1. 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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

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

11. APO Key Elements of Success

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

13. 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.

14. 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

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

16. 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.

17. 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)?

18. 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

19. Continuous Operational Loops

20. 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

21. 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

22. 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

23. QUESTIONS?

24. State of Indiana Service Delivery Manager
THANK YOU!
Presenter
(513)
State of Indiana Service Delivery Manager
(513)