Using Portfolio Management To Align Projects and Manage Business Applications

Using Portfolio Management to Align Projects and Manage Business Applications
Organizations need to understand the best ways to align projects and manage application costs. In this e-book, learn about the features, approaches, metrics and measurements used with application portfolio management tools. Using modern-day approaches in portfolio management, enterprise leaders will learn how to get projects in order and keep down costs.
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APM Processes: Determining Apps Business Value Using Metrics to Explore APM Business Value Advantage APM in ALM: Keeping Competitive by Building the Right Apps Lean and Agile for PPM Present Opportunity, but Challenges Await
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APM Processes: Determining Apps Business Value

By nAri KAnnAn
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APm Processes: Determining APPs Business VAlue
using metrics to exPlore APm Business VAlue ADVAntAge
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the APM Process
long with it matu-
APm in Alm: KeePing comPetitiVe By BuilDing tHe rigHt APPs
leAn AnD Agile for PPm Present oPPortunity, But cHAllenges AwAit
rity and complexity in organizations comes realizing business value out of the investment in applications. Which applications generate the highest profits? Which consume more resources, time, effort and money than other apps but return less business value? We may want to retire some of these applications and replace them with more modern ones, but are they worth replacing? And what are the costs of the proposed applications compared to their business value? These are the questions application portfolio management (APM) addresses.
Application portfolio, projects, programs inventory. In some enterprises, an application portfolio may be a simple list of applications. In larger enterprises, a program can be made of many applications, and an application may consist of many projects. The first step in the deployment of an APM system is creating a complete inventory of projects, applications and programs. This inventory also needs to be maintained. New applications may be proposed, funded and started any time. They all need to be added to the inventory.
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The application portfolio management process consists of one-time and ongoing efforts.
Service request, maintenance management. APM keeps track of an accurate inventory of current enhancements, bug fixes, changes and other efforts that go into maintaining applications. Maintenance is a huge part of application costs and should be performed diligently for meaningful comparisons of initial and ongoing total costs and their business value.
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Using Portfolio ManageMent to align Projects and Manage BUsiness aPPlications
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Real-time application management. The real-time application management capabilities of APM tools keep track of changing business objectives and strategies. These help bring in new application initiatives into the comparison. The cost and business value of old and about-to-be-retired applications can be compared with those of proposed ones. This step enables organizations to make sure that capital is allocated in an optimal way.
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Business value collection mechanisms. Business value is assessed by taking surveys of end users. These surveys assess how valuable and useful an application is to its users. If the application has users outside the companysay, consumersthen they are also surveyed.
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there may always be a disconnect between what an application costs to develop and maintain and its business value to its end users.
Real-time financial tracking and management. Following an inventory of applications, accurate cost figures for applications are brought in from existing financial systems. When comparing the business value of an application to its cost, billable and non-billable costs brought in from financial systems help produce more accurate calculations. Thats because they will be allocated properly.
Application portfolio visualization, analytics and reporting. Once APM tools collect all the data, powerful visualization capabilities like heat maps and bubble charts are used to represent the money spent on various applications and the business value they provide. Analytics and reporting features do this side by side and also perform deeper analysis for optimal decision making.
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Application portfolio adjustments. Once the APM analysis phase is over, the results are used to reallocate resources to applications that provide more business value. Applications that provide marginal business value can be retired and promising new ones taken up for development.
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APMs Benefits
It reduces costs and optimizes value. There may always be a disconnect between what an application costs to develop and maintain and its business value to its end users. APM helps assess this issue and make sure that
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any spending maximizes business value. It aligns business and IT. APM helps rebalance an application portfolio periodically to make sure that every IT dollar spent creates some business value. This forces a constant realignment of business and IT.
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cess of determining which applications IT resources should be directed toward and make it financially and strategically sound.
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It better utilizes resources. APM helps ensure that at any time IT resources are being spent on activities that maximize business value. If IT is working on applications that do not add much business value, their resource utilization can still register a high value, but much of it will be wasted. APM ensures that the utilization is meaningful.
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sometimes the simplest applications provide a great deal of business value, while very complex, expensive ones provide very little.
Applications provide varying amounts of business value to end users. Sometimes the simplest applications provide a great deal of business value, while very complex, expensive ones provide very little. The greatest benefit of APM is this: It allows an organization to analyze time, effort and money spent on an application and then compare that analysis to the apps business value. APM helps those same organizations optimally allocate IT budgets to maximize effectiveness and efficiency. n
It increases speed to market or deployment. If IT resources are constrained, APM can help use them to get a product or service to market faster. Speeding deployment of applications can be a competitive advantage.
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It standardizes and streamlines processes. APM can standardize and streamline an otherwise arbitrary pron
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Using Metrics to Explore APM Business Value Advantage

By nAri KAnnAn
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PPlicAtion portfo-
lio management (APM) helps measure and compare the business value of various applications in a portfolio. But what is business value? An application may score low on return on investment (ROI), but its competitive advantage may more than make up for that score. A number of metrics may be needed in addition to a baseline metric like ROI to make a meaningful comparison. Here are some metrics that can compare and manage a portfolio of applications.
plication. The benefits are quantifiable and verifiable. The initial development costs need to be amortized over a longer period along with maintenance and upgrade costs. An application with a low ROI value but high strategic value may compare well in a portfolio with an application that has a high ROI value and a lower strategic value. ROI is the most popular metric. Economic value added. EVA analysis measures an organizations profit that exceeds money spent on an application and its maintenance costs. EVA sorts the applications in descending order by the profits they generate. The advantage to this way of managing a portfolio is that money is allocated and spent only on applications that produce the highest profits. The disadvantage is that new and innovative applications that may generate profit down the road, but not today, may be killed in preference to those that are
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APPlicAtion Portfolio MAnAgeMent Metrics
Return on investment. ROI calculations are widely used in APM as a baseline comparison between different applications. This is calculated as a ratio of benefits to the costs of an ap-
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generating profits. This may strangle future competitive advantage. Val IT framework. Val IT provides a business value governance framework that balances tangible monetary metrics with intangible metrics. This is so apples can be compared with oranges in an application portfolio. This framework ensures that all involved are surveyed for an accurate picture of business value; the entire lifecycle of the application is considered over a multi-year period, and value is continually monitored, evaluated and improved.
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metric for certain applicationsa welldesigned e-commerce website, say, or a mobile commerce application. Companies producing innovative applications that help increase customer satisfaction may need to take into account the somewhat intangible benefit of repeat business or the value of creating a customer for life. Goodwill building. Some applications may help build public goodwill. During the 2010 Haiti earthquake, organizations like the American Red Cross let people donate money by texting, and phone service providers like AT&T included contributions in customers monthly phone bills.
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Risk management and compliance value. Some applications may be needed for risk management and compliance needs. They may not be scoring high in terms of monetary benefits. But measurement may involve the consequences of not monitoring and managing a risk. Privacy regulations ensured by the U.S. Health Insurance Portability and Accountability Act and fines for breaches are great examples.
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Time-to-market value. Applications that help products or services reach a market sooner may produce accelerated revenues and profits. Time-to-market value may need to be quantified for such applications and compared while managing a portfolio.
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Customer satisfaction index. The customer satisfaction index is a key

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Operation cost reduction value. Some applications may help indirectly reduce operations costs. Applications that eliminate manual steps and automatically communicate electronically with other systems fall into this category. For use as a metric, a careful and thorough analysis of business process improvement is needed. The money these improvements save must be taken into account as a benefit. The goal of APM is to make sure that money is spent on applications that increase business value for the company. But in addition to tangible metrics that can measure business value in monetary terms, a number of intangible benefits need to be included. Luckily, many APM tools provide support for these kinds of analyses. n
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APM in ALM: Keeping Competitive by Building the Right Apps

By colleen frye
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odAys it organiza-
tions need to not only build a product right; they need to build the right product to stay competitive. A wise first step for many software development companies is to get a handle on the bucket problem, learn from it and use that information to better plan and manage application and project portfolios. The bucket problem is how analyst Phil Murphy of Forrester Research Inc. in Cambridge, Mass., describes the accumulation of applications that represents a majority of IT spending apps that in many cases may no longer be useful, are expensive to maintain or are unwieldy or outdated. For the last 30-plus years weve been throwing stuff into the bucket and moving on to the next project. Whats in it represents 80% to 90% of IT spend; some is appropriate, some is wholly inappropriate, and theres no way to
tell the difference, Murphy said. Any company thats been in business for 10 years and isnt a mom and pop has a bucket problem. Application portfolio management (APM) can help organizations get a handle on whats in that bucket and also help them determine where there are big items consuming resources that would otherwise be working on [developing] new stuff, like mobile and cloud, Murphy said. APM, he said, has one goal: to make resource consumption transparent and let the business decide what the priorities are. The big factor is, whats the health of my existing application basesource code, data, the hardware it runs on, everything? Is it a price point that makes sense for each business function? Nicholas Spanos, principal consultant at Allentown, Pa., IT services company Computer Aid Inc., and a Lean IT blogger, said many organizations today have no concept of APM. What
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they do is have a whole bunch of applications, and they will operate and support them until someone tells them they shouldnt. In many cases they dont even know if anyone is using them. Mike Young, practice leader at Pinnacle Management Systems Inc. in Irving, Texas, agreed. One problem is organizations dont know which applications overlap, he explained. Second, they dont know how to tie return on investment (ROI) to specific applications. You own some and I own some; my compensation is tied to my application; yours is tied to your application. And chief information officers are often not the right people to make portfolio decisions because they dont own the revenue stream, he added. Young said organizations need to know what theyre spending money on. Its usually straightforward to understand hardware-software purchases; its more difficult to tie effort and cost of effort back to that, he said. The challenge [for large organizations] is if you have thousands of developers spread over the world, what are they spending time on? What are the support people spending time on? It sounds simplistic, but it comes down to tracking time and tying that back into what that costs. There are APM tools available today to help organizations do just that, but Forresters Murphy said few solve the problem entirely. Some PPM [project portfolio management] tools claim to
do APM, he said, adding that utilizing their resource and demand management capabilities is useful. But most tools simply trick the tool into pretending an application is a project. Projects have short lifecycles measured in months or a year or two; applications can live 30 to 40 years.
Projects have short lifecycles measured in months or a year or two; applications can live 30 to 40 years.
Research Inc.
PHil murPHy, analyst, Forrester
Murphy said there are also application-mining products that claim to do APM. They parse the source code and develop metrics about how big or how complex the application is. Theoretically, if you can carry that over to the SCM [supply chain management] system you could trap [the information]. He added that some enterprise architecture metadata modeling tools can serve a purpose for APM as well, but nobody has pulled it all together yet. Pinnacles Young advises clients that the first task is to rationalize the strategic initiatives. It doesnt do a lot of good to do APM or asset management unless you can tie it to revenue, strate-
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gic initiatives and future plans. This is where a lot of people struggle. Then do an inventory, he said, and include everyone involved in the project. For example, if there are billing applications, talk with marketing and financial people. Then examine where there is overlap. After inventory, Young said to start making hard decisions about what to retire. At that time, you need the costs available so you can determine where the money is going. At that point, organizations typically will realize they have to make a change in the way theyre accounting for what they spend. Cleaning house and streamlining costs isnt the only benefit of APM. It helps with new development as well. Jon Furner, president of ResultsPositive, a consulting firm in Chandler, Ariz., said hes seeing a lot of need in application rationalization, application inventory and application transformation. The No. 2 driver of APM is rolling out new applications, he said. Some leading companies are using it in conjunction or in parallel with the annual planning process, assessing the application portfolio, conducting surveys with business and application owners and getting feedback on how well [the applications] are working for the business needs. Its an opportunity to create new products or consolidate and retire outdated applications, Furner said.
Computer Aids Spanos said if IT wields APM confidently, it can effect real change. By managing the application portfolio proactively, IT can articulate to the business units what they are spending to support and maintain
cleaning house and streamlining costs isnt the only benefit of APm. it helps with new development as well.
an application, if there is risk or limitations posed by outdated technology and why development of a new feature or function or the implementation of a new package would provide better ROI and alignment with strategic initiatives. For now, though, its early days for APM, Spanos said, and IT has yet to take ownership of it. Theres a tendency for IT to do what business asks [them] to do, he said. The problem with that approach is busi-ness is not expert in technology, so busi-ness doesnt know what the new capabilities of technology are or what would be a much easier way to automate the manual business process they have, Spanos said. n
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Lean and Agile for PPM Present Opportunity, but Challenges Await
By colleen frye
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rgAnizAtions
embracing Lean and Agile methodologies for their software development projects have had to make some changes in the way they manage the application lifecycle. Accordingly, incorporating Lean and Agile principles into project and portfolio management methodologies will require some changes as well, industry observers say. Lean and Agile principles present a gnarly problem for portfolio management, said Jim Johnson, chairman of The Standish Group, a project management consultancy in Boston. The problem is speed and velocity; Agile projects go fast and people get things done quickly. But most enterprise project and portfolio management tools, Johnson said, incorporate an almost draconian style of management. Going
back 40 years, what happened is things would fail, people would put tools and compliance and governance on top, and things still failed, he said. Its a reaction to things gone badly. Every time things go badly we want to layer things on. Thats why Lean is goodit takes away the layers and really solves issues. According to a report by Margo Visitacion, an analyst at Forrester Research Inc. in Cambridge, Mass., project portfolio management (PPM) tools have gotten easier to use and gather a lot of information, but often its more information than what you needakin to telling you how to build the watch when all you want is the time. Rather than Gantt charts and project plans, Johnson said organizations should be trying to work on the most important things in a timely fashion. Do the right things with the right people at the right time. In her report, Visitacion suggests
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organizations adopt Lean to drive their portfolios and Agile to drive their activities. Lean supports the disciplines necessary to select high-value, highneed investments, while Agile provides the path to optimize how you work, she wrote.
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Johanna Rothman, an Arlington, Mass., consultant and author of Manage Your Project Portfolio: Increase Your Capacity and Finish More Projects, said understanding the value stream of an existing product or ongoing project is key. If we stop talking about people
PMI GIves LeAn A BIG PUsh

iMPleMenting leAn PrinciPles may have just gotten a little easier. The Guide to Lean Enablers for Managing Engineering Programs identifies 300 Lean enablers, or best practices, that organizations can implement to reduce waste and ensure project and program success. It was made available in May by The Project Management Institute (PMI), the International Council on Systems Engineering (INCOSE) and a joint team of researchers. Steve Townsend, director of global alliances and networks at PMI, said an executive briefing on the guide at the institutes global congress in France was greeted with enthusiasm. PMI also plans to present the principles at its upcoming conference in Vancouver, British Columbia. PMI will continue to work with INCOSE and the Massachusetts Institute of Technologys Lean Advancement Initiative, which also collaborated on the guide, to identify areas where organizations are particularly challenged and see if the application of Lean enablers helps performance in those
areas. While PMIs global standard guide, the Product Management Body of Knowledge (PMBOK), must go through the process set forth by the American National Standards Institute when it makes changes, Townsend expects the fourth edition will incorporate some of the Lean enablers identified in the guide. But he stressed that while many of the PMBOK practices have not been called Lean per se, Lean principles have been demonstrated in the context of our programs for many years. For example, he said, Project management is a team and people discipline, recognizing different levels of expertise, different abilities, different perspectives to ensure programs and projects achieve results. The concept of Lean has always been reflected in program and project management. The bottom line, he said, is change is constant. Project and program management are disciplines, but as people and organizations change you have to constantly review and evaluate how practices and processes work. n
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as resources and start talking teams, we have a better way of managing the portfolio, she said. If we flow work through teams, were much more likely to be successful; teams get things done in software. Rather than managing projects and portfolios at the lowest level, Rothman said organizations need to manage at a higher level by optimizing and prioritizing. Thats why you have to make one decision: Which project is No. 1? Which is No. 2? Which is 3? If project one is key to success, then you have to leave everyone on that project alone, and the same with two, she said. Its really that simple. Another key principle of Lean is getting rid of waste. Johnson recommended eliminating project plans and Gantt charts. What executives need to see is concrete results. Rothman agreed. With a Lean approach, she said, the organization knows that in some time it will see a feature, a deliverable, and make a decision. We see a demo and we say, should we commit, transform, kill? Thats the issue in a nutshell. Getting rid of waste also means stepping back and looking at the portfolio, she said. That consists of products or projects that transform your organization, grow your business and keep the lights on. For an existing application in the portfolio, Rothman said getting rid of waste may mean asking, Is there waste associated with the lack of a new feature? How many back-
office people does it take because we dont have a way to do this in an automated fashion? At the same time, organizations also have to determine when they should stop doing updates or maintenance. At some point you have to turn off the spigot of new features and say, we can kill projects or products, she said.
management has to change around the lean movement. if writing purchase orders takes six months, its not a very good fit.
Standish Group
Jim JoHnson, chairman, The
Reducing the overhead of managing portfolios also eliminates waste, Johnson said. Management has to change around the Lean movement. If writing purchase orders takes six months, its not a very good fit. For project and portfolio managers just getting started with Lean principles, Rothman said start with small chunks rather than the big picture. And most important, she said, Keep teams together and have work flow through projects. If thats the one thing you can do, do that. It will get you the biggest bang for the buck. n
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Nari Kannan is the CEO of appsparq Inc., a mobile applications consulting company based in Louisville, Ky. Kannan has more than 20 years of experience in IT, having started out as a senior software engineer at Digital Equipment Corp. He has since served as vice president of engineering or chief technology officer of six Silicon Valley startups. Email him at nari@appsparq.com.
Using Portfolio Management to Align Projects and Manage Business Applications is a searchsoftware Quality.com e-publication. hannah smalltree editorial director Jason sparapani Managing editor, e-Publications
Colleen Frye is a regular contributor to SearchSOA.com and SearchSoft wareQuality.com. She was an editor on Software Magazine and ESD Magazine. Frye has written about topics ranging from SOA governance to application integration.
Jan stafford executive editor Brein Matturro Managing editor Melanie webb associate site editor linda Koury director of online design Mike Bolduc Publisher mbolduc@techtarget.com ed laplante director of sales elaplante@techtarget.com
2012 techtarget inc. no part of this publication may be transmitted or reproduced in any form or by any means without written permission from the publisher. techtarget reprints are available through The YGS Group. About TechTarget: techtarget publishes media for information technology professionals. More than 100 focused websites enable quick access to a deep store of news, advice and analysis about the technologies, products and processes crucial to your job. our live and virtual events give you direct access to independent expert commentary and advice. at it Knowledge exchange, our social community, you can get advice and share solutions with peers and experts.
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APM Processes: Determining Apps Business Value

APm Processes: Determining APPs Business VAlue

using metrics to exPlore APm Business VAlue ADVAntAge

long with it matu-

APm in Alm: KeePing comPetitiVe By BuilDing tHe rigHt APPs