Allamerica

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Application Portfolio Optimization (APO) and
Project Governance
Prepared for Indiana Digital Government Summit
June 7, 2005 Doug Masten, PMP Service Delivery
Manager
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Application Portfolio Optimization Review

• What is APO?
• Why do it?
• Approach
• Outputs Results
• Moving to Project Governance

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Application Lifecycle OptimizationChallenges
ApplicationDevelopment
ApplicationManagement
ApplicationsRationalization
Costs
Benefits
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Application Lifecycle OptimizationOpportunities
ApplicationDevelopment
ApplicationManagement
ApplicationsRationalization

• Increase ROI by reducing development costs
• Gain benefits faster by cutting time-to-market
• Lower risk through strong project mgmt
• Fund with budget taken from low value projects

• Increase business value by
• Extending usage
• Expanding functionality
• Reduce costs through
• Rigorous processes
• Higher productivity
• Proactive mgmt

• Increase business value by
• Extending the life of useful applications
• Enhancing flexibility
• Reduce costs by
• Consolidating redundancy
• Retiring low value applications
• Standardizing technology platforms

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Why APO?

• APO provides an objective framework to
• Assess, align, and strengthen the existing
  application portfolio based on inherent value,
  cost, and risk to the business
• Assure alignment with key business objectives to
  gain the most business advantage from each IT
  dollar invested
• Change the business view of applications to
  assets for investment to achieve business
  objectives, not costs with un-quantified business
  value

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APO is Focused on Existing Applications
Governance Focus
APO Focus
Source META Group
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Potential APO Benefits

• Significant cost reductions
• Free IT staff and budget for higher value
  purposes
• Enable simplification of IT platforms
• Extend the life of value-generating functionality
• Accelerate portfolio evaluations as part of
  mergers and acquisitions
• Minimize risk, maximize potential of core and
  emerging applications
• Builds business alignment and buy-in
• Institute IT Governance / Portfolio Management
  processes and tools

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APO makes extensive use of Portfolio Analysis
methods and tools

• Portfolio Analysis
• Portfolio Analysis is used to objectively assess
  the value, cost, and risk of applications using a
  limited set of meaningful, traceable criteria
• Each application
• is viewed as an asset
• should produce a value which exceeds its cost to
  the enterprise
• should operate within appropriate risk profiles
  relative to its value

Comparative analysis allows IT Executives to
identify on which competing needs to spend its
limited IT dollars
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APO Assessment Framework

• The customization of the framework centers around
  three Key Performance Areas (KPAs)
• Value
• Cost
• Risk
• Each KPA consists of several categories used to
  rate each application
• The ratings are used to determine an
  applications index within each KPA

Value
StrategicAlignment
OperationalEfficiency
TechnicalCapability
Cost
Investment Costs
Support Costs
Platform Services Costs
Risk
Business Risk
Technology Risk
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APO Context Diagram
Business Objectives
Current Portfolio (e.g, Scorecard, Disposition)
Portfolio Recommendations / Deliverables
Optimize Portfolio
Current Initiatives
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APO Key Elements of Success
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Portfolio Management Tools support Comparative
Analysis
250K 3M)
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Sample Deliverables Application Roadmap

• To ensure detection of redundant functionality
  and to present the aggregate changes in the
  portfolio over time via execution of AR
  Recommendations, functional-based Roadmaps are
  developed. A Current View, Intermediate Views,
  and Recommended View are created through the
  course of the engagement.

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Methodology Details Disposition Definitions

• Each application is given one of four
  dispositions

Disposition Description
Retain Application supports business needs adequately current maintenance and investment strategy will be continued
Invest Incrementally increase investment in the application to positively impact value, cost, or risk to the organization
Replace Replicate current functionality within a new application
Retire Migrate functionality into another application, or cease utilizing the application
Develop substantive, defendable recommendations
for each application, or logical group of
applications
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Sample Deliverables Executive Summary

• This table provides an example of applications by
  Business Process, Portfolio Category, and Action
  Code.

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Sample Deliverables Executive Summary

• Segmenting the portfolio by action codes
  dramatically highlights that nearly 27 (15 of
  55) of the applications in the portfolio
  presented this organization with an immediate
  opportunity to Take Action, and improve
  business value or reduced cost.

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Key Questions Answered by APO

• What are the most valuable activities to pursue,
  and why?
• How does the current state of the application
  portfolio impact current activity and spending
  related to new development, incremental
  enhancement, and maintenance?
• How well aligned is IT spending with strategic
  objectives?
• How much redundancy exists in the application
  portfolio, and is there value in reducing it?
• What is the disposition strategy for each
  application in the portfolio (Retain, Invest,
  Replace, Retire)?

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Governance Focused on New and Existing Assets
Governance Focus
APO Focus
Source META Group
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Continuous Operational Loops
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Governance Committee Role
Governance Committee ensures benefits are
achieved

• At Project Selection
• Prioritize projects based upon value, cost, risk
• Align investments with objectives
• At project initiation
• Clear understanding of the mechanisms through
  which benefits will be achieved
• Measurements (quantification and qualitative)
  determined during planning
• Risks identified
• Review at key points to ensure all required
  mechanism are in place
• Assessment at project end

OPTIONS CONSIDERATION
ONGOING
REVIEWS
MAKING
THE
CASE
COST
SCENARIOS
DOCUMENTING
BENEFITS
THE CASE
DEFINITION
ANALYSIS
OPTION
ANALYSIS
RISK
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Maintaining Optimization Through Governance
IT Governance
Project Governance processes ensure they receive
value from investments in projects and that
risks are managed
Monitoring of Performance
Selection and Approval of Projects
Project Oversight Mechanisms
Project Management
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Summary

• Budget Constraints, Competing Priorities, and
  Accountability Demand Optimization of Investments
• Application Portfolio Optimization Delivers Cost
  Reduction and Alignment with Strategic Objectives
• Once Application Portfolio is Optimized, Keep it
  that way through Governance Processes
• View Applications as Assets vs. Expenses
• Align IT with Business

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• QUESTIONS?

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• THANK YOU!
• Presenter
• Douglas_G_Masten_at_Keane.com
• [phone]
• State of Indiana Service Delivery Manager
• Donald_E_Stoner_at_Keane.com
• [phone]

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