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

Application Portfolio Optimization Review What is APO? Why do it? Approach Outputs & Results Moving to Project Governance

Application Lifecycle Optimization Challenges Application Development Application Management Applications Rationalization Cost & Benefit Costs Benefits Aligning IT Investments With Business Strategy No Budget Failed Development Projects Poor Project Management Inadequate Performance Metrics Inefficiencies Escalating Costs Poor Process & Management Disciplines Reactive Expensive, Antiquated Technologies Inflexible Systems Unmet Business Needs Redundant Applications Disparate Applications End-of-Life Applications

Application Lifecycle Optimization Opportunities Application Development Application Management Applications Rationalization Cost & Benefit Benefits Costs 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

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

APO is Focused on Existing Applications IT Strategy Establish Enterprise Priorities Identify Asset Improvements Manage Asset Usage Assess Value Asset Retirement Manage Portfolio Execution Implement Projects/ Programs Adjust Project Portfolio Asset Transformation Project Proposals New/Modified Assets Enterprise Program (Project Portfolio) Management Asset Portfolio Transformational Process Operational Governance Focus APO Focus Source: META Group

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

APO makes extensive use of Portfolio Analysis methods and tools 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 High Low Business Value Cost Risk Medium Large Small Business Volume PUR MON ACC PAY ACR ACP SUB INV WOR EIS TAX MAR MAN TIM TRT IDA FCS PPS APS CLS Portfolio Quadrant Chart Comparative analysis allows IT Executives to identify on which competing needs to spend its limited IT dollars

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 application’s index within each KPA Value Strategic Alignment Operational Efficiency Technical Capability Cost Investment Costs Support Costs Platform Services Costs Risk Business Risk Technology Risk

Portfolio Recommendations / Deliverables APO Context Diagram Business Objectives Current Portfolio (e.g, Scorecard, Disposition) Optimize Portfolio Portfolio Recommendations / Deliverables Current Initiatives Other Constraints

APO Key Elements of Success

Portfolio Management Tools support Comparative Analysis $250K & $3M)

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.

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

Sample Deliverables: Executive Summary This table provides an example of applications by Business Process, Portfolio Category, and Action Code.

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.

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)?

Governance Focused on New and Existing Assets IT Strategy Establish Enterprise Priorities Identify Asset Improvements Manage Asset Usage Assess Value Asset Retirement Manage Portfolio Execution Implement Projects/ Programs Adjust Project Portfolio Asset Transformation Project Proposals New/Modified Assets Enterprise Program (Project Portfolio) Management Asset Portfolio Transformational Process Operational Governance Focus APO Focus Source: META Group

Continuous Operational Loops

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 COST CASE SCENARIOS DOCUMENTING BENEFITS THE CASE DEFINITION & ANALYSIS OPTION RISK ANALYSIS

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

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

QUESTIONS?

State of Indiana Service Delivery Manager THANK YOU! Presenter Douglas_G_Masten@Keane.com (513) 218-1671 State of Indiana Service Delivery Manager Donald_E_Stoner@Keane.com (513) 520-2372