition and cost models Arrival of optimal
resource model to support transition cost model
to calculate effective Savings
Suitability analysis Determination of suitability
of application towards offshoring using a
objective multi dimensional statistical approach
PA
Suitability
TM CM

• Benefits
• Reduced operating cost
• Reduced risk
• Highly available skilled resource pool
• Value added services

Roadmap
Offshorability road map An implementation road
map to offshore the applications in a tiered
manner to manage and plan for effective resource
utilization and for absorbance of the new
offshore processes by the business users
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When to go for PA?
Main drivers
PA

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Approach highlights
PA
Removes subjectivity and guesswork in
identifying applications and the subsequent
planning for offshoring
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Cognizants PA methodology
A proven methodology for Portfolio Analysis
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Tool framework - OPAT

• OPAT Offshorability Portfolio Analysis Tool
• OPAT
• Unique cognizant intellectual property towards
  portfolio analysis
• Automates many of the analysis
• Reduces subjectivity and aid in consistency in
  logical decision-making
• Tool Highlights
• Transparently uses advanced statistical
  normalization techniques and complex empirical
  algorithms in achieving the results
• Very flexible to accommodate changes per the
  needs of a specific client environment
• Components
• Application maturity modeling
• Application transition modeling
• Application cost modeling
• Client preference modeling
• Multidimensional suitability analysis

Tool framework for standardization and for
transparently absorbing the complexities of
advanced concepts of statistics
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Maturity modeling

• Uses more than 125 quantitative attributes
• Maturity Index is an indicator of
  Ease-of-offshorability (The inverse provides
  the application level risk index towards
  offshoring)
• Norms are major categories on which applications
  are analyzed
• Categories are made up of different attributes
• Maturity Index is a normalized statistical score
  of norms

Scientific way of measuring an applications
readiness for offshoring, based on multitude of
factual data points
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Maturity (Sample Outputs)
Distribution of the importance factors of Norms
based on advanced Analytical Hierarchal Process
(AHP)
This application scores low on Documentation
Unavailability and high on FTE Norm
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Value modeling

• Uses more than 100 quantitative qualitative
  attributes
• Value Index is an indicator of Add On Value
  Benefits that are significant and that could
  make a significant difference to the customer
• Value Index is measured against the current
• state of the applications, systems and
  processes
• Determined by norms that are made up of different
  attributes

Means for the client realization of key benefits
on application management due to offshoring
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Value (Sample Outputs)
80 of application scores high to medium scores
meaning more value addition possible due to
offshoring
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Transition modeling

• Uses complex mathematical formulas and
  optimization techniques to determine ideal
  resource distribution through various phases of
  transition and steady state
• A phased model for transition
• Uses Cognizants application value management
  (AVM) methodology
• Aggregated results at different levels
  application level, tier level, portfolio level etc

A very robust model to comprehend the optimal
time and resource distribution needed on
offshoring. Maturity Index will be one of the
critical inputs
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Transition (Sample Outputs)
Clients resources ramping down to 6 at steady
state
Progressive increase in cost savings from tier 1
to tier 3 as applications are offshored in order
of tiers
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Cost modeling (Sample Outputs)

• Cost savings determined using steady state
  resource count (cognizant and client)
• Uses transition model as key input
• More the cost savings for an application more the
  cost benefits through offshoring
• Based on actual cost parameters (wage rate,
  inflation rate, productivity etc)

Gives an early insight to client on potential
cost savings due to offshoring at application
level
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Client preferences (Sample Outputs)

• The client preferences identifies the various
  qualitative inputs towards specific expectations,
  limitations, pain points, preferences etc.
• The relative priority if any, for offshoring
  amongst the set of applications under portfolio
  is also seeked from the client

Some of the qualitative inputs could be on Data
related security issues High resources dependency
(a state where a resource cannot be moved out
because he is the only one who is an expert in
that) Current Resource Utilization and
Distribution of typical work Software development
life cycle related issues and manageability State
of Business Users interaction with the IT
Management and discipline of the existing
systems and processes etc
Comprehends the generic qualitative feelings and
expectations from the client
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Suitability analysis A multidimensional
statistical approach
Suitability
In reality, it becomes very complex when these
indices are in contradiction with one another
thereby necessitating advanced normalization
techniques
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Four dimensional analysis
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Implementation road map
A final implementation road map on a tiered
approach is derived using inputs from suitability
analysis and transition cost models. The
associated risks and mitigations are also
identified.
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Summary

• Cognizant is The Leader in this area across the
  market
• Unique, Robust and Proven Portfolio Analysis
  Methodology
• The Methodology and the tool has been used in
  very many engagements and is customized to suit
  any client environment
• Leverages significant experience of Cognizant in
  the IT Services arena
• Rich experience in CMM-Level 5, CMMi-Level 5,
  ISO, PCMM, BS7799 and quality standards.
• For more information contact
• Kaushik Bhaumik, VP Business Technology
  Consulting
• [phone]
• Kaushik.bhaumik_at_cognizant.com

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