Strategic Planning

for Information
Systems
Third Edition

CHAPTER 7
Managing the
Application Portfolio
John Ward and Joe Peppard
 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
 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
 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
Sullivan matrix
 Sullivan matrix
• Identifies need for new, demand-driven
decentralised approaches to improve
management of strategic and high
potential quadrants
 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
 ITAA Matrix

Technology Normative
High
Driven Ideal

Technology
Emphasis

Low Opportunistic Issue Driven

Low Issue High

Emphasis
 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.
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
Hartman and Sifonis Matrix
– 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
 Hartman and Sifonis Matrix

Breakthrough Operational
High
Strategies Excellence

Business
criticality

Low Rational New

Experimental Fundamentals

High Innovation Low

Application Portfolios in Differen
t IS/IT Environments
HIGH Opportunistic Complex • Comprehensive
• Decentralized application
IT control Applications Applications portfolio
• Not seen as St HP St HP • Balance of control
critical to • Enable business
business KO Su KO Su creativity
Diffusion Portfolio Portfolio
(Development)
Applications Applications
• Centralized IT St • Centralized IT
• Predominance • Lack of
Su KO Su perception in
of support
applications Portfolio Portfolio the business of
what can be
LOW Traditional Backbone
achieved
LOW HIGH
Infusion
(Impact)
 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
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
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
Reconciling Demand & Supply Issues
in the Application Portfolio
Driving Forces Critical Requirements
High New business ideas or Rapid evaluation of prototypes
potential technological opportunity and avoid wasting effort/resources
Individual initiative- owned by on failures
a ‘product champion’ Understand the potential benefit in
Need to demonstrate the relation to business strategy
value or otherwise of the idea Identify the best way to proceed

Strategic Market requirements, Rapid development to meet the

competitive pressures or business objectives and realize
other external forces benefits within the window of
Business objectives, success opportunity
factors and vision of how to Flexible system that can be
achieve them adapted in the future as the
Obtaining an advantage and business evolves
then sustaining it. Link to an associated business
initiative to sustain commitment
 Reconciling Demand & Supply
Issues in the Application Portfolio
Driving Forces Critical Requirements
Key Improving the performance High-quality, long-life
operational of existing activities solutions & effective data
Integration of data & management
systems to avoid Balancing costs with
duplication, inconsistency, benefits & business risks –
and misinformation identify the best solution
Avoiding a business Evaluation of options
disadvantage or allowing a available by objective
business risk to become feasibility study
critical/comply with
industry legislation
 Reconciling Demand & Supply
Issues in the Application Portfolio
Driving Forces Critical Requirements
Support Improved Low-cost, long-term
productivity/efficiency of solutions – often packaged
specific business tasks software to satisfy most
General legislation needs
Most cost-effective use of Compromise the needs to
IS/IT funds and resources the software available
available Objective cost/benefit
analysis to reduce financial
risk and then control costs
carefully
 Key Questions on the Applications
Portfolio
STRATEGIC HIGH POTENTIAL
WHY Do we want to do it in WHY? Not clear
strategic terms?

WHAT does the system need to WHAT? Not certain and/or

do to gain the advantage?

HOW best to do it? HOW? Not yet known

WHY to improve performance WHY to reduce costs by

and avoid disadvantage? improving efficiency
WHAT actually has to improve WHAT of existing necessary
and by how much? tasks?
HOW best to do it?
HOW best to do it?

KEY OPERATIONAL SUPPORT

WHY = efficiency WHAT = need to be improved HOW = to do that successfully
(cost-effective use of IT)
 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)
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
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
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
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
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
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
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
 STRATEGIC HIGH POTENTIAL

Leading edge
Centrally planned
Free market
DEMAND

Free market SUPPLY

Monopoly
Scarce resource

KEY OPERATIONAL SUPPORT

CENTRALISED DECENTRALISE
D
Relationship of applications portfolio and generic IS strategies
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
 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
 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
 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
 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)
 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
Portfolio, Planning and Generic
Strategies Evolution
(alternative strategy)
Strategic High Potential
4 BUSINESS LED
5 ORGANIZATIONAL and Free market (or
and Central Planning Leading Edge
technology)

3 ADMINISTRATIVE LED
and Monopoly and Scare
Resource

1 TECHNOLOGY LED
2 METHOD LED and Scare Resource
and Monopoly (Free Market) or even
Monopoly

Key Operational Support

 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
 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
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
The Business/Systems Portfolio
Matrix
STRATEGIC (STARS) HIGH POTENTIAL (WILDCATS)

Continuous innovation Process research and design

Vertical integration Minimal integration

High value-add Cost control

Defensive innovation Disinvest/rationalise

Effective resource utilisation Efficiency

High quality Sustained quality

KEY OPERATIONAL SUPPORT (DOGS)

(CASH COWS)
 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.
 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.
 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
 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
Key Issues in Managing the Evolution
of an Application over Time
STRATEGIC HIGH POTENTIAL

Lose: Individual ownership

Gain: Senior mgt. ownership and freedom
: IT involvement
: Project mgt.

Return to
Re-engineer for Re-evaluate standards
long-term use benefits & costs
Fully integrated
with other Evaluate lower-cost
applications for options to meet core
effectiveness needs

KEY OPERATIONAL SUPPORT

 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
 Management Styles
STRATEGIC HIGH POTENTIAL

DEVELOPER ENTREPRENEUR

- organization goal seeker - personal achiever

- risk accommodating - risk taking
- 'Central Planner' - 'Free Marketeer'

CONTROLLER CARETAKER

- long term/quality - immediate/efficient

solutions - stability solution
- risk reducing - risk avoiding
- 'Monopolist' - 'Scarce Resourcer'
KEY OPERATIONAL SUPPORT
Managing Applications Portfolio
in Multi-Unit Organizations
CORPORATE ‘BUSINESS UNIT’

BUSINESS UNIT 3

BUSINESS UNIT 2

BUSINESS UNIT 1

STRATEGIC HIGH POTENTIAL

Evaluate how Share ideas and results

advantages gained of evaluations and
in 1 SBU can be prototypes
obtained in others
‘ CAPITALIZE’ ‘ COMMUNICATE’

Transfer experience in Achieve economies by

use of applications and sharing non-critical
technology across units. systems and standardizing
Reduce duplication of IS on technologies and
and IT effort resources used
‘CONTROL’ ‘CONSTRAIN’

KEY OPERATIONAL SUPPORT

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