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.

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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)

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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

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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

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Project Portfolio DashboardProject Portfolio Dashboard

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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.

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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.

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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

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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

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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

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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

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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