Local Touch ‒ Global Reach.

Where the numbers really count

Frank Vogelezang, Sogeti Nederland B.V.International Workshop on Software Measurement – November 19, 2008

Portfolio €ontrol

Local Touch ‒ Global Reach.

About portfolios

Project portfolio• Investment decisions

Application portfolio• Budget decisions• Replacement decisions

It’s all about (inancial) €ontrol

€ontrol€ontrol€ontrol

Local Touch ‒ Global Reach.

About Portfolio €ontrol

Portfolio €ontrol is the use of metrics

about relevant portfolio aspects

to support and justify

management decisions

about the portfolio

€ontrol€ontrol€ontrol

Local Touch ‒ Global Reach.

Which projects will be funded and which projects will be canceled?

Project Portfolio €ontrol

Local Touch ‒ Global Reach.

Quick portfolio decision

You are managing a project portfolio of severalhundred projects. You have to decide about:

Project cost: 10 M€ Duration: 3 years Expected profit: 30 M€

AGREE DISAGREE MORE INFO

Local Touch ‒ Global Reach.

$anity €heckC

osts

(in

million

s o

f €u

ros)

Duration (in months)

www.cs.vu.nl

200 projects750 M€

Local Touch ‒ Global Reach.

MaxNPV-MinNPVRDiff= Mean NPV

NPVPI= CAPEX

Project Value vs Project Risk

Proj NPV

A 2,000,000

B 1,600,000

C 1,600,000

D 1,000,000

E 900,000

Proj NPV CAPEX PI

A 2,000,000 2,200,000 0.91

B 1,600,000 5,000,000 0.32

C 1,600,000 900,000 1.78

D 1,000,000 2,000,000 0.50

E 900,000 500,000 1.80

Proj MeanNPV CAPEX PI Min NPV Max NPV RDiff

A 2,000,000 2,200,000 0.91 1,500,000 2,500,000 0.50

B 1,600,000 5,000,000 0.32 200,000 3,000,000 1.75

C 1,600,000 900,000 1.78 1,100,000 2,100,000 0.63

D 1,000,000 2,000,000 0.50 950,000 1,050,000 0.10

E 900,000 500,000 1.80 0 1,800,000 2.00

Local Touch ‒ Global Reach.

Project Value vs Project Risk

0.00 0.50 1.00 1.50 2.000.00

0.50

1.00

1.50

2.00

2.50

Relative Difference NPV (Risk)

Pro

fita

bilit

y I

nd

ex

E

Abandon

Add flexibilityInvest

Postpone

C

A

DB

Local Touch ‒ Global Reach.

Which applications are healthy and which applications need management attention

Application Portfolio €ontrol

€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol

Local Touch ‒ Global Reach.

Functional size as base metric

With the functional size different aspects

of applications in a portfolio can becompared as a compound metric

≠

Local Touch ‒ Global Reach.

Application Portfolio Mgmt

Possible relevant portfolio aspects:• Service Level• Application Complexity • Application Age• Application Size• Number of applications• Architecture fit

• . . . . . . . . . . . . . . . . . . . .

Local Touch ‒ Global Reach.

The agreed service level has anoften underestimated impact:

Electronic banking Service level : 24/7 1,000 function points

Management reporting Service level : 2 working days 9,000 function points

Service level

Local Touch ‒ Global Reach.

Service level – the costs

Electronic banking Weekly capacity 168 hr Average cost level 125 €/hr 1,000 function points 21 €/FP

Management reporting Weekly capacity 20 hr Average cost level 95 €/hr 9,000 function points 0.21 €/FP

Local Touch ‒ Global Reach.

How to decide what budget is needed for which applications

Application Portfolio €ontrol

Local Touch ‒ Global Reach.

Do I get enough budget?

Most used way of budgetting:• Take last year’s budget• Correct for inflation (in good times)• Reduce it (in bad times)

There is a better way . . .

Local Touch ‒ Global Reach.

Activity Based Costing

0

500

1.000

1.500

2.000

2.500

3.000

Applications

Co

st (

EU

R/F

P).

Maintenance budget can be based on portfolio characteristics by means of Activity Based Costing

Implementation

End-of-life

Local Touch ‒ Global Reach.

Measurable budget

Investments in the portfolio can be mademeasurable

Implementation workflow package• Implementation is a one-off peak• Costs per fp decrease when more

functionality will be implemented

End-of-life applications• Invest in migrating functionality• Savings on yearly license fees

Local Touch ‒ Global Reach.

Impact for the organisation

No mea$ure, no €ontrol

Application or project size• Make fairly precise size estimates• Document these estimates

€osts• Good design of time registration• Out-of-pocket via Control or project office

Local Touch ‒ Global Reach.

Portfolio €ontrol

By making the portfoliomeasurable you will get more gripfor your (internal) control

By expressing measurable aspectsin financial terms investments in theportfolio can be “sold” much easierto the budget holder

Local Touch ‒ Global Reach.

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metrieken.sogeti.nl

Local Touch ‒ Global Reach.