Application Portfolio Management

1
Application Portfolio Management

• An organisation will tend to develop a range of
  IS/IT applications over time
• data processing systems
• clerical support systems
• customer service applications
• just-in-time systems
• strategic information systems
• This is rather like a product portfolio
• each has its place purpose
• each will have current future value

2
Application Portfolio Management

• Application portfolio management is about
• improving the contribution of existing systems
• allocating organisational resources more
  effectively
• ensuring that the best approach is adopted for
  new applications
• enables managers (IS/IT and otherwise) to make
  more informed consistent judgements about IS/IT
  resources

3
Characteristics of IS/IT applications

• Any IS/IT application in the portfolio may
• have high future potential that is currently
  under exploited
• have potential to be developed to give more value
  to the organisation
• have more value if integrated with other
  applications
• be critical but suffer from poor quality
• need to be altered to suit changes in the
  organisation
• need transfering to newer technology
• have no current or future value at all

4
The Strategic Grid - an APM Tool

• The Strategic Grid measures the organisations
• level of dependence on IT systems
• high essential to organisations survival
• low may improve operations, but not essential
• strategic impact on business
• high a critical success factor, mission
  critical
• low useful, but low business potential

5
Strategic Grid Quadrants

• Strategic
• company depends on IT system now in future
• Turnaround
• not critical at the moment, may be in future,
  could be made so. May become less critical
• Factory
• core systems, critical but are unlikely to
  affect organisations position or create new
  opportunities
• Support
• useful but not critical

6
The Strategic Grid
High
factory
strategic
Dependency
support
turnaround
Low
Impact
High
Low
7
Using Application Portfolio Management

• Application Portfolio Management helps
• see the balance of IS/IT investment in terms of
  organisational resources funds
• see where IS/IT management effort is being
  deployed where it is planned
• APM is needed because
• most organisations want to focus effort money
  on strategic factory applications
• but
• they often waste effort money on generic
  applications in the support quadrant
• and
• dont invest sufficient effort or money in
  (future) turnaround applications

8
Identifying Strategic Applications of IT

• Six useful questions (after Michael Porter)
• can IT create sustain barriers to entry to
  industry or market segment?
• can we create switching costs for our strategic
  target?
• can IT change the basis of competition?
• can IT change competition from cost leadership to
  differentiation or focus?
• can IT lock-in suppliers or customers?
• can IT be used as a product or service?

9
Interpreting the Strategic Grid

• To help managers develop a greater awareness
  of the strategic role of IT in their
  organisations FW McFarlan
• As a tool for managing the IS/IT applications
  portfolio Ward et al
• 1980s emphasis on factory support
• 1990s emphasis on strategic
• 2000s solving the turnaround problem
• There will always be a role for factory support
• applications and they should be valued

10
Using the Strategic Grid

• The process of using the grid is important...
• creates agreement between stakeholders
• focuses management action
• tool of communication
• The grid may be used for
• systems development/improvement
• IT investment
• opportunity spotting
• IT requires management action to be effective

11
Identifying Opportunities to Use IT Strategically

• competitive advantage
• see work of Porter, Wiseman, McFarlan etc.
• strategic collaboration
• business alliances based on shared technology
• diversification
• new products/services, new uses for existing P/Ss
• marketing focus
• target intelligence communication
• management improvement
• new methods, organisational forms, processes

12
Characteristics of turnaround applications

• Driving force Requirements
• New opportunity Evaluation, selection
• for organisation rejection of ideas
• Individual initiative Managers
  appreciate potential of idea(s)
• Obtaining full value Policy on how to
• for IS/IT investment proceed

13
Characteristics of support applications

• Driving force Requirements
• Improved productivity Packaged software,
• operational efficiency user compromises
• Legal requirements Evolve to latest versions
  of packages
• Cost effective use of Use of cost/benefit
• IS/IT funds resources risk analysis

14
Characteristics of factory applications

• Driving force Requirements
• Improve performance Effective information
• of existing activities management, stable
• long-term systems
• Integrate systems Business process
• Streamline processes re-engineering (BPR)
• Avoid duplication Cost benefit analysis
• wastage Value chain analysis

15
Characteristics of strategic applications

• Driving force Requirements
• Opportunities Rapid IS applications
• Environmental pressure development
• Organisational vision, Flexible IT platforms,
• objectives, CSFs IS applications
• Spreading benefits Organisational networks

16
Management action to balance portfolio

• buy cheaper off-the-shelf packages to service
  support applications
• point out importance of factory applications -
  prevent legacy systems
• develop champions for turnaround applications
  
• ensure management budgetary support for
  strategic applications
• Understanding the forces that drive systems
  is the key to managing them