5 Steps to Application Portfolio Management [Webinar]

Ben Chamberlain will be presenting on one of the hottest topics we see in the IT portfolio management world these days…..Application Portfolio Management.

Ad-hoc, event-driven approaches to Application Portfolio Management (APM) simply aren’t delivering results. Important application data and metrics simply can’t be effectively maintained using spreadsheets and homegrown tools. This makes it a challenge to sustain a continuous APM process that supports annual IT planning and budgeting.

Tune into this webinar to see how APM can help you:

  1. Consolidate applications in one inventory
  2. Derive key assessment metrics (Value, Risk,
    Architectural Fit etc.)
  3. Calculate  Total Cost of Ownership
  4. Collaborate to record lifecycle decisions
  5. Build and execute multi-year transformation roadmaps

For more details, or to register…..

5 Steps to Application Portfolio Management [Webinar]

Does Your Project Matter?

At the recent PMO Symposium, I attended a couple sessions on reporting and metrics, and each session mentioned something in passing that I thought was actually quite relevant.  The basic gist was that at the strategic level of the organization, only 10 or so projects really matter.  Everything else is just noise.

Not only that, but people within the organization should be able to list those top ten projects – and they should know that if there is any resource contention between those 10 projects and anything not on the list, the top projects will win.  If you can achieve this within your organization, you’re doing well in terms of communicating your values.

From an executive dashboard perspective, incorporate a mechanism to flag those projects, and provide a high level overview of how they’re doing.  As for all of the other projects within the organization…..aggregate them up to a more meaningful entity: service, asset, program, or strategic theme.

Does Your Project Matter?

IT Portfolio Optimization Leads to….the Cloud?

I’ve spent some blogging cycles this week talking about the evolution of IT portfolio selection processes – specifically that there is a natural maturity curve from what I am calling a tightly coupled model of fragmented IT delivery and a decoupled model of consolidated IT delivery.  I’ve also pointed out that there’s almost a chicken-egg relationship between IT portfolio optimization and the IT funding model.

Illustrating the Coupled Model

Let’s take a look, shall we?  To illustrate this point, let’s say that our software vendor, in this case Microsoft, follows a tightly coupled funding model.  In this model, the customer may have a need, say, to manage agile projects in Microsoft Project Professional.  The customer goes to his Microsoft account representative and says, “Can you create an agile function, specifically tailored to our requirements?”

The Microsoft account representative goes back to Redmond and chats with the Product Team.  She goes back to our customer and with pinky firmly planted next to her lips does her best Dr. Evil impression by telling the customer that this can be done, “for 1 million dollars!” Chortle, chortle.

Now, our customer is no dummy.  He knows that while he needs this agile functionality, he doesn’t “need need” it.  He can wait.  He knows some other customer will step up and pay to develop the functionality he needs, and until then he’ll just make do.  In fact, he’s read books on Game Theory, and knows that if he just waits long enough, he can reap the benefits of someone else’s investment.  In the meantime, maybe he goes and buys something off the shelf that sort of meets his needs and doesn’t need to hit the IT radar.

What’s the moral of this story? 

  • New features won’t get implemented until long after they’re actually desired. 
  • Business units play games to try to push the costs off on other units. 
  • The net result is that IT is playing catch up to the business.

…And the Alternative

What about the alternative?  In this case, and this is purely hypothetical, Microsoft has a large customer base for the product and bills by the user, say in some sort of arcane licensing scheme that only the high priests of the Temple of LAR understand.  Microsoft can relatively accurately predict licensing revenue for the next year, and strategically decide to set aside a percentage of that revenue for further investments in the product.  That sets the stage for the investment portfolio.

Our customer again needs agile functionality, and again approaches the Microsoft account rep.  This time, when she goes back to Redmond, the team agrees to throw the request into the feature backlog.  When the annual planning cycle rolls around, they perform a survey of their top clients and prioritize the feature according to the results.  The priority dictates where the feature falls in terms of absorbing a portion of the available investment portfolio.  Assuming the feature is ranked high enough, the team develops it, and makes it available through the SA ritual practiced by the priests of LAR.

This latter example is what I am calling a decoupled model.  Features are developed and prioritized within the constraints of an investment portfolio, and not individually as requested by the business. 

Here’re a couple characteristics of a decoupled IT portfolio selection model:

  • Projects are bundled into logical programs that leverage economies of scale to deliver capabilities across multiple business units.
  • The program bundling supports consolidated investment in the platforms upon which processes are enabled.
  • IT is proactively identifying what the business will need in the future, and incorporating that in all ongoing service design activities

To the Cloud

…which means that to accommodate this economy of scale, we need to find a more mature IT funding model.  Slicing and dicing our portfolio at the project level and funding at that level from our business units doesn’t enable us to get the consolidated benefits that a decoupled portfolio can deliver. 

Perhaps a user based revenue model doesn’t apply as many users end up not using the solution, or end up using the solution less than more advanced power users.  In this world, to make things more equitable, we may need to find a different funding model, something like transactional costing.   In transactional costing, the cost of developing and delivering the service is recovered using metering.  The respective business units pay per use, and in return get a solid service and don’t have to worry about more complex cost models.

Sound familiar?  The logical conclusion of that decoupled model is the cloud based model.  IT portfolio optimization maturity inevitably leads to the cloud or at least a cloud-like decoupled service model.

IT Portfolio Optimization Leads to….the Cloud?

Strategically Decoupling Your Second Tier Portfolio (Part 2)

In yesterday’s post, I introduced the concept of a tier 2 portfolio, and how the concept of strategic coupling works in a tiered portfolio.  This post continues that discussion with an overview of a decoupled portfolio.


A decoupled portfolio means that IT understands where the business is going, and instead of reacting to that, makes plans hand in hand with the business to achieve those goals.  In a decoupled portfolio, the IT organization identifies a series of strategic drivers that guide investment programs to support the business.  These investment programs, in turn, provide the governance framework to a series of projects that better position IT to deliver effective, efficient services to the business.

Some characteristics of a decoupled portfolio are that:

  • IT is proactively identifying what the business will need, and preparing those capabilities in advance.
  • These proactive efforts end up being bundled into programs, where each program is designed to enhance specific capabilities.
  • As a secondary benefit of bundling efforts into programs, IT is better positioned to invest in options assessment, i.e. to invest in alternatives analysis to determine the optimal approach to developing a specific capability.  The budget for such efforts may be attached to the program as opposed to waiting for business funding.
  • There is significant investment in shared platforms to support business projects.  Coordinated investment replaces piecemeal investment in shared platforms.

The Role of Programs in Decoupled Environments

In the absence of a defining business program structure, a decoupled portfolio naturally lends itself to the bundling of projects into logical programs defined by IT.  These programs, in turn, provide a structure to the IT portfolio that enables it to both define funding priorities, and to approve these priorities within the program – thus providing a more agile governance structure.

The challenge inherent in this rebundling of IT project work is that it necessitates a reassessment of the traditional IT funding model.  In a tightly coupled IT environment, each project is owned by a business unit, and hence funding is easy to determine.  In a decoupled portfolio, more investments tend to be made in an entire platform – that is then leveraged by multiple business units to achieve economies of scale.

Thus, as IT organizations move to this decoupled model, a new funding model is necessary – either splitting the costs equally across business units, or more logically, moving to a transaction based costing model.  This is the inevitable result of moving away from a coupled IT portfolio.

Yes, but……

Of course the issue with any framework is that it is overly simplistic.  I’d no sooner finished writing this post when I started poking holes in it.  For example, if tier 1 portfolios are defined in terms of what makes us a profit, and tier 2 portfolios support the people that provide the tier 1 services, then where does new product development (NPD) fit in?  In alignment with the proposed framework, NPD is another tier 2 portfolio that is designed to generate the grist that goes into the tier 1 portfolio and makes a profit.

The entire tier 1 and tier 2 thing may be a bit of a hazy line at some times.  For example, what if I have an IT consulting shop that shares resources between internal and externally facing projects?  Are those projects all one portfolio?  Do I have two portfolios?

I’ll defer to later posts for clarifying that question.

Strategically Decoupling Your Second Tier Portfolio (Part 2)

Strategically Decoupling Your Second Tier Portfolio (Part 1)

Frameworks can be very useful things.  They allow folks like myself and my colleagues to walk into almost any organization and quickly size them up in terms of maturity, capabilities, and well, let’s face it, consulting opportunities.  The risk of course is that we size up the organization incorrectly – or worse yet, we don’t bother to size up the organization and apply some sort of standard best practice drawn straight from the latest consulting memeplex.  (That never happens.)

Many times, we don’t even realize that we’re applying a classification scheme – until we take a step back and realize that we’re taking a totally different approach to the current organization than we did to the last organization.  When those sorts of epiphanies happen, I like to sit back and identify intellectually why I adapted the approach and see if I can turn that into a theoretical framework.  This post is the result of such an exercise.

Portfolio Types

I tend to cross operational domains about once a year, typically bouncing back and forth between pipeline construction and IT portfolio management.  Needless to say, these two domains seem to operate in entirely different worlds – with different priorities, operating goals, and differing concepts of velocity.  When was the last time you heard an IT shop talk about dropping a developer into the project via helicopter to ensure you make your deadlines?

When you talk to pipeliners about missions and portfolio optimization, you tend to get a blank stare.  That’s usually because project decisions are often made by the Marketing folks.  They work with customers to identify whether or not a new pipeline would be profitable, conduct feasibility studies, and then after all of that, they issue the marching orders to go build the pipeline.

IT tends to struggle with its fundamental mission, often not able to articulate why, in fact, a project has been selected.  That doesn’t mean though that all of IT operates significantly different than a pipeline company.  For example, try going to an IT consulting shop one day and asking them how they select the projects they do.  You’ll probably get the same answer as the pipeline company above: The salesperson made the sale.  Delivery did a feasibility estimate.  The consulting shop has chartered the project and expects to make a profit on it.

Tiered Portfolios

The difference in IT (support) having a tougher time articulating why it selects projects vs. IT (consulting) stems to one extent from the fact that IT is typically regarded as a cost center.  In other terms, if I go back to my ITIL training days, the two portfolios represent different service tiers within an organization:


A tier 1 organization is responsible for providing services directly to the organization’s customers, the people who pay money to the organization for the services it provides.  Tier 2 organizations provide services to the tier 1 group, i.e. tier 2 provides the tools to enable tier 1 to generate value for the customers.

I submit that a tier 1 portfolio, being directly responsible for the provision of profitable services to the external customers of the organization, has a much easier time of defining strategy.  Essentially that’s whatever’s profitable and fits within the long term goals of the firm.

It’s the tier 2 portfolios that are a bit more challenged.  The tier 2 portfolios are charged with supporting the mission of the organization, i.e. facilitating the job of the tier 1 service provider.  Hence, tier 2 portfolio optimization tends to suffer when the organizational strategy is poorly articulated.  When you look at a traditional project portfolio selection process such as AHP, you’ll see that it almost invariably is targeting the tier 2 portfolios.  You almost never see portfolio selection guidance applied to tier 1 portfolios.

To Couple or Not to Couple…?

Now we have the concept of a tiered portfolio defined, let’s take a look at another concept: the coupled portfolio vs. the decoupled portfolio.  Many IT portfolios are tightly coupled with the business (tier 1) portfolio.   This means that IT projects are chartered to directly support a business project.  If the business plans Project A as part of the annual planning, IT plans an IT Project A.  If business plans Project B, IT plans an IT Project B.

I’m almost certainly oversimplifying here, but the idea is that IT has a poorly defined strategy, and is simply following the tier 1 lead.  That’s not necessarily a bad thing, but it does have a couple of implications:

  1. IT is always reacting to the business needs and not proactively driving to meet forecasted needs.
  2. IT tends to not be able to invest in options analysis, i.e. it’s more difficult to set aside money to identify alternatives to achieve a specific goal, as the business is often not interested in investing in these optimization exercises.
  3. IT programs are poorly defined and often fragmented.  There is often only a transitory acknowledgement that projects belong to programs, and those programs are the ones defined by the business.
  4. There is minimal investment in shared platforms to support business projects.  Coordinated investment is replaced with piecemeal investment where the shared platform is only upgraded when the business is willing to attach the funding to a specific project.

That’s what a coupled portfolio looks like.  In my next post, I’ll talk about the implications of a decoupled portfolio.

Strategically Decoupling Your Second Tier Portfolio (Part 1)

UMT 360: It’s Here and It’s Awesome

We’re thrilled to announce the Release to Manufacturing and General Availability of UMT 360, the latest iteration of our flagship product offering.

For more information, please check out our official blog:


Watch this and other UMT spaces for more information over the coming months.  If you’re in the Houston neighborhood, come on by our shindig on August 22 to personally kick the tires.

UMT 360: It’s Here and It’s Awesome

Everything is Discretionary

On my last(ish) post, The Road to Portfolio Analytics, fellow Buckeye and overall great guy Prasanna, asked the following question:

“Are you saying that by arriving at the costs of assets, and corresponding benefits, and a ratio of both, one could somehow arrive at common ground for prioritization?…..if yes, I would like to disagree.  For example, if I am trying to decide whether to spend money buying apples or oranges, cost (my expense), benefit (hunger taken care of), form only part of the equation. I think the real driver there is ‘Value’ (which is Satisfaction/Joy in this case). However, if it can be done, then that’s what the driver should be for project selection. And the prioritization should be based on the ‘Speed of value attainment’.”

I started responding, and it turned into this blog post.

Let Me Explain; No, There Is Too Much; Let Me Sum Up….

To rehash a bit of last week’s post, there were a couple of points I made there:

  1. Work is associated with a specific asset or program. The priority of the work is then inherited (to an extent) from the asset…..as are potential risks.
  2. The next question is how to rank specific assets or programs against each other. The easiest way is to quantify the value somehow, and then to map the value against the TCO for the asset.
  3. The real question is how to quantify a mandatory program such as Hunger, which in this case would be considered equivalent to a regulatory mandated program, i.e. things we do to keep our executives out of jail.

Classifying the Asset And/Or Program

Thinking through this, I think the real question is how to quantify the priority within the pool of mandatory work versus within the pool of discretionary work. For example, I have work that supports an asset that is not mandatory. The asset drives financial benefits or value. I also can calculate the cost of the asset. This allows me to identify which assets merit further investment versus those that do not.

Mandatory work is different. In the example, we used “Hunger,” which I would say is equivalent to a regulatory driven program. Sure, at this point the program may be considered mandatory, and the prioritization occurs a bit further down the work chain, i.e. if we can define our minimum requirements well enough (per identified business drivers), we can then assess new work as it comes through the pipeline to see if it gets us to the minimum acceptable standards, or if it exceeds those standards. If it exceeds the basic standards, great…..but we don’t want to pay for that if it takes investment away from other assets.

Assessing Mandatory Work

If we step back a level though, everything is discretionary. If the costs of the regulatory mandated program exceed our ability to make a profit or get capital (say in the case of a non-profit), then that would drive a decision to get out of the industry entirely and focus on more viable areas of business.  Mandatory programs need to be assessed against a higher level of benefits aggregation, i.e. the line of business which they specifically support.

Hence, while mandatory programs may not require the same level of rigor in prioritizing against discretionary programs, they still sum up to the unavoidable costs of doing business, which must then be assessed against our overall strategic goals of whether or not we want to be in that business. In a sense, it’s the same benefit-cost strategy, but as part of a more holistic approach.  Arguably, we would still need to track the TCO of these mandatory programs in order to drive any continual improvement initiatives such as reducing the overall cost of meeting regulatory requirements.


I would also contend that there’s no definite ruling as to what constitutes mandatory vs. discretionary. In the Texas oil patch, there are plenty of examples of companies flirting regulations and accepting fines instead of investing in being compliant in the first place. Arguably, that’s driven by the same cost benefit calculations discussed above.

In fact, I would further posit that simply labeling work as “mandatory” immediately prompts many organizations to simply cease doing due diligence and good governance on the work in question.  A mandatory designation is not a free pass to avoid governance….it’s merely a label that implies a higher level of benefit aggregation in the benefit-cost ratio.

…And Now For Some Navel Gazing

Of course, we could extend this metaphor to the breaking point.  If discretionary work can be measured against other discretionary work, and mandatory work can be assessed against the overall benefits of being in the business we are in, then if we truly reviewed “Hunger” as an example, that would imply there’s a third category of work with its own unique prioritization mechanism, existential.  Needless to say, I’d prefer not to got down that philosophical rabbit hole.

Everything is Discretionary