The amount a
company invests in each business application
should directly correspond to the value and the
impact to the business. By treating all the
company's applications as a total investment
'portfolio', and by applying portfolio
management best practices, it is possible to
quantify the business value of each application,
and reprioritize applications spending to
enhance the business contribution with the same
level of investment. The starting point of this
process is an Application Value Assessment.
Why Reprioritize
Applications Spending?
Theoretically, the
amount invested in a particular business
application should directly correspond with the
amount of value the application contributes to
the business. Those applications with the most
value should receive the most funding, and vice
versa. Unfortunately, this rarely occurs. For
example, legacy applications with heavy
maintenance requirements often absorb a
disproportionate share of the budget. In this
situation, new strategic spending becomes
severely limited. Or, conversely, a major new
application initiative can stretch internal
resources so thin that routine maintenance
suffers. Users complain, day-to-day business
operations start to degrade, and the replacement
application starts developing a bad 'rep' before
it even has a chance, slowing its adoption when
it eventually does go into production. Other
worthwhile projects get ignored or undertaken as
back-door projects, and the company's
applications 'strategy' spirals out of control.
A portfolio
management approach, in which applications
spending across the company is treated like any
other investment portfolio, offers a coherent,
holistic strategy with clear ROI. The approach
is not new. A few years ago, the Gartner Group
made the following statement: "Enterprises that
use a portfolio management approach for the
first time typically identify opportunities to
improve efficiencies by cutting project expenses
from 10 to 30 per cent ? even before the
portfolio is balanced or adjusted." (Gartner
2001)
However, like any
discipline, portfolio management must become
embedded in the company culture if it is to be
effective. The old truism, "there's no silver
bullet," is still true. Employing portfolio
management to reprioritize applications spending
takes commitment at every level of the
organization.
Ideally, it should
be possible to priorities all the company's
applications and balance business risk across
the entire portfolio - without disrupting
day-to-day operations.
The Potential
Rewards Are Significant
Comprehensive
view of total application spend
More flexible,
cost effective operations as a result of
rationalizing and decommissioning some
applications
Improved focus
on current business requirements through
re-allocation of application support budgets
and resources
High confidence
that new applications investments will be
aligned with and contribute to strategic
business objectives
Better
decisions about the best sourcing strategies
for reducing the cost of applications
support while still meeting service needs
and managing risk
Faster rollout
of new products when supported by optimized
applications.
