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Implementation of Application Portfolio Management

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Presentation on theme: "Implementation of Application Portfolio Management"— Presentation transcript:

1 Implementation of Application Portfolio Management
IT Advisory Board Meeting January 2006

2 Framework for Managing IT Investments
III. Operation, Maintenance, and Renewal, Retirement, or Replacement Applications Portfolio Management - APM I. Strategic Business and IT Planning and Investment Selection and Budgeting Investment Portfolio Management - IPM Life Cycle of IT Investments Three basic phases of North Carolina’s overall effort, with some overlap. We decided to do Project Implementation first. Already completed. Concept -- Build and Implement in the Right Manner Now implementing III – Applications Portfolio Management Goal -- Maintain in the Right Ways and Retire or Replace at the Right Times Investment Portfolio Management will be done last. Concept -- Build, Buy, and/or Implement the Right Things Operate and maintain assets so that: Benefits/costs are optimized over their operational useful lives Services offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgets Retirements and replacements are done when they are no longer cost-justified or risk-acceptable II. Project Implementation Project Portfolio Management - PPM

3 Framework for Managing IT Investments
III. Maintain Operate Assets in the Right Ways and Retire or Replace Them at the Right Times I. Build, Buy, and/or Implement the Right Assets Identify investments that best: Enable governmental initiatives or agency missions and strategies Result in financial returns – revenue generation or cost savings Provide better constituent services or program effectiveness Fit technical architectures Satisfy budget, staffing, and other constraints Meet risk profiles Operate and maintain assets so that: Benefits/costs are optimized over their useful lives through astute and timely renovations, consolidations, or eliminations Services offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgets Retirements and replacements are effected when assets are no longer cost-justified or risk-acceptable Life Cycle of IT Investments II. Build and Implement Assets in the Right Manner Manage projects by: Clarifying roles and responsibilities Providing appropriate oversight Ensuring they are well planned and thoroughly researched prior to starting Defining, tracking, and evaluating project progress frequently to achieve budget, schedule, scope, and quality expectations Completing them successfully so that business goals and objectives are realized

4 Portfolio Management is…
Information analyzed in a way that helps decision makers optimally allocate scarce resources. The purpose is to weigh key factors, such as desired returns or public value, initial and life cycle costs, architectural directions, and risk profiles to meet strategic business goals more effectively and productively. The objective is to make fact-based, data-driven decisions using a consistent and disciplined approach.

5 Major Portfolio Management Tasks
Inventory and classify items in the portfolios. Perform relevant analyses – identify problems and opportunities, develop viable options, determine relevant criteria, ask the right questions, and evaluate alternatives using pertinent information. Make decisions.

6 Overview of IT Portfolio Management
Agency Missions and Vision and Business Goals and Objectives Develop Business Drivers and Business Cases Investment Portfolio Management Identify Problems and Opportunities Statewide and Agency IT Plans Analyze Candidate Investments Project Proposals for Applications Renovations, Retirements, or Replacements Select and Plan Investments Funded New Projects Manage Portfolio Adjust Project Portfolio Analyze Portfolio Application Portfolio Management Optimize Portfolio Assess Value of Projects and Portfolio Project Portfolio Management Manage Portfolio New or Renovated Applications Implement Projects Build and Maintain Inventory

7 Status of Implementation of Portfolio Management
Phase/Type of Portfolio Management Effort Implementation Status and Timeframe Topic Research and Purchase of Tool Completed – performed in 2004 and early 2005 Project (PPM) Completed – performed summer and fall 2005 Applications (APM) In process - winter and spring 2006 Investment (IPM) In process - initial efforts in winter and spring 2006 as part of applications endeavor; more advanced capabilities will be implemented later as agencies are ready and need them

8 Project Portfolio Management
Provides a workflow process that encompasses project approvals, checkpoint reviews, and periodic status reporting at project, agency, and statewide levels Provides a “gated” review approach to ensure work done acceptably and project is in position to complete the succeeding phase successfully. Offers documents and administrative management capabilities that follow industry recognized best practices for system development life cycle (IEEE) and project management (PMI) 91 projects with estimated cost approaching $850 million being tracked in December 2005


10 Project Portfolio Dashboard

11 Applications Portfolio Management
Collects and analyzes cost, benefit, and strategic value information to evaluate the TCOs of retention, enhancement, or replacement alternatives Evaluates assets by determining business and technical status; developing remediation, retirement, or replacement approach; and ascertaining priority and timeframe for action Develops cost estimates for asset modernization, and retirement (with and without replacement) and total statewide Identifies vulnerabilities, criticalities, return-to-service needs, dependent business processes, public services offered, supporting technical infrastructure, etc. Applications swallow cost, time, and management bandwidth, while increasing risks – unless they are well managed to reduce complexity and risk and retired or consolidated in a timely fashion, the entire IT budget will be operations and DR/BCP will be unaffordable Creating a portfolio view of existing applications does not have to be complicated; focus on the basics and the big picture – let the software tool highlight problem areas and offer improvement opportunities for management decision making Benefits of APM are clear; Investment decisions for elimination, replacement, or remediation are made in a consistent manner considering application risks, value/importance to organization and its priorities, most effective use of personnel, and life span optimization of costs/benefits IT complexity is reduced; thereby, maximizing business value received while minimizing IT costs incurred Planning for DR/BCP is facilitated to ensure continuity of operations Risks are managed, and stewardship for assets is facilitated

12 Applications Portfolio Management Builds Upon Legacy Study
In the portfolio of approximately 900 applications: 40% are considered critical for department mission/strategy; 17% are enterprise (statewide) applications; and 75 of the applications processed by the state data center require 1-day return-to-service capability. The statewide portfolio is relatively young, with an average age of 7.5 years – since 1997, from 70 to 90 new or replacement applications have been added each year to bring down the average age. Health status is: 23% presenting functional, technical, or both problems; 50% with some problems, but manageable; and 27% healthy, with a prescription for continuing on-going operations and maintenance. NC is not Alone in Implementing APM - Gartner Prediction for 2006 Gartner predicts that 40% of large public and private enterprises will implement application portfolio management in the next two years. The reason for the rapid growth in the use of APM is other companies and government entities have achieved successes in cost reduction, managing the complexities of hundreds of established assets, and improving budget process effectiveness. Applications portfolio management is critical to understanding and managing the 40 percent to 80 percent of IT budgets devoted to maintaining and enhancing software. Most organizations don’t track established applications over time to ascertain return on investment (or to determine which should be disposed of), and few manage application portfolios with tools. In other words, these organizations haven’t truly associated the substantial amount of money they’re spending with what they are spending it on.

13 Application Portfolio Management Perspectives
Level IV (Step 4) Alignment (Optimize Portfolio) Process Inventory, contribution, function association Core Business Drivers, priorities, process contribution Initial Deployment Focus Level III (Steps 2 and 3) Financial (Analyze and Manage Portfolio) Detailed application-level costs and cost-effectiveness analyses Level II (Steps 2 and 3) Assessment (Analyze and Manage Portfolio) Risk, Operational Performance, Architectural Fit Scope of Keane-Gartner Study Level I (Step 1) Inventory (Build and Maintain Inventory) Application identity and basic information

14 Applications Portfolio Management Process
Transition to Executive Decision Making Process Funding Requests Tool Assisted Decisions Subjective Business Decisions Step 1 – Level I Collect, Validate, and Maintain Data (Build and Maintain Inventory) Step 2 – Levels II & III Perform Assessments (Analyze Portfolio) Step 3 – Levels II & III Determine Dispositions and Life Span Transition Roadmap (Manage Portfolio) Step 4 – Level IV Determine Priorities, Timeframes, Costs, and Benefits (Optimize Portfolio) Investment Portfolio Management (IPM) Process One-Time Work Transfer data from Keane/Gartner study Perform initial collection and validation of remaining data Ongoing Work Perform data changes and validations as they occur Collect and validate data for implementation projects transitioning to applications assets Major Data Elements ID Costs Business criticality Business processes enabled or supported Functional quality Technical quality Risk profile Identify Business problems/issues Technical problems/issues Risk vulnerabilities, probabilities, and impacts Other problems/issues Evaluate Status/Health (Good, Bad, Moderate) Value to organization (High, Moderate, Low) Risk of unrecoverable failure (High, Medium, Low) Identify Dependencies on other applications and projects Costs/fiscal requirements Technical infrastructure requirements Benefits/value to accrue Alignment with state/agency priorities Confirm and/or Develop Implementation approach Determine Priorities and Timeframes Select priority for action (High, Medium, Low) Select timeframe for action (Immediate, Near-Term, Long-Term) Potential Benefits for Selected Actions Cost savings from consolidate/eliminate applications Improvements in public service, reliability, recoverability, and security resulting from functional/technical renovation or replacement Consider Cost-effectiveness Risk acceptability – status of Identify Problems/opportunities Alternative approaches Best actions for managing application over expected life spans Mission criticality/importance to agency Determine Whether To Invest additional funds (technical or functional enhancement or replacement) Sunset/eliminate Consolidate Replace and consolidate as part of an agency wide or state wide initiative Continue maintenance

15 Investment Portfolio Management
Identifies a pool of IT investments that best support core mission functions and prioritized business needs, best fit with approved architectures, have acceptable risks, and are accomplishable within fiscal and personnel limitations Requires high quality business cases that increase probability of successful outcomes (on budget, within schedule, and meet user and stakeholder expectations) Enables collaboration and transparency between IT/non-IT executives via an integrated process and better managed decision making activities that optimizes program benefits and public value throughout the enterprise

16 Overview of IT Investment Portfolio Management in State Government
Department Mission Statutory Mandates Governmental Initiatives Department Business Strategy Business/Program Goals and Objectives Processing and Information Flows Organization Charts Business Reengineering Opportunities Department Business Architecture (Business Service Models) Application Portfolio Management Asset Infrastructure Management New Projects Retirements Replacements Modernizations Maintenance Refreshment Cycles Security/Reliability Upgrades New Applications Infrastructure Additions/Upgrades IT Investment Portfolio Management Identify potential investments and evaluate candidates against defined criteria Prioritize projects based on analysis results (relative weighted scores) Balance staffing and fiscal resources Determine disposition – invest, adjust, or sunset Current IT Project Portfolio Other Plans and Strategies This chart is an illustration of what is accomplished in Phase I of NC’s Framework for the Life Cycle Management of IT Investments. The intent is to create new processes, procedures, and tools and employ a disciplined approach for “doing the right thing” by identifying, evaluating, justifying, and selecting/recommending IT investments (projects) that are: synchronized with governmental initiatives, agency strategies, and business goals; are achievable within budgetary constraints and personnel resource limitations; offer acceptable risk profiles; maximize financial returns, citizen benefits, and societal value; satisfy project interdependencies; meet legal or regulatory mandates; and comply with technical architecture standards. The traditional functions for IT were: Standardize and automate business processes. Reduce unit transaction costs. If those are the limits of our successes, IT will become irrelevant to the strategic goals of the enterprise, devolve to a utility function that, will be categorized and treated as a cost center, and will go to the cheapest provider of services, which probably will not be in the US. Rather IT must become a valued partner with the business to meet the more demanding challenges of increased globalization, uncertain economics, greater public expectations for more and butter services at less costs, ever expanding governmental initiatives. Status of all projects (schedule, budget, business objectives, etc.) Projects no longer relevant or with lower priorities Projects with higher priorities or increased urgency State CIO IT Plan Statewide IT Initiatives Department & Statewide Tech. Architectures Department IT Plan Funding Requests and Project Approvals

17 Document Business Cases Investment Prioritization
Steps for Evaluation of Alternative Investments Build candidate investment portfolio using a consistent business case framework Develop and prioritize Business Drivers and Impact Measures 1 2 Document Business Cases Business Drivers Evaluate the relative impact/linkage of candidate investments on Business Drivers Understand project priorities - based on strategic linkage(business drivers) - to strengthen transparency of rankings for decision making Business Drivers 3 4 Investments Business Alignment Investment Prioritization

18 Investment Implementation Sequencing Portfolio Optimization Curves
Steps for Evaluation of Alternative Investments Evaluate multiple variables in concert before making investment/portfolio selection decisions (e.g., priority, cost, benefits/value, architectural fit, and risk) Optimize investment sequence (schedule) by analyzing key staff competencies, supply/demand by month, and regulatory deadlines against the strategic value of the selected portfolio 5 6 L - Priority - H Investment Implementation Sequencing Portfolio Analysis Cost Mathematically calculate the best portfolio selection of investment opportunities considering value/benefits offered for costs incurred under selected constraints 7 Portfolio Optimization Curves


20 Timeline for Implementation and Use of Application and Investment Portfolio Management Capabilities
Legend SCIO Deliver Interim Legacy Assessment Report to General Assembly for 90 Projects Needing Immediate Attention APM – Applications portfolio management IPM – Investment portfolio management SCIO – State CIO Agency Submissions to SCIO: 1) Legacy Assessments, 2) Agency IT Plans, and 3) Expansion Budget Requests Agencies Assess Study Findings for 90 Immediate Attention Applications and Report Status, Remediation Approach, and Needs for Assistance Submissions to General Assembly: Governor’s Budget Package SCIO – 1) Statewide Legacy Assessment, and 2) Statewide IT Plan SCIO Review Agency Expansion Budget Requests, Prepare Statewide Legacy Assessment, and Write SCIO IT Plan Agencies Perform Legacy Assessments, Develop IT Plans, and Prepare Expansion Budget Requests APM Configuration and Agency Rollout Plan Development APM and IPM Rollout to Agencies Four Months Five Months Implement APM and IPM Use APM and IPM Jun 2005 Sep 2005 Jan 2006 Mar 2006 Apr 2006 Jun 2006 Aug/Sep 2006 Due Date Jan 2007 Jun 2007 Jan 2008 Today 2005 –2007 Biennial Budget 2007 –2009 Biennial Budget

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