Focus on application portfolio management for quick ROI

By Barry Bernstein, Compuware's business development manager for IT Portfolio Management

Recognising that IT investments can represent up to 50 percent of an organisation's capital investment, large South African companies are starting to embrace IT Portfolio Management (ITPM). However, while there are growing levels of maturity in our market, most companies still have a long way to go.

The concept of ITPM - a term coined by research organisation Gartner - is still fairly new. It maximises IT value through the alignment and management of project, application and infrastructure portfolios.

Like many organisations worldwide, local companies who have embarked on the ITPM journey tend to focus mainly on project portfolio management. Only 20 percent of the IT budget, however, is usually allocated to innovation or new projects.

More significant returns can be realised from implementing effective application portfolio management. In general, 80 percent of the IT budget goes towards 'keeping the lights on', or maintaining existing infrastructure and applications. It therefore makes sense for organisations to focus their portfolio management activities in this area.

Application portfolio management provides a framework for application life-cycle decision-making: which applications to maintain, which to invest in, which to replace and which to retire. Application portfolios allow IT to categorise applications in terms of business needs and to track client usage of - and satisfaction with - applications.

Effectively managing the application portfolio supports IT efforts to consolidate applications, reduce costs and increase focus on the strategic needs of the business.

Companies can gain quick, significant return on investment (ROI) by applying application portfolio management to software licensing, for example. This often highlights huge payments for non-performing or retired applications. This problem is particularly prevalent in the public sector, although the private sector also battles to audit software licences effectively.

Companies can thus achieve significant cost savings by measuring and monitoring performance, and then rationalising their software licences.

Only once they have successfully rolled out application portfolio management should companies begin to focus on project portfolio management, which provides the framework for assessing the health of key IT initiatives throughout the project life cycle. These portfolios need to be continually monitored to ensure new projects don't exceed expected budgets, are delivered on time and fulfil the business needs. Project portfolio management also enables continuous monitoring of the portfolio and leverages information collected through business process to drive critical metrics.

While ITPM as a whole is still fairly new, many local companies considering project management solutions are looking at the bigger picture solution, and recognising the importance of project portfolio management. They realise that a project management solution does not extend far enough into the important area of governance.

Another often-neglected area within ITPM is portfolio and investment planning. A notable exception is the financial services sector, which must comply with a number of governance frameworks, including King 2, Basel II and Sarbannes-Oxley, and therefore must ensure effective portfolio and investment planning.

This provides a framework for IT executives and their line-of-business colleagues to determine which strategic projects should be funded and added to the portfolio, based on key business criteria and in accordance with governance processes.

Portfolio planning enables a collaborative environment where informed decision-making can improve business performance while providing transparency into the process. Portfolio planning helps business and IT executives select and prioritise IT investments that best support business goals, while balancing risk and value.

Companies looking to roll out IT portfolio management should ensure that they invest in a solution that addresses all three key areas of portfolio management, is easy to configure and is able to deliver value to the organisation very quickly.

It should also be compatible with all the major governance frameworks.

IT governance involves three main areas - methodology, processes and technology. One, or two, out of the three will not get the job done. Companies must also be aware that any technology solution is only an enabler of the governance framework.

Companies considering ITPM must also realise that its implementation does have a considerable impact on the organisation and implies changes to the modus operandi.

In addition, companies need to develop a roadmap when implementing IT governance. ITPM should be phased in over a number of years. A big bang approach does not work.

Finally, CFOs and CEOs need to get involved in the ITPM rollout rather than delegating to the IT department or portfolio management officers. They must appreciate the full impact on the organisation, and champion the implementation themselves. They need to drive the project, and be seen to be involved.