IT Portfolio Management 1 2007 Gartner Inc andor

IT Portfolio Management 1 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

IT Portfolio Management in Government Getting it to work for you Dave Mc. Clure Research Vice President Montana Digital Government Summit September 9 -11, 2007 Helena, Montana This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2007 Gartner, Inc. and/or its affiliates. All rights reserved.

So, What’s the Problem? State-wide or Agency IT Status ü ü No consistent process flow ü Lack a common business case framework ü Manual and paper-based process that are too late in identifying problems and issues ü Little or no formal review, little transparency ü ü Large variability of project performance No fact-based analysis for decision making No long term solution for aging applications and IT infrastructure 3 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Theory, Concept or Reality? In-Progress Reviews Alignment with Drivers Enterprise Strategy & Objectives Risk/Value Tradeoffs Benefits Realization Costs Benefits Risks Approved Portfolios Skills Needs Budgets Staffing Time Projects, ideas & alternatives: Enterprisewide and specific agencies, departments or programs ü Client ü Program & policy outcomes Business case review & approval Initial triage ü Operational Dependencies Crossboundaries Constraints U. S. Government U. S. States 4 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. Project to project OMB Directives and Guidance / Laws OH, TX, WA, MI, NC, VA (15+)

Key Issues 1. How is IT portfolio management delivering better value in government decision making? 2. What are the key practices that distinguish different maturity levels of government organizations? 3. What are the key lessons learned to date from implementations in different government settings? 5 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Does having well trained project managers with disciplined project management processes produce better IT project results? Cost Variance Portfolio Management Foundations Michigan Idaho Time Does having a well designed governance process ensure more successful results? Mi. CSES Project Control Office and Governance Model 6 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Clear Investment Approval Criteria and Processes Bring Order to Certain Chaos Project Business Cases Relative Importance Mission, Program, Business Process Priorities/Needs 25% Financial/Benefit Cost Analysis 30% Risk Factors/Probabilities Affecting Outcomes 25% Enterprise Architecture and Standards Fit Optimized ROI Optimized Risk Optimized Enterprise Strategy Impact 20% Strategic Alignment, Mix and Prioritization Example Government Frameworks Demand & Value Assessment (AU) Value Measurement Methodology (U. S. ) MI, VA, NC Models Risk-adjusted ROI, PVIT (U. S. ) EMF/Value for Money Framework (CAN) Example ESP Value Tools Economy, efficiency, IBM Public Value Scorecard effectiveness, empowerment Accenture Public Value Deloitte business, Performance Value Map Technology, project, SAP Public ROI resource, customer Example PPM Applications Reference models, interoperability, Primavera/Prosight, CA/Clarity, Microsoft/UMT, Metier, Pacific Edge, sequencing, data sharing Planview/Business Engine, HP/Mercury, Oracle, IBM RPM IT Portfolio 1. Addresses Governor’s Cabinet Action Plan 2. Alignment with IT Department goals 3. Level of cross agency collaboration 4. Project visibility or political sensitivity Infrastructure and Ongoing 5. Amount of process change required 6. Level of coordination O&M 7. Project size in staff and budget 8. Level of technology customization. 7 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. New Projects Utility Applications Business Application M&E $$ linked to program and policy needs and results

Better Views Provided by Portfolio Analyses IT Portfolio Assessments Provide Government CIOs Valuable Input into Evolving Strategic Planning and Enterprise Architecture Development. Admin. Systems, Planning, Other New Development 22% Infrastructure, Telecom, End. User Support Are there cost-saving opportunities we are missing that leverage common application needs? 12% 9% 11% 46% Major Application Enhancements Agencies/Departments A C B D HR $$ Finance $$ Infrastructure $$ App. Support/ Maintenance $$ $$ 2009 Poor REPOSITION MAINTAIN/ ENHANCE ELIMINATE MIGRATE/REENGINEER 2008 REPOSITION 2007 Technical Soundness Where are the potential cost savings and the ways we can reallocate dollars to fund transformation or critical process improvement priorities? Excellent ELIMINATE Low Business Value 8 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. High MIGRATE/REENGINEER How can we get a better proactive understanding of "life-cycle" strategies for existing application and system investments?

Tradeoffs: 'Balancing' the Portfolio Balance the Portfolio to Optimize Overall Return for an Acceptable Risk Level. Low-risk/high-reward; Long-duration, limited transformation projects short-duration/significant transformation projects Eliminate Quick Wins High Major Support Risk High Categorize by Risk & Reward Consider Some of These Eliminate High-risk, low reward projects B Increasing Value Reward Low Target Portfolio A E H I G F D C Increasing Risk High-risk/high-reward; Low-risk/low-reward projects The True Test Is the Ability to Stop, Cancel or Delay Low-value and Problem-plagued In-progress Investments. And then to have fewer of these. 9 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Portfolio Management Works in Tandem With IT Governance Strategy n n n Demand Governance IT Governance Goals Domains Principles and Policies Decision Rights Styles IT Governance Operations Supply Governance What Should IT Work On? How Should IT Do What It Does? Business Management Primary Responsibility IT Management Primary Responsibility 10 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Create a Culture of Discipline Membership Business Units Enterprisewide Executive Committee Agency Head (Chair) Deputy Sec. COS, CIO, CFO, CPO, CAO, CHCO, Dept Heads Roles -- Approve IT Portfolio -- IT impact on Strat. Directions -- Alignment of IT Investments -- Review all major IT decisions -- Decide direction of IT IRB recommends portfolio changes; EC accepts / rejects Membership Investment Review Board CIO (Chair), Senior Business Directors (Co. Chair), CFO/Finance Unit CIOs Roles -- Monitor IT programs/policies -- Propose policies & standards -- Coordinate IT issues -- Recommend project approval, disapproval, termination ITRB reviews portfolio/projects; ITAPC reviews EA issues Information Technology Review Boards Membership Deputy CIO (Chair), Dept CIOs, CA, CISO, Business Line Directors Roles -- Specialized Review Boards -- Review project milestones -- Technical issue assistance -- Make recommendations to ITC and Agency CIO about project status 11 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. ü Are the specific domains requiring decision rights and inputs ALIGNMENT established? ü Is the structure of each group making, approving, and overseeing VALUE decisions clearly established? ü Is decision-making guidance and authority within each group and RESOURCES across groups clear? ü Have adequate steps been taken to ensure that information and analyses used for decisions is RISK reliable and constructed using agreed upon approaches? ü Is a regular meeting schedule adhered. PERFORMANCE to and out-of-cycle meeting criteria established for pressing problems or exceptions?

But Be Practical Does NOT Mean • More process • A project with no one accountable for its outcomes • A project where expectations and outcomes are not reconciled • Unilateral decision-making by the CIO 12 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Key Issues 1. How is IT portfolio management delivering better value in government decision making? 2. What are the key practices that distinguish different maturity levels of government organizations? 3. What are the key lessons learned to date from implementations in different government settings? 13 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Expanding From the Project to the Portfolio Strategic Scope of Work n n Tactical n Portfolio Scope Definition n Overall Investment, Benefit, Risk Optimization n Active Portfolio Performance Monitoring n Business Environment Change Adaptation n Comprehensive Program Planning n Change and Risk Management n Coordination of Project Delivery n Measurement of Results n Business/IS Collaboration Initiation Budget Schedule Resources IT-Centric n n Deliverables Scope Risks Metrics Program Management Project Management Scope of Initiatives Business/IT Source: Adapted From New York City Housing Authority and Cisco Systems Portfolio Management 14 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. Enterprise

Process Maturity Is Fundamental to Successful Implementation Optimizing Leveraging for Strategic Outcomes Sense and respond Managing Mechanisms and metrics Governing More-refined portfolio decisions Communicating Enterprise and unit IT views Admitting There must be a better way! Source: "IT Portfolio Management Step-By-Step, " Bryan Maizlish and Robert Handler, 2005 Improving Investment Process Developing Complete Portfolio Building Investment Foundation Investment benchmarking and change management techniques are deployed for strategic mission/business outcomes. Process evaluation techniques focus on improvement of portfolio performance and management. Comprehensive selection and control processes with benefit and risk criteria linked to mission. Repeatable investment controls in place and key foundational capabilities in place. Little awareness of investment management techniques. Processes are ad hoc and project-centricfocused, and outcomes vary widely. Creating Investment Awareness 15 Source: "Information Technology Investment Management Framework, 2004, " U. S. Government Accountability Office © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Crawling: Application Triage Government Entity ABC Major Application Portfolio Strategy High-Level Risk Assessment Process Methodology for Measurement and Prioritization Inventory Business View Filter Input from Business Clusters Spreadsheet Tool Used 153 major apps; approx 40% with significant risks n Incremental change 2007/08; more aggressive in 2008/09 1. Application remediation plans Risk Assessment Scorecard Vetting Refine n Strategy Technical View Filter Short-list sequencing Identified 2, 300+ applications (goal of reducing applications ½ or more) Prioritization based on technical supportability Prioritization based on business criticality n 2. Simplify the IT environment Short and mid-term tactical and long-term strategic recommendations 3. Formalize APM; move toward PPM maturity 4. Formalize technology adoption process 5. Address culture change 16 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Walking: From Projects to Investments Investment Category Percent of Spending Definition Mandate/Contract Projects necessitated by legal or policy requirement or binding contract is in place (as necessary) Leverage Current Investments Continued investments to extend capabilities of existing systems (Previously for Refresh of Existing Capabilities) Refresh Infrastructure (Previously for Investments That Furthered Strategic Goals) Investments that refresh or replace infrastructure components New Capabilities Projects to bring automation to a previously non-automated function As Necessary Arlington County, Virginia County Commissioners 33% Executive Steering Committee 23% PMO Reserve for Emergencies (Previously for New Technologies) Contingency fund to cover unforeseen needs Source: Toolkit Case Study: Arlington County Moves From Project to Investment Management, March 2007 17 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. 10% Department Projects and Initiatives

13 Project Scoring Criteria q Improves Internal Program Services q Improves Service to the Public q Linkage to County Master Plans q Department Business Model q Level of Interest q Inter-departmental Impact/ Crossq Functional Business Process Redesign q Schedule Risk q Cost Sensitivity q Technical Risk unty o Arlington C q Organizational Risk q Risk of Not Doing It q Benefit to Cost Impact 18 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Running: Integrated, Active, Repeatable Portfolio Management U. K. Criminal Justice IT • Benefits Realization Planning • Selection Criteria • Investment Appraisal • Portfolio Prioritization Evidence-based Decisions • Project attractiveness, achievability, affordability • Alignment with business priorities • Portfolio adjustments as necessary Source: Managing the Portfolio, Realizing the Benefits, UK CJIT, Office for Criminal Justice Reform Active Benefits Management Performance Management • Delivery Plan • Portfolio Dashboard • Performance Review • Monthly and Six-month Progress Managing Project Delivery: • Transparent, line-ofsight reporting • Funding continuation linked to realization of forecasted 19 benefits © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. • Data Validation • Transparent Reporting Ensure Investment Success By: • Validating scale and quality of benefits • Project and business line owner involved • Capture of crosssystem benefits and wider public value

Running: Investment Logic Maps Concept & Feasibility Implementation Planning Operation Investment Lifecycle Investment Logic Map Investment Concept Brief Investment Reviews Business Case Project Management Benefit Mgmt Plan Costs down 10%; Benefit realization up 20% 20 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. Benefit Reports Facilitated Workshop Victoria Province, Australia

Key Issues 1. How is IT portfolio management delivering better value in government decision making? 2. What are the key practices that distinguish different maturity levels of government organizations? 3. What are the key lessons learned to date from implementations in different government settings? 21 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

Calibrating Expectations of Stakeholders Short Term Midterm ü Process simplification ü More transparency ü Fewer and more- in your IT spending ü Tangible savings ü Best practice sharing and reuse ü Stronger arguments for funding needs ü EA/ITAM input: "as-is" architecture ü Consolidation opportunities and cost savings (apps. , licensing, contracts) manageable projects and benefits capture ü Better business/IT alignment ü Stronger controls for large, complex projects ü More-agile IT Long Term ü Investment optimization ü Life-cycle planning to support "to be" EA ü Agility in dealing with changing budgets and demands ü More-consistent, positive ROI and benefits realization ü Continuity in approach planning ü Better understanding of IT staffing needs 22 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. rather than constant reinvention

Our Advice ü Avoid false starts. Balance implementation urgency and pace with organizational readiness and maturity. Success requires heavy doses of change management. Crawl – walk – run! ü Don't turn it into a "finding the right tool" decision. ü Recognize the interaction of governance, processes and tools that enables an organization to optimize its IT investment portfolio. ü Focus on value, risks and prioritization with active engagement of key stakeholders. Ensure a healthy dose of useful risk impacts. ü Avoid using it solely for one-time annual budget decisions. It is about continuous alignment, tracking and benefits realization of existing applications and new projects. ü Clarify governance and put a process in place that uses portfolio management data to consider, make and enforce decisions. 23 © 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.