Applications portfolio analysis COM333 – IS3 Applications portfolio analysis

Applications portfolio analysis Derived from BCG (Boston Consulting Group) matrix Product Life Cycle

The BCG grid is a simple matrix that can be used anywhere where it is possible to compare two measurable variables against each other low high

The product life cycle is based on the concept that the cash flow from any product (service) follows a similar pattern. Mature Growth Decline Emerging

Wild cat stage - Emerging At the start of its life, the product is being designed, developed, launched and promoted; Net cash flow is likely to be negative: High investment, Low rate of return. There is no guarantee that the product will become successful Jump in any direction.

Star stage - Growth If the product is successful, its growth potential is greatest at the next stage Net cash flow shoots up. Still a high cash injection is needed, Marketing of the product Establish the product’s market share This is the shooting star shoots upwards.

Cash cow - Mature Product is established Generates income without the need for further cash injection. It is the company’s breadwinner, earning income and allowing investment in other areas. Keep the cash cow for as long as possible so that it can be milked.

Dog Stage - Decline Declining cash flow New products from competitors Fashion or economic trends An injection of cash is needed to boost the declining cash flow. Or the company will wish to divest itself of the product.

high Wild cat Star Market growth Dog Cash cow low Market share

The principle can the then be applied to a mapping of the strategic importance of current IS applications versus the strategic importance of planned IS applications.

Importance refers to business importance high Turnaround (or High potential) Strategic Strategic importance of planned IS Support Factory (or Key operational) low Strategic importance of current IS Importance refers to business importance not on technological complexity or newness

Turnaround (High potential) systems Systems that are of low importance now, but are predicted to be critical in the future. Strategic systems Are those on which the organisation depends now, and will do in the future. Factory (Key operational) systems Are of high current value keep the business running Are predicted to fall in value to the business. Support systems Are of low importance now, and are expected to continue so.

Sample portfolio (Manufacturing Company) STRATEGIC ORDER MANAGEMENT LINKS TO SUPPLIERS (JIT) SALES FORECAST & MARKET ANALYSIS PRODUCT PROFITABILITY ANALYSIS HIGH POTENTIAL EDI WITH WHOLESALERS MANPOWER PLANNING DECISION SUPPORT DOCUMENT PROCESSING BILL OF MATERIALS DB INVENTORY MANAGEMENT SHOP FLOOR CONTROL PRODUCT COSTING MAINTENANCE SCHEDULING EMPLOYEE DB CAD (PRODUCT DESIGN) CUSTOMER DB RECEIVABLES/PAYABLES KEY OPERATIONAL TIME RECORDING BUDGETARY CONTROL EXPENSE REPORTING GENERAL ACCOUNTING MAINTENANCE COSTING CAD FOR LAYOUT DESIGN PAYROLL SUPPORT

Given that the objectives of IS applications development are to Deliver cost-effective applications with sustainable value to the business Provide a faster development process Build less prescriptive and more flexible applications Establish a style for applications development that matches the business style Enable users to participate more and take more direct control Support team working or dispersed work groups Enable more customer contact Enable more informed decision-making Increase the value delivered by legacy applications Maximise re-use of existing applications material Exploit the useful potential in current technology and tools Provide a range of information delivery methods and tools

High potential (turnaround) systems Prototyping, New technology or new development tools Evaluate technology or business idea Independent – integration and data management are not appropriate Rapid low cost iterative development Business Champion End-user development or user/IS team New skills/skills transfer Focussed pilots/broad potential

Strategic systems Sophisticated application generators, Prototyping, Advanced database technology Based on the corporate model Fast and flexible development approach Close partnership between users and IS professionals/new skills Complex applications built up in increments, sometimes on top of Key Operational (Factory) systems Evolving or creating a new business process External links Good inter-connectibility with Key Operational (Factory) systems and external data Executive support Limited package availability

Key operational (factory) systems Systems development life cycle, Software engineering, Corporate data management, Industry-specific application packages, Application generators/CASE/IPSE, Re-engineering Well designed Efficient, robust, long life Complex and integrated, based on corporate model Strict change control procedures IS and users’ skills and knowledge high during development, package integration and ongoing support

Support systems Standard packages, Disinvestment/third party support Minimum intervention Minimum maintenance Skills – package selection and implementation/essential interfaces/vendor management Compromise business needs rather than modify package Integration not vital Efficient/low risk

How to carry out applications portfolio analysis? Begin with a grid illustrating the current portfolio, you should end up with a grid showing the desired portfolio.

List the current applications Allocate the applications to the appropriate boxes using the criteria on the axes of the grid Ask “Is the grid balanced?” Think There is a need to know why certain boxes may be empty or nearly empty, and why some boxes are full. Consider what is required to balance the portfolio. Better use or management of some IS applications Introduction of new applications (investment).