Strategic Planning for Information Systems

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

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

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

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 Operational Excellence Breakthrough Strategies High Business criticality Rational Experimental New Fundamentals Low High Low Innovation

HIGH Opportunistic Complex Applications Applications St HP St HP KO Su KO Su Portfolio Portfolio Diffusion (Development) Applications Applications St KO Su Su Portfolio Portfolio LOW Traditional Backbone LOW HIGH Infusion (Impact) Application Portfolios in Different IS/IT Environments • Comprehensive application portfolio • Balance of control • Enable business creativity • 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

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

STRATEGIC HIGH POTENTIAL 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? HOW best to do it? WHY to reduce costs by improving efficiency WHAT of existing necessary tasks? HOW best to do it? KEY OPERATIONAL SUPPORT Key Questions on the Applications Portfolio 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 Free market Centrally planned DEMAND SUPPLY Free market Scarce resource Monopoly KEY OPERATIONAL SUPPORT CENTRALISED DECENTRALISED 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

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

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

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

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

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

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

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 Management Styles

Managing Applications Portfolio in Multi-Unit Organizations

Strategic Planning for Information Systems