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STAGE 5: BALANCING 257
EXHIBIT 5.41 BALANCING THE PORTFOLIO: MULTIPLE AND REDuNDANT applications
¦ Basic collaboration: e-mail, calendaring, telephony, shared whiteboard
¦ Personal productivity: officesuittefeand print
¦ Business applications: Human resources
Application consolidation is akin to shared IT services — balance economies of scale with unique business rules
an asset, even before the end of its life cycle, is critical to balancing the portfolio. Modeling the life span of investment and understanding the various milestone dates is also important.
Views to Select/Approve Portfolio Changes
The impacts of each of these possible options can be illustrated through views and characterized graphically. The trade-offs of each option being considered (and the result of combinations of options) can then be discussed with business leaders by showing the impacts to schedules, costs, risks, and value, and describing the business impacts resulting from each case. Each option and change to a variable produces a scenario illustrating the value/risk repercussions. Changes are made to one (or more) of the three models shown in the assessing stage: the scoring method, standard financial models, or advanced modeling and simulation approaches.
As shown in a screen shot from United Management Technologies (UMT) Portfolio Optimizer, the Efficient Frontier Curve in Exhibit 5.43 shows how tuning a subset of variables and constraints such as costs, resources (labor and nonlabor), and schedule (time and duration) could lead to dramatic improvements. In the exhibit, through tuning the variables and constraints associated with the Efficient Frontier
258 CHAPTER 5 BUILDING THE IT PORTFOLIO
EXHIBIT 5.42 BALANCING THE PORTFOLIO: LIFE CYCLES AND Life spans of applications
Value = Quantity x Quality Cost x Time
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Initiation Upgrade Upgrade
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Costs to Retire
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Curve, a UMT client experienced a 24% strategic value gain and $137 million EBIT (option 3) at the same budget level as the original selection (option 1).16 As shown in Exhibit 5.43 in the subsection labeled Efficient Frontier:
• Portfolios that are below the curve reflect inefficient portfolios
• Portfolios that are on the curve are maximizing value from limited budgets
• It is impossible to have portfolios that are above the curve.17
The table on the left side of the chart in Exhibit 5.43 reflect investments, priorities as ranked against business drivers, and cost associated with each investment. Options 2 (optimal selection) and 3 (recommended solution) are what-if scenarios performed against option 1. Option 3 was the chosen portfolio. For many reasons, including mandatory investments that may not rank as high as other investments, the optimal solution, option 2, was not chosen.
Implement Portfolio Changes
Evaluating, prioritizing, and balancing IT investments is an emotionally charged activity. People are naturally attached to the merit of their project or operational
EXHIBIT 5.43 EFFICIENT FRONTIER CURVE
Priorities Total Qiginal Optional Ftecnmmencfed
Cost Selection Selection Selection
Projects 1 3edsion Dedsion Dedsion
Variables Variables Variables