1. CHAPTER 7 Managing the Application Portfolio
Strategic Planning
for Information
Systems
John Ward and Joe Peppard
Third Edition
CHAPTER 7 Managing the Application Portfolio

3. Managing the Applications Portfolio
Set of known requirements and potential Applications portfolio concept is a means of bringing together existing, planned and potential Information Systems and their business contribution
Usefulness of “Matrix” approach is borne out by the ease with which management is willing and able to categorize systems in this way

4. Managing the Applications Portfolio
Conclusions from Various Matrices and Models
A number of matrices developed to help management decision making with respect to IS/IT planning, utilisation and resourcing
Ideas and concepts are generally complementary, even convergent
More recent versions of the “matrix” devised to address developments in the 1990s are also very similar - terminology is different
Composite matrix - see fig. 7.1 pg. 301

5. Composite Matrix Composite Matrix based on:
The Sullivan matrix considered a range of IS/IT management issues that depend on the combination of infusion and diffusion of IS/IT in the organisation
Infusion is the degree to which IS/IT has penetrated a company in terms of importance, impact or significance
Diffusion is the degree to which IS/IT has been disseminated or scattered throughout the company

6. Sullivan matrix

7. Sullivan matrix
Identifies need for new, demand-driven decentralised approaches to improve management of strategic and high potential quadrants

8. ITAA Matrix
Information technology Assessment and Adoption Matrix ITAA (Munro and Huff)
considers how organisations have adopted IS/IT as a competitive weapon based on premise that most organisations are either:
technology-driven – looking for ways of deploying new technology to advantage
Issues-driven – looking for new business opportunities within known possibilities of existing technology

9. ITAA Matrix Technology Driven Normative Ideal Opportunistic
Issue Driven
High
Low
Technology Emphasis
Issue Emphasis

10. ITAA Matrix
Opportunistic: Neither issues nor technology. The firm acquires technology as it seed opportunities to match technology and new opportunities
Technology driven: the firm devotes considerable resources to scanning new technological developments and the identification of a new technology deemed to be of some potential relevance triggers a search for areas in the firm in which to apply the technology.
Issue driven: identify the issues or problem areas that might be addressed by new technology
Normative/complete: refers to an organization which both expends sufficient resources to monitor in a major way all information technology change, while devoting considerable time and energies to the generation of issues.

11. Ives and Learmonth and Galliers Matrix
Ives and Learmonth and Galliers Matrixes
Consider how the “value adding potential” of IS/IT in the business and the “quality of resources” affect how IS/IT is deployed and managed
Show how a vision of what is possible plus strength of resources is essential if IS/IT is to be used as an offensive (strategic) weapon and how the two are often interrelated

12. Hartman and Sifonis Matrix
More recent matrices e-business value matrix devised to help management address ’e-business’ options’
Axes of core matrix are business criticality and practice innovation and four resulting segments equate closely with those of the applications portfolio
Not all ideas from these matrices map precisely onto the applications portfolio

13. Hartman and Sifonis Matrix
Operational Excellence
Breakthrough Strategies
High
Business criticality
Rational Experimental
New Fundamentals
Low
High
Low
Innovation

15. Application Portfolios in Different IS/IT Environments
Comprehensive application portfolio
Balance of control
Enable business creativity St KO Su HP
Portfolio
Applications
Complex
Opportunistic
Backbone
Traditional
HIGH
LOW
Diffusion
(Development)
Infusion
(Impact)
Decentralized IT control
Not seen as critical to business
Centralized IT
Lack of perception in the business of what can be achieved
Centralized IT
Predominance of support applications

16. Classifying Applications in the Portfolio
Understanding the role and value of existing application set
Some applications may be obsolete and no longer required
Some may need significant investment to avoid future business problems
Some may be under-exploited
Some may be consuming undue amounts of resources in relation to their business value

17. Analysing the applications in the portfolio (SWOT)
Exploit strengths
High future potential, currently under-exploited
Can be extended, enhanced to be of more value
Could be more valuable if integrated more effectively or used more extensively
Needs to be developed to meet current and future business needs
Critical to business, but data quality is poor

18. Analysing the applications in the portfolio (SWOT)
Exploit Strengths cont.
Must be enhanced to meet changed and future business needs
System required, but needs to be re-implemented to absorb less resources or overcome technology obsolescence
System no longer of value should be discontinued
System will be less important in the future – needs to be simplified/reduced to real needs
Then overcome weaknesses

19. Reconciling Demand & Supply Issues in the Application Portfolio
Driving Forces
Critical Requirements
High potential
New business ideas or technological opportunity
Individual initiative- owned by a ‘product champion’
Need to demonstrate the value or otherwise of the idea
Rapid evaluation of prototypes and avoid wasting effort/resources on failures
Understand the potential benefit in relation to business strategy
Identify the best way to proceed
Strategic
Market requirements, competitive pressures or other external forces
Business objectives, success factors and vision of how to achieve them
Obtaining an advantage and then sustaining it.
Rapid development to meet the business objectives and realize benefits within the window of opportunity
Flexible system that can be adapted in the future as the business evolves
Link to an associated business initiative to sustain commitment

20. Reconciling Demand & Supply Issues in the Application Portfolio
Driving Forces
Critical Requirements
Key operational
Improving the performance of existing activities
Integration of data & systems to avoid duplication, inconsistency, and misinformation
Avoiding a business disadvantage or allowing a business risk to become critical/comply with industry legislation
High-quality, long-life solutions & effective data management
Balancing costs with benefits & business risks – identify the best solution
Evaluation of options available by objective feasibility study

21. Reconciling Demand & Supply Issues in the Application Portfolio
Driving Forces
Critical Requirements
Support
Improved productivity/efficiency of specific business tasks
General legislation
Most cost-effective use of IS/IT funds and resources available
Low-cost, long-term solutions – often packaged software to satisfy most needs
Compromise the needs to the software available
Objective cost/benefit analysis to reduce financial risk and then control costs carefully

22. Key Questions on the Applications Portfolio
STRATEGIC
HIGH POTENTIAL
KEY OPERATIONAL
SUPPORT
WHY Do we want to do it in
strategic terms?
WHAT does the system need to
do to gain the advantage?
HOW best to do it?
WHY? Not clear
WHAT? Not certain and/or
HOW? Not yet known
WHY to improve performance
and avoid disadvantage?
WHAT actually has to improve
and by how much?
WHY to reduce costs by
improving efficiency
WHAT of existing necessary tasks?
WHY = efficiency
WHAT = need to be improved
HOW = to do that successfully (cost-effective use of IT)

23. Generic Application Management Strategies
No single implementation approach likely to deal effectively with the range of issues involved
Equally, adopting a unique approach to each and every new development will lead to a degree of chaos and may result in failure
Parsons (1983) describes five strategies that are prevalent in organisations “linking strategies”
Guide opportunities for IT identified, IT resources developed, rate at which technologies are adopted, level of impact within the firm etc.
(See table 7.3 page 313)

24. Generic Application Management Strategies
Strategies define different roles and responsibilities for the three key parties involved in enabling successful implementation
Executive management
Line management: functional or process managers and users of the systems
IS/IT specialists: whether or not they are internal to the organisation (centrally located or in business units) or external

25. Generic Application Management Strategies: Centrally Planned
Management rationale
Central coordination of all requirements will produce better decision making
Organizational requirements
Knowledgeable and involved senior management
Integrated planning of IS/IT within the business planning process
IT role
Provide services to match the business demands by working closely with business managers
Line managers and users role
Identify the potential of IS/IT to meet business needs at all levels of the organization

26. Generic Application Management Strategies: Leading Edge
Management rationale
Technology can create business advantages and risks are worth taking
Organizational requirements
Commitment of funds and resources
Innovative IS/IT management
Strong technical skills
IT role
Push forward boundaries of technology use on all fronts
Line managers and users role
Use the technology and identify the advantages it offers

27. Generic Application Management Strategies: Free Market
Management rationale
Market makes the best decisions and users are responsible for business results
Integration is not critical
Organizational requirements
Knowledgeable users
Accountability for IS/IT at business or functional level
Willingness to duplicate effort
Loose IT budget control
IT role
Competitive and probably profit centre- intended to achieve a return on its resources
Line managers and users role
Identify, source and control IS/IT developments

28. Generic Application Management Strategies: Monopoly
Management rationale
Information is a corporate good and an integrated resource for users to employ
Organizational requirements
User acceptance of the philosophy
Policies to force through single sourcing
Good forecasting of resource usage
IT role
To satisfy user’s requirements as they arise, but non-directive in terms of the uses of IS/IT
Line managers and users role
Understand needs and presents them to central utility to obtain resources

29. Generic Application Management Strategies: Scare Resource
Management rationale
Information is a limited resource and its development must be clearly justified
Organizational requirements
Tight budgetary control control of all IS/IT expenses
Policies for controlling IS/IT and users
IT role
Make best use of a limited resource by tight cost control of expenses and projects
Justify capital investment projects
Line managers and users role
Identify and cost-justify projects
Passive unless benefits are identified

30. Generic Application Management Strategies
Strategies include:
Centrally planned – most appropriate for strategic systems
leading edge – while technology is brand new to the organisation it should be confined to the high potential box
free market – most effective for support applications but also many high potential applications
Monopoly – opposite of free market – key operational applications
scarce resource – financial strategy that controls spend on IT – support but also some high potential

31. DEMAND SUPPLY STRATEGIC HIGH POTENTIAL KEY OPERATIONAL SUPPORT
Leading edge
Free market
Centrally planned
DEMAND
SUPPLY
Free market
Scarce resource
Monopoly
KEY OPERATIONAL
SUPPORT
CENTRALISED
DECENTRALISED
Relationship of applications portfolio and generic IS strategies

32. Generic Application Management Strategies
Relationship between generic strategies and styles of management proposed by Simon (1995):
Boundary control - appropriate when objectives and constraints are clear – allows project team discretion about how best to achieve required outcome – correlates with aspects of free market and scarce resourcing

33. Generic Application Management Strategies
Styles of management cont.
Diagnostic control - implies clear, prescriptive control based on sound knowledge of what has to be done to achieve performance targets – appropriate for key operational projects - monopoly
Interactive control – appropriate where there is a vision of the potential ‘end point’ but much to learn in order to define, scope and develop appropriate solution – similar to concept of central planning
Belief system – project team is expected to create a new and innovative application that will be closely congruent with business strategy and relate to needs of strategic investment – also similar to central planning

34. Generic Application Management Strategies
Generic strategies have primarily two uses in IS/IT strategy development:
Diagnostic – way of assessing current strategies being used – clear way of expressing how IS/IT applications & investments are actually being managed
Formulative - used to identify a migration path toward the mix of approaches required in the future – attractive when central planning is needed

35. Generic Application Management Strategies
Relating approaches to IS strategy formulation & generic implementation strategies
Should be a logical relationship between HOW an organisation plans its IS investments and approach it adopts for implementation
Correlation is not perfect and there are some anomalies

36. Generic Application Management Strategies
Relating approaches to IS strategy formulation & generic implementation strategies cont.
Organisation led - implies cross-functional views of IS to ensure investments are targeted on business objectives and key themes implied by the objectives (follows centrally planned approach)
Business led - IS investments driven by plans for particular business areas, should lead to uncovering high potential & in due course strategic applications (aligns with free market strategy)

37. Generic Application Management Strategies
Relating approaches to IS strategy formulation & generic implementation strategies cont.
Administrative approach - main objective is budgetary control of IS/IT which can result in a scarce resource approach to implementation
Method driven - involves highly analytical and structured approach to determining needs and priorities for investment (monopoly)
Technology led - and leading edge are very similar but anomalous when placed in portfolio context. Difference is one of perception and time. Implies incremental adoption of technology as available and proven to enable technology efficiency

38. Portfolio, Planning and Generic Strategies Evolution (alternative strategy)
High Potential
Strategic
Key Operational
Support
5 ORGANIZATIONAL and Central Planning
3 ADMINISTRATIVE LED and Monopoly and Scare Resource
2 METHOD LED and Monopoly
1 TECHNOLOGY LED and Scare Resource (Free Market) or even Monopoly
4 BUSINESS LED and Free market (or Leading Edge technology)

39. Staged Approach
Many organisations develop or evolve their mix of planning and implementation strategies using a staged approach
Stage 1: no coherent strategy – mix of free market, monopoly and scarce resource – bottom up approach & only planning is of technology supply
Stage 2: monopolistic strategy prevails – linked to need for structure and integration related to method driven planning used to avoid systems ineffectiveness
Stage 3: combination of monopoly and scarce resourcing to provide necessary controls of implementation & costs in line with emphasis on budget

40. Staged Approach
Stage 4: users pursuing localised opportunities opens up free market activities. Emerging new technologies provide opportunity to innovate in creating new business processes or radically change existing ways of working
Stage 5: use of centrally planned strategy occurs for implementation of strategic applications as the organisation identifies links between strategic themes and the role of IS/IT

41. Portfolio Management Principles Applied to Applications Portfolio
Products and IS/IT applications must be managed according to their contribution to the business over an extended life cycle
Determined by both internal and external factors
In the case of IS/IT external market-driven factors becoming increasingly important
Lessons from other portfolios have become more pertinent as IS/IT becomes integral to products, services and relationships with customers and suppliers

42. The Business/Systems Portfolio Matrix
STRATEGIC (STARS)
HIGH POTENTIAL (WILDCATS)
KEY OPERATIONAL
(CASH COWS)
SUPPORT (DOGS)
Continuous innovation
Vertical integration
High value-add
Process research and design
Minimal integration
Cost control
Defensive innovation
Effective resource utilisation
High quality
Disinvest/rationalise
Efficiency
Sustained quality

43. Application Management Styles: High Potential (wildcats products )
Approaches to management
Process R&D:
satisfying the technical professional, not the user
Using prototyping or pilot implementation of an application to find out how the organization, and/or its trading partners, can benefit most from a new use of IT, not to discover all that the technology can do
Minimal integration:
While being evaluated, risky ventures should be separated from mainline activities.
Should they fail, aspects of the business should not have become dependent on them and, at low cost, the prototype can be aborted.
Cost control:
Restricting the time allowed for evaluation, even though it is difficult to predict how long it will take when it is a unique R&D project.

44. Application Management Styles: Strategic (Star)
Approaches to management
Continuous innovation:
What the system does and how it does it, to increase its value-added as an integral part of the business
High value-added and vertical integration
The business manager has to understand how the system can enhance the business process and then have the capability to make further changes to increase the value created, or improve process performance.
The process of systems management should be vertically integrated with the business unit management to obtain max. strategic leverage from the systems or the information it delivers.

45. Application Management Styles: Key Operational (Cash Cows)
Approaches to management
Defensive innovation
The system should only be enhanced or redeveloped in response to changes in the business that threaten to put the business at risk through a reduction of competitive capability
High quality
The low cost of support depends on professional quality management – data and processing integrity and accurate integration of the system with other key operational systems and databases as well as related processes and procedures
Effective resource utilization
Sharing resources and expertise to reduce the costs

46. Application Management Styles: Support (Dogs)
Approaches to management
Disinvest/rationalize
Using software packages and/or outsourcing their operation and support b/c they offer no competitive advantage
Sustained quality and efficiency
The quality of the system should be maintained in proportion to the costs of failure
The system should not be enhanced unless there is a very demonstrable economic case

47. Key Issues in Managing the Evolution of an Application over Time
STRATEGIC
HIGH POTENTIAL
Gain: Senior mgt. ownership
: IT involvement
: Project mgt.
KEY OPERATIONAL
SUPPORT
Lose: Individual ownership
and freedom
Fully integrated with other applications for effectiveness
Re-engineer for long-term use
Re-evaluate benefits & costs
Return to standards
Evaluate lower-cost options to meet core needs

48. Application Management Styles
Nature of these management styles reflect generic strategies required to manage the various components of the portfolio
An entrepreneur is a free marketer, who pays little attention to established procedure
A developer is a central planner, close to the organisational goals, who builds resources to achieve results
A controller is a monopolist, uncomfortable with anything outside his or her control
A caretaker is a scarce resourcer, providing that he or she can achieve as much with less

49. Management Styles STRATEGIC HIGH POTENTIAL DEVELOPER
- organization goal seeker
- risk accommodating
- 'Central Planner'
KEY OPERATIONAL
SUPPORT
CONTROLLER
- long term/quality
solutions - stability
- risk reducing
- 'Monopolist'
ENTREPRENEUR
- personal achiever
- risk taking
- 'Free Marketeer'
CARETAKER
- immediate/efficient
solution
- risk avoiding
- 'Scarce Resourcer'

50. Managing Applications Portfolio in Multi-Unit Organizations

51. Managing Applications Portfolio in Multi-Unit Organizations
Constrain
Corporate scare resourcing for applications that are not unique in any of the units
Control
To reduce unnecessary diversity over time to enable both reduction in costs through effective resource use
To develop and sustain expertise in application operation and use
Capitalizing
Requires some central planning across the units to determine whether and how the same benefits can accrue across the organization
Communication
Sharing knowledge of new technology, its capabilities and limitations
Could increase the speed of exploitation and reduce wasted effort