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App Portfolio Management

By Doug Bartholomew  |  Posted 2008-04-04 Print this article Print

Research from a new study shows that savvy IT companies turn in far better financial results.

Another important area where companies that excel in managing IT outdistance their peer group is in application portfolio management. Top performing companies track and manage their applications rigidly, compare to their peers that have a poor understanding of their application portfolio and manage it inadequately.

The latter group tends to permit a level of application complexity, resulting in higher management and maintenance costs and less capability to respond to business needs.  

The success of this top “IT BVM” group is centered around careful management of the business value created through IT investment. This capability manifests itself in four key areas:

  • Investment allocation:  Top performers reallocate investment from infrastructure and utilities to innovation and improvement.
  • Project pipeline:  Top performers weed out questionable project proposals early, minimizing the project backlog.
  • Delivery performance:  Leading IT BVM companies deliver far more projects on budget and realize projected benefits more often than peers.
  • Application portfolio management:  Top performers actively manage their application portfolio to drive out complexity.

“In our research, we found that these are the processes with the highest impact on business value,” says Erik Dorr, senior business director at Hackett Group, based in Atlanta.

From a strategic perspective, the implications for CIOs are far-reaching. Hackett researchers content that they should shift the debate about whether IT is a core competency to a discussion about which specific IT competencies are core, and which are not. “The case should be made that IT competencies directly related to managing the business value created through IT investment are core and independent of industry and  business strategy,” Dorr explains.

Unfortunately, Dorr says, most companies are still focused on cutting IT costs, not on training their sights on ways to maximize business value. He believes CIOs should focus their attention on those specific IT processes that maximize business value.

“The question is, what within IT specifically is valued most from a business perspective,” Dorr says. While many organizations have invested in ITIL and Six Sigma to improve their IT processes, he asserts that these are “efficiency oriented” improvements. “These will not help IT to make the decisions on what to optimize in the first place,” he says. “The tools and processes around managing business value are far less established than these efficiency-focused IT tools.”

Doug Bartholomew is a career journalist who has covered information technology for more than 15 years. A former senior editor at IndustryWeek and InformationWeek, his freelance features have appeared in New York magazine and the Los Angeles Times Magazine. He has a B.S. in Journalism from Northwestern University.
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