Presentation on theme: "Implementation of Application Portfolio Management"— Presentation transcript:
1 Implementation of Application Portfolio Management IT Advisory Board MeetingJanuary 2006
2 Framework for Managing IT Investments III. Operation, Maintenance, and Renewal, Retirement, or Replacement Applications Portfolio Management - APMI. Strategic Business and IT Planning and Investment Selection and BudgetingInvestment Portfolio Management - IPMLife Cycle of IT InvestmentsThree 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 MannerNow implementing III – Applications Portfolio ManagementGoal -- Maintain in the Right Ways and Retire or Replace at the Right TimesInvestment Portfolio Management will be done last.Concept -- Build, Buy, and/or Implement the Right ThingsOperate and maintain assets so that:Benefits/costs are optimized over their operational useful livesServices offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgetsRetirements and replacements are done when they are no longer cost-justified or risk-acceptableII. Project ImplementationProject 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 TimesI. Build, Buy, and/or Implement the Right AssetsIdentify investments that best:Enable governmental initiatives or agency missions and strategiesResult in financial returns – revenue generation or cost savingsProvide better constituent services or program effectivenessFit technical architecturesSatisfy budget, staffing, and other constraintsMeet risk profilesOperate and maintain assets so that:Benefits/costs are optimized over their useful lives through astute and timely renovations, consolidations, or eliminationsServices offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgetsRetirements and replacements are effected when assets are no longer cost-justified or risk-acceptableLife Cycle of IT InvestmentsII. Build and Implement Assets in the Right MannerManage projects by:Clarifying roles and responsibilitiesProviding appropriate oversightEnsuring they are well planned and thoroughly researched prior to startingDefining, tracking, and evaluating project progress frequently to achieve budget, schedule, scope, and quality expectationsCompleting 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 ObjectivesDevelop Business Drivers and Business CasesInvestment Portfolio ManagementIdentify Problems and OpportunitiesStatewide and Agency IT PlansAnalyze Candidate InvestmentsProject Proposals for Applications Renovations, Retirements, or ReplacementsSelect and Plan InvestmentsFunded New ProjectsManage PortfolioAdjust Project PortfolioAnalyze PortfolioApplication Portfolio ManagementOptimize PortfolioAssess Value of Projects and PortfolioProject Portfolio ManagementManage PortfolioNew or Renovated ApplicationsImplement ProjectsBuild and Maintain Inventory
7 Status of Implementation of Portfolio Management Phase/Type of Portfolio Management EffortImplementation Status and TimeframeTopic Research and Purchase of ToolCompleted – performed in 2004 and early 2005Project (PPM)Completed – performed summer and fall 2005Applications (APM)In process - winter and spring 2006Investment (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 levelsProvides 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
11 Applications Portfolio Management Collects and analyzes cost, benefit, and strategic value information to evaluate the TCOs of retention, enhancement, or replacement alternativesEvaluates assets by determining business and technical status; developing remediation, retirement, or replacement approach; and ascertaining priority and timeframe for actionDevelops cost estimates for asset modernization, and retirement (with and without replacement) and total statewideIdentifies 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 unaffordableCreating 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 makingBenefits 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/benefitsIT complexity is reduced; thereby, maximizing business value received while minimizing IT costs incurredPlanning for DR/BCP is facilitated to ensure continuity of operationsRisks 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 2006Gartner 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 associationCore Business Drivers, priorities, process contributionInitialDeploymentFocusLevel III (Steps 2 and 3)Financial (Analyze and Manage Portfolio)Detailed application-level costs and cost-effectiveness analysesLevel II (Steps 2 and 3)Assessment (Analyze and Manage Portfolio)Risk, Operational Performance, Architectural FitScope of Keane-Gartner StudyLevel I (Step 1)Inventory (Build and Maintain Inventory)Application identity and basic information
14 Applications Portfolio Management Process Transition to Executive Decision Making ProcessFunding RequestsTool Assisted DecisionsSubjective Business DecisionsStep 1 – Level ICollect, Validate, and Maintain Data(Build and Maintain Inventory)Step 2 – Levels II & IIIPerform Assessments(Analyze Portfolio)Step 3 – Levels II & IIIDetermine Dispositions and Life Span Transition Roadmap(Manage Portfolio)Step 4 – Level IVDetermine Priorities, Timeframes, Costs, and Benefits(Optimize Portfolio)Investment Portfolio Management (IPM) ProcessOne-Time WorkTransfer data from Keane/Gartner studyPerform initial collection and validation of remaining dataOngoing WorkPerform data changes and validations as they occurCollect and validate data for implementation projects transitioning to applications assetsMajor Data ElementsIDCostsBusiness criticalityBusiness processes enabled or supportedFunctional qualityTechnical qualityRisk profileIdentifyBusiness problems/issuesTechnical problems/issuesRisk vulnerabilities, probabilities, and impactsOther problems/issuesEvaluateStatus/Health (Good, Bad, Moderate)Value to organization (High, Moderate, Low)Risk of unrecoverable failure (High, Medium, Low)IdentifyDependencies on other applications and projectsCosts/fiscal requirementsTechnical infrastructure requirementsBenefits/value to accrueAlignment with state/agency prioritiesConfirm and/or DevelopImplementation approachDetermine Priorities and TimeframesSelect priority for action (High, Medium, Low)Select timeframe for action (Immediate, Near-Term, Long-Term)Potential Benefits for Selected ActionsCost savings from consolidate/eliminate applicationsImprovements in public service, reliability, recoverability, and security resulting from functional/technical renovation or replacementConsiderCost-effectivenessRisk acceptability – status ofIdentifyProblems/opportunitiesAlternative approachesBest actions for managing application over expected life spansMission criticality/importance to agencyDetermine Whether ToInvest additional funds (technical or functional enhancement or replacement)Sunset/eliminateConsolidateReplace and consolidate as part of an agency wide or state wide initiativeContinue 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 limitationsRequires 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 MissionStatutory MandatesGovernmental InitiativesDepartment Business StrategyBusiness/Program Goals and ObjectivesProcessing and Information FlowsOrganization ChartsBusiness Reengineering OpportunitiesDepartment Business Architecture(Business Service Models)Application Portfolio ManagementAsset Infrastructure ManagementNew ProjectsRetirementsReplacementsModernizationsMaintenanceRefreshment CyclesSecurity/Reliability UpgradesNew ApplicationsInfrastructure Additions/UpgradesIT Investment Portfolio ManagementIdentify potential investments and evaluate candidates against defined criteriaPrioritize projects based on analysis results (relative weighted scores)Balance staffing and fiscal resourcesDetermine disposition – invest, adjust, or sunsetCurrent IT Project PortfolioOther Plans and StrategiesThis 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 prioritiesProjects with higher priorities or increased urgencyState CIO IT PlanStatewide IT InitiativesDepartment & Statewide Tech. ArchitecturesDepartment IT PlanFunding Requests and Project Approvals
17 Document Business Cases Investment Prioritization Steps for Evaluation of Alternative InvestmentsBuild candidate investment portfolio using a consistent business case frameworkDevelop and prioritize Business Drivers and Impact Measures12Document Business CasesBusiness DriversEvaluate the relative impact/linkage of candidate investments on Business DriversUnderstand project priorities - based on strategic linkage(business drivers) - to strengthen transparency of rankings for decision makingBusiness Drivers34InvestmentsBusiness AlignmentInvestment Prioritization
18 Investment Implementation Sequencing Portfolio Optimization Curves Steps for Evaluation of Alternative InvestmentsEvaluate 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 portfolio56L - Priority - HInvestment Implementation SequencingPortfolio AnalysisCostMathematically calculate the best portfolio selection of investment opportunities considering value/benefits offered for costs incurred under selected constraints7Portfolio Optimization Curves
20 Timeline for Implementation and Use of Application and Investment Portfolio Management Capabilities LegendSCIO Deliver Interim Legacy Assessment Report to General Assembly for 90 Projects Needing Immediate AttentionAPM – Applications portfolio managementIPM – Investment portfolio managementSCIO – State CIOAgency Submissions to SCIO: 1) Legacy Assessments, 2) Agency IT Plans, and 3) Expansion Budget RequestsAgencies Assess Study Findings for 90 Immediate Attention Applications and Report Status, Remediation Approach, and Needs for AssistanceSubmissions to General Assembly:Governor’s Budget PackageSCIO – 1) Statewide Legacy Assessment, and 2) Statewide IT PlanSCIO Review Agency Expansion Budget Requests, Prepare Statewide Legacy Assessment, and Write SCIO IT PlanAgencies Perform Legacy Assessments, Develop IT Plans, and Prepare Expansion Budget RequestsAPM Configuration and Agency Rollout Plan DevelopmentAPM and IPM Rollout to AgenciesFour MonthsFive MonthsImplement APM and IPMUse APM and IPMJun 2005Sep 2005Jan 2006Mar 2006Apr 2006Jun 2006Aug/Sep 2006Due DateJan 2007Jun 2007Jan 2008Today2005 –2007 Biennial Budget2007 –2009 Biennial Budget