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Tota l 28,421 Strategic




EXHIBIT 8.7 Project Portfolio for Decision Making

Risk/Impact Analysis, with Cost
70
Bubble Size
60
Indicates Cost
50

40
Risk




30

20

10

0
0 100 200 300 400
Impact
137
Elements of Right Decisions


EXHIBIT 8.8 Balancing the Portfolio

Spending by Portfolios

Business
Infrastructure
Strategic
26%
39%



Mandatory
17% New Strategic
18%




Right decisions is a management process of assessing the projects against
business strategic intentions for bottom-line impact, risk, and other factors. The
process permits the management team to holistically consider all possibilities
and choose those best for the company, based on all the considerations included
in the assessments. The Prioritization result itself is not the final decision on the
projects. Prioritization is part of the decision-making process that creates the
project plan from the candidate list of projects. The Prioritization exercise gives
management the tools to make the decisions.
Prioritization deals with projects after they have been developed and busi-
ness cases have been prepared; it does not help in developing new projects to
satisfy business needs. Whether “better” projects are needed, and whether they
can be created, is an issue of planning (see Chapter 9). Furthermore, prioritiza-
tion does not in itself improve project business cases. (See the section on “Impli-
cations for Business Cases” below.)

Right Decisions: Lights-On Budgets
Right decisions for the lights-on budget is a management process that exam-
ines the investment strategies for each line item in the budget. Two questions
are asked. First, is the level of budget support appropriate to the application?
For example, if costs are too high for the alignment/quality of the application,
then the application might be abandoned, or support levels reduced. Second,
should the application be replaced through outsourcing, acquisition, or design/
development?
Consider a company that has classified its complete lights-on budget into
the four basic asset pools: applications, infrastructure, services, and manage-
ment. This classification accounts for 100 percent of the IT spend other than
projects (development and enhancement). Each asset pool is then described in
a set of line items that make up the asset pool. For example, for applications,
each line item is a separate application that the company uses.
138 MAKE THE RIGHT DECISIONS


In the following example, the business leadership team is exploring the
investment strategies for applications. (See Appendix B for an explanation of the
members of this team.)
The business leadership team has assessed each application for alignment
(connection to strategic intentions), service-level and quality, and intensity of
use. (Exhibit 8.9 shows the applications together with annual cost and the
assessments.) Alignment is the relationship of each application to business
strategic intentions. Intensity of Use indicates how widely the application is
used in the company and how important it is to the users. Service Level and
Quality indicate availability, reliability, functionality, and so forth. Cost is sep-
arated into operational costs (e.g., datacenter and infrastructure) and mainte-
nance/support costs (e.g., the personnel assigned to keep each application
running). The Alignment practice description later in this chapter explains the
management processes and templates used in these assessments.


EXHIBIT 8.9 Portfolio Assessments for Intensity of Use and Service
Level/Quality
Intensity Personnel Operations
Application Alignment Quality
of Use Cost Cost
General Ledger 3 3 3 650 1,100
Management Reporting 1 5 5 290 450
Customer Service 4 2 2 1,400 750
Call Center Support 4 4 5 2,300 2,700
Premier Reconciliation 2 5 2 1,750 3,100
DBIS 5 2 2 265 750
Sales Force Toolset 5 2 4 395 800
DB Overbooking 3 5 1 480 520
Traffic Control and Reporting 1 3 1 1,600 2,150
Min/Max Support 3 3 1 250 690
CIS Statements 4 2 3 250 420
Auto Transfer System 2 2 5 1,100 650
Fund and Balance 2 2 2 950 130
TRACON 3 5 4 490 710
Rebate Management 5 3 1 1,600 1,930
CANNON II 3 3 1 100 50
Total 13,870 16,900



In Exhibit 8.10, we portray the Alignment, Quality, and Personnel Cost
together in order to examine whether the allocation of personnel is appropri-
ate considering the Alignment and Quality of each application. Managers can
see immediately the level of spending for each quality level and for each level
of strategic intention support, and begin to frame questions about why money
is being spent in some areas (e.g. low quality, low strategic intention support)
and not in other areas (high strategic intention support, for example).
Taking the analyses to another level, we can look at combinations of strate-
gic alignment and quality, for example, to help the business leadership team
139
Elements of Right Decisions


EXHIBIT 8.10 Portfolio Assessment for Decision Making
Personnel Cost of Applications ($000)
Alignment/Quality Pairs


1600
5 660


1650
4 2300
Alignment




1000
3 970


2 2050 1750


1600
1
290
0
0 1 2 3 4 5
Quality




identify specific reallocation or abandonment opportunities within the lights-
on budget.
Five investment strategies address applications that fall in various alignment/
quality pairings (see Exhibit 8.11). By examining the combination of alignment
and quality for each application, management can make specific investments
decisions, based on bottom-line impact on the business, about where lights-on



EXHIBIT 8.11 Investment Strategies for the Lights-On
Application Portfolio
Investment Category Investment Strategy
Abandon Applications should be
abandoned.
Alignment is low
Crisis Applications are candidates for
new investment to improve
Alignment is high (4, 5)
quality, especially with high
Quality is low (1, 2)
alignment (new projects).
Noncritical, Stabilize Alignment is moderate. Spend as
little as possible on maintenance
Alignment is moderate (3)
and enhancement.
Improve Only as Needed Although alignment is high,
quality is adequate. Spend
Alignment is high (4, 5)
money only in emergency or
Quality is moderate (3)
as resources are left over.
Excellent, Monitor Monitor applications for quality
issues. Spend money to maintain
Alignment is high (4, 5)
quality levels, but new investment
Quality is high (4, 5)
is likely not necessary.
140 MAKE THE RIGHT DECISIONS


dollars should be increased, where expenditures can be reduced, and where invest-
ment will have the greatest impact on the business. See Exhibit 8.12.
Note that this directly supports our overall objective of controlling IT spend
and improving (and maximizing) bottom-line impact. It is through such reallo-
cation or abandonment decisions that we can improve the performance of the
overall lights-on budget. We highlight only two possibilities here; others include
additional support for applications that are in crisis but are also high in align-
ment, and therefore deserving of improvement. Personnel currently in stable
noncritical categories (candidates perhaps for reallocation) could be pointed at
the applications in crisis.


EXHIBIT 8.12 Investment Decisions within Lights-On Application Portfolio
6000

5690
5000



4000



3000



2000 2300
2310
1970
1600
1000



0
Abandon Crisis Noncritical Improve Only as Excellent, Monitor
Needed




Overall, the business leadership EXHIBIT 8.13 Alignment of Lights-On
Applications Portfolio
team, in viewing the complete appli-
cation asset pool, can determine how
Strong
well the lights-on budget is perform- Weak Support Support
ing. As an example, Exhibit 8.13 $12M, 39% $13M, 42%
shows the relative alignment of all
line items; this indicates the relative
amount of lights-on in direct sup-
port of business strategic intentions.
As in prioritization, the lights-
on alignment and alignment assess-
Moderate
ment processes do not make the
Support

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