When proof of IT's value is on the agenda, a well-done IT investment portfolio belongs there too.
Back in the days when "computer" used to mean the gigantic mainframe in the middle of the IT shop floor, the twin watchwords of most IT groups were rigour and discipline. Sadly, with the advent of the PC revolution, those hard-won principles soon became a distant memory. The sheer multitude of devices, the way they had fanned out across the organisation - not to mention the determination of users to "do it themselves" - saw a laissez-faire approach become the norm.
No wonder with most organisations still struggling to complete the recapture of control few have so far found any truly useful ways to get a handle on their total IT expenditure and the value it returns them. Now leading-edge organisations are looking for a way out of the morass. Software portfolio analysis is seen as one possible answer.
"All those generations of people that worked with the quick fix, the quick solution, are now coming to realise that the chaotic mess that has been built needs a more rigorous approach if they are to manage that environment and have a high level of success in their application development projects," META Group consultant Robert Peake says. He says even the financial service and government sectors, which revolve around management of information and have always led the way in trying to get a handle on their investment in technology and information, have largely failed because they have not as yet managed to re-inject the necessary rigour and discipline.
Pioneered in part by META Group executive vice-president and board member Dr Howard Rubin, software portfolio analysis treats software investments like a financial portfolio, classifying all expenditure into one of three portfolios:
The transform-the-business portfolio: holds all IT investments designed to change or transform the current business. For example, many m-commerce investments will fit into this portfolio.
The grow-the-business portfolio: the place you manage all IT investments designed to grow your current business. CRM applications are a good example of IT investments which belong in this portfolio.
The run-the-business portfolio: contains all the IT investments needed for IT services and products which are not transformational or growth driving, but needed nevertheless. The dollars invested in the help desk and e-mail system often go in here. These are also generally referred to as commodity services.
Joe Santana, co-author of Manage IT, says the idea is to recognise that the management goal varies with the type of portfolio. For instance, when it comes to run-the-business investments, organisations want to attain an acceptable level of service for the lowest possible cost, whereas grow-the-business investments are driven by ROI expectations. "The model is an excellent tool that enables the IT executive to link and maintain the alignment between their technology investment decisions and the company's business strategy," he says.
The approach is designed to allow alignment at both a macro and a micro level. Once the CIO has achieved this map, he or she can use it to quickly adjust their leadership agenda throughout the IT organisation as the corporate strategy changes and evolves. "I believe that it is only by creating this high-level and cascading link between the IT agenda and the needs of the business that the CIO will establish and maintain a strong working relationship with the executive team," Santana says.
Like a financial portfolio, a software portfolio must be re-evaluated continually and altered to suit the investor's (in this case, the enterprise's) financial goals. Research firm Gartner notes: "As we analyse our legacy software portfolio, we must come to terms with the state, utility and viability of historical investments in mainframe and client/server systems. Neither the weight of legacy applications nor the excitement of new technologies should overly influence an enterprise's application strategy."
Gartner points out the very process of understanding legacy systems - extending them to new technologies and perhaps transforming them as new drivers - changes the nature of the business and is a recipe for success and reduced risk. Indeed, Gartner insists enterprise can only hope to leverage effectively legacy jewels of software and applications while tackling new challenges of e-business through careful analysis of the software portfolio, balanced planning and skilful execution.
And there is another good reason to undertake this work. Joint research by experts at the University of Minnesota and Carnegie Mellon University (Diseconomies of Software Portfolio Diversity: an Empirical Analysis) suggests software portfolio diversity is strongly associated with inefficiencies in software enhancement, particularly in software testing. The authors warn the results have implications for both practice and research in information technology management. "Specifically, [the results] imply that portfolio diversity should be an important software life cycle consideration, because the costs of diversity emerge in software maintenance," the report says.
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