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1
Implementation of Application Portfolio Management
IT Advisory Board Meeting
January 2006
2
Framework for Managing IT Investments
I. Strategic Business I. Strategic Business and IT Planning and and IT Planning and Investment Selection Investment Selection
and Budgetingand Budgeting Investment Portfolio Investment Portfolio
Management - IPMManagement - IPM
III. Operation, III. Operation, Maintenance, and Maintenance, and
Renewal, Retirement, Renewal, Retirement, or Replacementor Replacement
Applications Portfolio Applications Portfolio Management - APMManagement - APM
II. Project ImplementationII. Project Implementation
Project Portfolio Management - PPMProject Portfolio Management - PPM
Life Cycle of IT
Investments
3
Framework for Managing IT Investments
I. Build, Buy, and/or I. Build, Buy, and/or Implement the Right Implement the Right
AssetsAssets
III. Maintain Operate Assets in III. Maintain Operate Assets in the Right Ways and Retire or the Right Ways and Retire or
Replace Them at the Right Replace Them at the Right Times Times
II. Build and Implement Assets in the Right MannerII. Build and Implement Assets in the Right Manner
Life Cycle of IT
Investments
Identify investments that best:
• Enable governmental initiatives or agency missions and strategies
• Result in financial returns – revenue generation or cost savings
• Provide better constituent services or program effectiveness
• Fit technical architectures
• Satisfy budget, staffing, and other constraints
• Meet risk profiles
• Clarifying roles and responsibilities
• Providing appropriate oversight
• Ensuring they are well planned and thoroughly researched prior to starting
• Defining, tracking, and evaluating project progress frequently to achieve budget, schedule, scope, and quality expectations
• Completing them successfully so that business goals and objectives are realized
Manage projects by:
Operate and maintain assets so that:
• Benefits/costs are optimized over their useful lives through astute and timely renovations, consolidations, or eliminations
• Services offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgets
• Retirements and replacements are effected when assets are no longer cost-justified or risk-acceptable
4
Portfolio Management is…
• Information analyzed in a way that helps decision makers optimally allocate scarce resources.
• The purpose is to weigh key factors, such as desired returns or public value, initial and life cycle costs, architectural directions, and risk profiles to meet strategic business goals more effectively and productively.
• The objective is to make fact-based, data-driven decisions using a consistent and disciplined approach.
5
Major Portfolio Management Tasks
• Inventory and classify items in the portfolios.
• Perform relevant analyses – identify problems and opportunities, develop viable options, determine relevant criteria, ask the right questions, and evaluate alternatives using pertinent information.
• Make decisions.
6
Overview of IT Portfolio ManagementAgency Missions and Vision and Business Goals and Objectives
Statewide and Agency IT Plans
Application Portfolio Management
Project Portfolio Management
Investment Portfolio Management
Identify Problems and Opportunities
Funded New ProjectsManage
Portfolio
Analyze Portfolio
Optimize Portfolio
Build and Maintain Inventory
Develop Business Drivers and Business Cases
Analyze Candidate Investments
Adjust Project Portfolio
Assess Value of Projects and Portfolio
Manage Portfolio
Implement Projects
Select and Plan Investments
New or Renovated Applications
Proj
ect
Prop
osal
s for
App
licat
ions
Ren
ovat
ions
,
Ret
irem
ents
, or
Rep
lace
men
ts
7
Status of Implementation of Portfolio ManagementPhase/Type of Portfolio
Management EffortImplementation Status
and Timeframe
Investment (IPM)
In process - initial efforts in winter and spring 2006 as part of applications endeavor; more advanced capabilities will be implemented later as agencies are ready and need them
In process - winter and spring 2006
Applications (APM)
Topic Research and Purchase of Tool
Completed – performed in 2004 and early 2005
Completed – performed summer and fall 2005
Project (PPM)
8
Project Portfolio Management
• Provides a workflow process that encompasses project approvals, checkpoint reviews, and periodic status reporting at project, agency, and statewide levels
• Provides a “gated” review approach to ensure work done acceptably and project is in position to complete the succeeding phase successfully.
• Offers documents and administrative management capabilities that follow industry recognized best practices for system development life cycle (IEEE) and project management (PMI)
• 91 projects with estimated cost approaching $850 million being tracked in December 2005
9
Initiation Phase Cost Planning Phase Cost Enterprise Architecture Questionnaire Service Component Reference Model (Completed by
EPMO) Project Manager Interview (Completed by EPMO) Proposed Budget - Level 1 Budget Cost Tab Financial Benefits - Level 1 Benefit Tab Alternative Analysis if over $10M investment cost Business Driver Impact Statements - Strategic Impact Tab Summary Risk Profile - Risk Tab Procurement Plan
Project Approval :For investments >= $500K, Complete entireworkflowFor investments < $500K, complete only Project Infosection and Budget Cost Tab - Level 1; < $100Kagency approval onlyExpansion Budget Requests complete entireInitiation criteria
ProjectInitiationSignoff
ProjectInitiationReview &Approval
Implementation Review &
Approval
ProjectCloseout
Planning /Design
Review &Approval
Planning /DesignSignoff
Execution /Build / PilotReview &Approval
Execution/ Build /
PilotSignoff
Implementation
Signoff
Gate 1Planning &
DesignApproval
Gate 2Execution &
Build Approval
Gate 3Implementatio
n Approval
SCIO REQUIRED
Initiation Exit Criteria and Planning & DesignEntrance Criteria
SC
IO/O
SB
M/
OS
C
Investment Cost = Project Cost (Initiation thru Closeout Phase) + 5 years Operations
Co
ntr
ibu
tors
Re
vie
we
rs/
Ap
pro
vers
AG
EN
CY
Phase 1: Project Initiation Phase 2: Planning & Design Phase 3: Execution & Build Phase 4:Implementation
Phase 5:Closeout
Project Information SectionProject Charter
Business Issues Business Goals Project Goals Project Deliverables Items Out of Scope Proposed Strategy
Additional Requirements
High Level Assumptions /Constraints
Key Dependencies Externalto the Project
Project Organization andRoles
Planning & Design Exit Criteria andExecution & Build Entrance Criteria
SCIO REQUIRED Updated Roles/Responsibilities Updated High Level Assumptions / Constraints Updated Key Dependencies external to project Significant Issues / Risks - Issues & Risks Tab Project Schedule / Milestones Budget Cost - Levels 2 & 3 budget Cost Tab Financial Benefits - Level 2 Benefit Tab Updated Significant Issues / Risk - Issues /
Risk Tab Preliminary System Design Document Project Status Reporting Plan vs. Actuals
AGENCY DOCUMENT CHECKLIST* Project Plan Staffing Plan Communication Plan Change Mgmt Plan Configuration Mgmt Plan Project Test Plan Acceptance Criteria Quality Assurance Plan Statement of Work (SOW) Work Breakdown Structure (WBS) Business Requirements Updated Procurement Plan Training Plan Deployment / Rollout Plan Risk Management Plan
Execution & Build Exit Criteria andImplementation Entrance Criteria
SCIO REQUIRED
Updated Roles/Responsibilities Updated High Level Assumptions / Constraints Updated Key Dependencies external to project Updated Significant Issues / Risks - Issues / Risk
Tab Updated Detailed System Design Document Updated Project Schedule / Milestones Updated Budget Cost - Levels 2 & 3 Budget Cost
Tab Updated financial Benefits - Level 2 Benefit Tab Project Status Reporting Plan vs. Actuals
AGENCY DOCUMENT CHECKLIST* Disaster Recovery/Business Continuity Plan Test and Acceptance Results Pilot Results Operations & Maintenance Transition Plan
* Agency documents may be attached inDocument Management tab
SCIO REQUIRED
Project Status Reporting Plan vs. Actuals Updated Significant Issues /
Risks - Issues / Risk Tab
Implementation Exit Criteria& Closeout Entrance Criteria
Project Status Reporting :>= $500K = Monthly Status Reporting< $500K = Status Reporting not required
EPMO QAREQUIRED
Project CloseoutReview
AGENCYDOCUMENTCHECKLIST*
Lessons Learned Historical Records
State of North Carolina PPM Workflow
Version 2.612/29/2005
10
Project Portfolio DashboardProject Portfolio Dashboard
11
Applications Portfolio Management
• Collects and analyzes cost, benefit, and strategic value information to evaluate the TCOs of retention, enhancement, or replacement alternatives
• Evaluates assets by determining business and technical status; developing remediation, retirement, or replacement approach; and ascertaining priority and timeframe for action
• Develops cost estimates for asset modernization, and retirement (with and without replacement) and total statewide
• Identifies vulnerabilities, criticalities, return-to-service needs, dependent business processes, public services offered, supporting technical infrastructure, etc.
12
Applications Portfolio Management Builds Upon Legacy Study
• In the portfolio of approximately 900 applications: 40% are considered critical for department mission/strategy; 17% are enterprise (statewide) applications; and 75 of the applications processed by the state data center require 1-day return-to-service capability.• The statewide portfolio is relatively young, with an average age of 7.5 years – since 1997, from 70 to 90 new or replacement applications have been added each year to bring down the average age.• Health status is: 23% presenting functional, technical, or both problems; 50% with some problems, but manageable; and 27% healthy, with a prescription for continuing on-going operations and maintenance.
13
Inventory (Build and Maintain Inventory) Application identity and basic information
Financial (Analyze and Manage Portfolio) Detailed application-level costs and cost-effectiveness analyses
Assessment (Analyze and Manage Portfolio)
Risk, Operational Performance, Architectural Fit
Alignment (Optimize Portfolio) Process Inventory, contribution, function association Core Business Drivers, priorities, process
contribution
Application Portfolio Management Perspectives
Level I
(Ste
p 1
)
Level II
(S
tep
s 2
an
d 3
)
Level II
I (S
tep
s 2
an
d 3
)
Level IV
(S
tep
4)
InitialDeploymentFocus
Scope of Keane-Gartner Study
14
Applications Portfolio Management ProcessTool Assisted Decisions Subjective Business Decisions
Transition to Executive Decision Making Process
Step 1 – Level I
Collect, Validate, and Maintain Data
(Build and Maintain Inventory)
Step 2 – Levels II & III
Perform Assessments
(Analyze Portfolio)
Step 3 – Levels II & III
Determine Dispositions and Life Span Transition
Roadmap
(Manage Portfolio)
Step 4 – Level IV
Determine Priorities, Timeframes, Costs, and
Benefits
(Optimize Portfolio)
Funding Requests
Investment Portfolio Management (IPM) Process
One-Time Work
•Transfer data from Keane/Gartner study
•Perform initial collection and validation of remaining data
Ongoing Work
•Perform data changes and validations as they occur
•Collect and validate data for implementation projects transitioning to applications assets
Major Data Elements
•ID•Costs•Business criticality
•Business processes enabled or supported
•Functional quality•Technical quality•Risk profile
Identify
•Business problems/issues
•Technical problems/issues
•Risk vulnerabilities, probabilities, and impacts
•Other problems/issues
Evaluate
•Status/Health (Good, Bad, Moderate)
•Value to organization (High, Moderate, Low)
•Risk of unrecoverable failure (High, Medium, Low)
Consider
•Cost-effectiveness
•Risk acceptability – status of
Identify
•Problems/opportunities
•Alternative approaches
•Best actions for managing application over expected life spans
•Mission criticality/importance to agency
Determine Whether To
•Invest additional funds (technical or functional enhancement or replacement)
•Sunset/eliminate
•Consolidate
•Replace and consolidate as part of an agency wide or state wide initiative
•Continue maintenance
Identify
•Dependencies on other applications and projects
•Costs/fiscal requirements
•Technical infrastructure requirements
•Benefits/value to accrue
•Alignment with state/agency priorities
Confirm and/or Develop
•Implementation approach
Determine Priorities and Timeframes
•Select priority for action (High, Medium, Low)
•Select timeframe for action (Immediate, Near-Term, Long-Term)
Potential Benefits for Selected Actions
•Cost savings from consolidate/eliminate applications
•Improvements in public service, reliability, recoverability, and security resulting from functional/technical renovation or replacement
15
Investment Portfolio Management
• Identifies a pool of IT investments that best support core mission functions and prioritized business needs, best fit with approved architectures, have acceptable risks, and are accomplishable within fiscal and personnel limitations
• Requires high quality business cases that increase probability of successful outcomes (on budget, within schedule, and meet user and stakeholder expectations)
• Enables collaboration and transparency between IT/non-IT executives via an integrated process and better managed decision making activities that optimizes program benefits and public value throughout the enterprise
16
Overview of IT Investment Portfolio Management in State Government
Overview of IT Investment Portfolio Management in State Government
Department Business StrategyDepartment Business Strategy
Department Business Architecture
(Business Service Models)
Department Business Architecture
(Business Service Models)
• Business/Program Goals and Objectives• Processing and Information Flows• Organization Charts• Business Reengineering Opportunities
• Department Mission• Statutory Mandates• Governmental Initiatives
Application Portfolio Management
New ProjectsAsset Infrastructure Management
• Retirements • Replacements• Modernizations• Maintenance
IT Investment Portfolio Management •Identify potential investments and evaluate candidates against defined criteria•Prioritize projects based on analysis results (relative weighted scores)•Balance staffing and fiscal resources•Determine disposition – invest, adjust, or sunset
•Refreshment Cycles•Security/Reliability Upgrades
•New Applications•Infrastructure Additions/Upgrades
Current IT Project Portfolio
•Status of all projects (schedule, budget, business objectives, etc.)
•Projects no longer relevant or with lower priorities
•Projects with higher priorities or increased urgency
Other Plans and Strategies
•State CIO IT Plan•Statewide IT Initiatives•Department & Statewide Tech. Architectures
•Department IT Plan
Funding Requests and Project Approvals
17
Develop and prioritize Business Drivers and Impact Measures
Evaluate the relative impact/linkage of candidate investments on Business Drivers
Understand project priorities - based on strategic linkage(business drivers) - to strengthen
transparency of rankings for decision making
3 4
Business Drivers
2
Business Alignment Investment Prioritization
Business Drivers
Inve
stm
ents
1
Document Business Cases
Build candidate investment portfolio using a consistent business case framework
Steps for Evaluation of Alternative Investments
18
6
7
Optimize investment sequence (schedule) by analyzing key staff competencies, supply/demand by month, and
regulatory deadlines against the strategic value of the selected portfolio
Mathematically calculate the best portfolio selection of investment opportunities considering value/benefits offered for costs incurred under selected constraints
Investment Implementation
Sequencing
Evaluate multiple variables in concert before making investment/portfolio selection decisions (e.g., priority, cost, benefits/value, architectural
fit, and risk)
5
Cost
L -
Pri
ori
ty -
H
Portfolio Analysis
Steps for Evaluation of Alternative Investments
Portfolio Optimization
Curves
19
ProjectInitiationSignoff
ExpansionBudgetAgency
Approval
ExpansionBudget SCIO
Approval
SCIO REQUIRED
Initiation Expansion Budget Exit Criteria and Waitingfor Expansion Budget Approval Entrance Criteria
SC
IO/O
SB
MInvestment Cost = Project Cost (Initiation thru Closeout Phase) + 5 years Operations
Co
ntr
ibu
tors
Re
vie
we
rs/
Ap
pro
vers
AG
EN
CY
Phase 1: Project Initiation
Project Information SectionProject Charter
Business Issues Business Goals Project Goals Project Deliverables Items Out of Scope Proposed Strategy High Level Assumptions / Constraints Key Dependencies External to the Project Project Organization and Roles
OPTIONAL INFORMATION (But Recommended)
State of North Carolina PPM Expansion Budget Workflow
ProjectRange =
ExpansionBudget Req
ProjectInitiation
ExpansionBudget State
Approval
Phase 1: ProjectInitiation
Recommendedfor Expansion
BudgetApproval
ChangeProjectRange
Funds Approved
ProjectInitiation
Waiting for Expansion BudgetApproval
Approval
Yes
No Hold
Approval
No
Yes
Financial Benefits - Level 1 Benefit Tab
Proposed Budget - Level 1 Budget Cost Tab Business Driver Impact Statements - Strategic
Impact Tab Summary Risk Profile - Risk Tab Attach Worksheet II in Document Management Tab
Additional Requirements
20
Timeline for Implementation and Use of Application and Investment Portfolio Management Capabilities
Jun 2005
Jan 2008
Jan 2006
Mar 2006
Jun 2006
Jan 2007
Jun 2007
Aug/Sep 2006
Sep 2005
2005 –2007 Biennial Budget 2007 –2009 Biennial Budget
APM Configuration and Agency Rollout Plan Development
APM and IPM Rollout to Agencies
Agencies Perform Legacy Assessments, Develop IT Plans, and Prepare Expansion Budget Requests
SCIO Review Agency Expansion Budget Requests, Prepare Statewide Legacy Assessment, and Write SCIO IT Plan
Agency Submissions to SCIO: 1) Legacy Assessments, 2) Agency IT Plans, and 3) Expansion Budget Requests Submissions to
General Assembly:
• Governor’s Budget Package
•SCIO – 1) Statewide Legacy Assessment, and 2) Statewide IT Plan
SCIO Deliver Interim Legacy Assessment Report to General Assembly for 90 Projects Needing Immediate Attention
Agencies Assess Study Findings for 90 Immediate Attention Applications and Report Status, Remediation Approach, and Needs for Assistance
Today
APM – Applications portfolio management
IPM – Investment portfolio management
SCIO – State CIO
Legend
Due Date
Four Months Five Months
Implement APM and IPM Use APM and IPM
Apr 2006