Portfolio Management presentation


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  • Iowa’s Technology Governance Board is entrusted with the facilitation of decision processes to provide key collaboration in making Investment decisions across the Administrative Departments. To this end 4 critical questions must be answered including: How can investments in technology add maximum value to the state? How can we increase the cost effectiveness of investments on a statewide basis? How can we provide a greater focus on the core mission of the state? How can we effectively manage scarce resources and improve service delivery?
  • A Couple of Key Points: Even if you are good at internal project management…how can you be sure you are working on the right projects ? If you think you are working on the right projects…did you objectively select them for value contribution ? How are we managing our mission critical project risks? We have a framework that we believe can help you answer these questions. Some of META’s research results: 60% of firms surveyed indicate they have an EPMO or intend to establish one (MMWest 2/00 data) The majority of these EPMOs are thematic in nature 30% of firms surveyed have no metrics to measure performance results
  • TGB Mission: “Facilitate information technology decisions within the executive branch of Iowa State Government, basing these decisions on business drivers supporting customer requirements.” Based on the TGB mission statement, managing “Portfolios” of investment requests, projects (work in process) and assets (installed applications, infrastructure and hardware) becomes the critical role for the TGB.
  • One lump sum just doesn’t seem to work well in many organizations. Pattern, service, component, project, human capital and other portfolio items could be organized in this way to understand funding. Some clients report that just dividing up expenses into patterns gave management enough insight into the value that the budget was passed. Finding a language the business will understand is critical (it’s NOT technology). This investment model groups those portfolio items in a metaphor business people can understand. A fixed sum would be allocated to each portfolio based on business discontinuity and mandatory enhancements to existing systems. The investment model supports both utility and innovation. New activities would be approved and funded based on business cases and value propositions. Non-Discretionary: Fund the minimum baseline costs to carry on business operations; these are non-discretionary maintenance and enhancement activities: defect correction, tier 3 user support, database administration, and updates to keep data/rules current with business requirements that are revenue-affecting. Skeleton funding based on minimum headcount and costs to keep system running (based on history and application complexity). Incentive to reduce baseline costs. Investments: Strategic priorities of importance Criteria for investment projects: revenue growth, globalization, market differentiation, competitive value. Process for investment consideration: strategic business case, alignment with strategy, business partner champion, multiple business drivers/metrics addressed, clear milestones and commitments established with business. New investment projects are given a one-month initial funding for proof of concept (“jump-start”); once this is achieved, the remaining funding will be released. Decision making and funding allocation supported by consensus. Venture projects should indicate: strategic business case, business partner champion, breakthrough thinking, IT as a weapon, future technology road map (3-5 years), first-mover advantage, three-year return on investment projection, and business criticality. Manage using a venture funding model and should reflect higher risk — new technology, new area, high flux, no known models, no experience.
  • Abbreviations: RTB – Run the Business (keeping the business operational) GTB – Grow the Business (expand the business within it’s current scope of operations) TTB – Transform the Business (break into new markets, expanding beyond current scope) Express activities in business terms; underscore value and timing Continuously manage the investment yield from a risk/ return vantage point Position the CIO as a “fund manager” Position IT as portfolio and product managers Link all through an investment management discipline Categorize your portfolio of assets and projects: RTB vs. GTB/ITB; value categorization; timing of benefits (short and long term) Core/operational expenses: “Keeping the lights on” Non-discretionary enhancements: Supporting organic growth Discretionary enhancements: Supporting basic business change Investments: Supporting competitive differentiation to deepen market penetration Venture: Supporting massive innovation to broaden reach into new markets Rebalance based on necessary timing Focus on driving RTB down … now and forever Budget only for RTB Clean up GTB/ITB: “Defending your project life!”
  • Running the business: 50%-80% of IT spending Efficiency play — 15%-25% annual savings via demand management and application segmentation Expose “costs and consequences” Invest to save money and retire old/non-performing assets Servers, storage, networks, middleware, key applications, systems management, IT operations (e.g., help desk) RTB “absorbs” discretionary efforts and successful GTB/TTB activities after 9-18 months Growing the business: 10%-35% of IT spending 6-18 month investments to spur revenue, market share, profit growth IT extensions, upgrades, add-on modules, minor customization, integration “ Nice to haves” and soft productivity enhancers Minor changes in business processes relative to customers, partners, employees, and channel financials Moderate risk, moderate reward Transforming the business: 0%-25% of IT spending 12-24 month investments Technology use impacts/changes business strategy/direction New partners, alliances, models New financial metrics used (e.g., cost of sales [COS], cost of goods sold [COGS], revenue/employee) New products/services New customer segments Major business process efficiency play
  • Portfolio Management presentation

    1. 1. How Does Iowa get to Value Based Portfolio Management? Iowa Technology Governance Board May 10, 2007 Mark A. Peterson – Managing Partner Coeur Group – St. Louis 636-561-2455 [email_address]
    2. 2. Managing Partner – Mark Peterson <ul><li>Experienced Executive </li></ul><ul><ul><li>(SVP, CIO, CEO) </li></ul></ul><ul><li>Methodology Developer </li></ul><ul><ul><li>Organizational Agility </li></ul></ul><ul><ul><li>Business Value Alignment </li></ul></ul><ul><ul><li>Enterprise Portfolio Management </li></ul></ul><ul><ul><li>Innovation and Commercialization </li></ul></ul><ul><li>Organizational Expertise </li></ul><ul><li>Technology Background </li></ul><ul><ul><li>(US Navy, Honeywell, Digital Equipment Corporation, QORE Business Solutions, Sentry Technology, META Group, EVP Partners) </li></ul></ul><ul><li>Innovator in Cost Reductions and Value Mgt. </li></ul><ul><li>Experienced Practitioner, Local, State, Federal </li></ul><ul><li>Author – 3 Dimensional Portfolio Management </li></ul><ul><ul><ul><ul><li>(J. Ross Publishing , Fall 2007) </li></ul></ul></ul></ul>
    3. 3. Technology Governance Board – Portfolio Futures <ul><li>Building The States Asset Value </li></ul><ul><li>Portfolio Management (>Plan > Invest >Govern For Value And Alignment) </li></ul><ul><li>Constructing Portfolios </li></ul><ul><li>Realizing Maximum Value Accretion </li></ul>
    4. 4. TGB Key Questions to Ask The Objectives Of Portfolio Management Are To Address These Questions. <ul><ul><li>Are we selecting the right projects in order to best maximize business value? </li></ul></ul><ul><ul><li>Are we deploying our resources appropriately? </li></ul></ul><ul><ul><li>Are we developing the capacity to understand, and learn from, our project failures? </li></ul></ul><ul><ul><li>What are we doing to increase the probability of achieving expected benefits from our projects? </li></ul></ul><ul><ul><li>Do we have a framework for institutionalizing program and project management best practices? </li></ul></ul>
    5. 5. What is TGB’s Real Role – Increasing Asset Value <ul><li>Invest for Modernization, Efficiency and Effectiveness of the State’s Business </li></ul><ul><li>Oversee Increasing the States Technology Asset Value </li></ul><ul><li>Select High Value Investments </li></ul><ul><li>Build Portfolios for Value Accretion Management </li></ul><ul><li>Oversee Investment Portfolio Performance </li></ul>TGB Mission: “Facilitate information technology decisions within the executive branch of Iowa State Government, basing these decisions on business drivers supporting customer requirements.” What is the Agenda?
    6. 6. TGB Vantage Point for Portfolio Management Enterprise Architecture Government Regulations Business Information Requirements Business Drivers Common Executive Vision Technology Architecture Application Portfolio Infrastructure Environmental Trends Vendors/Suppliers and Partners Business Architecture Governance External Forces Program Management Staff and Organization Operational Excellence Capabilities IT Resource Management Customer Customer Customer Customer ’ IT Governance and Investment Performance
    7. 7. Two Interacting Portfolios Must Be Managed For Value Both Applications And Projects Must Be Managed Simultaneously For Maximum Value Accretion and Business Alignment Principal Process Focus: Generation of Business Value Projects change the IT Assets Portfolio <ul><li>Project attributes: </li></ul><ul><li>Add asset </li></ul><ul><li>Modify asset </li></ul><ul><li>Delete asset </li></ul>Projects Portfolio <ul><li>Business Data </li></ul><ul><li>Business Applications </li></ul><ul><li>Technical Infrastructure </li></ul><ul><li>Staff </li></ul><ul><li>Knowledge </li></ul><ul><li>Governing Infrastructure </li></ul>Assets Portfolio
    8. 8. Portfolio Categorization Based on Business Stage Needs High risk, hopefully high reward Transform The Business NPV – Net Present Value Identify and size projects critical to established strategy Grow The Business ROI – Return on Investment Run The Business Business Continuity Cost Control Assets Applic’s Projects Assets Applic’s Projects Assets Applic’s Projects
    9. 9. Financial Views and Value Categorization <ul><li>What business stage? </li></ul><ul><li>Run The Business </li></ul><ul><li>Grow The Business </li></ul><ul><li>Transform The Business </li></ul><ul><li>Developing the Financial Views of The Portfolios is Essential for Gaining Value and Aligning to the Departmental Business Needs. </li></ul><ul><li>Results: </li></ul><ul><ul><li>10% to 35% Increase in Project Returns </li></ul></ul><ul><ul><li>10% to 20% Cost Avoidance </li></ul></ul><ul><ul><li>5% to 15% Improvement in Resource </li></ul></ul><ul><ul><li>Utilization </li></ul></ul>Nondiscretionary Costs Risk Discretionary Projects Risks Value/Timing Venture Growth Discretionary Enhancements Non- Discretionary Core RTB TTB GTB IT Investment Portfolios 10% To 25% Cost Reductions Overall Are Fairly Normal For First Pass Portfolio Management Implementations Source: Gartner Group
    10. 10. Building the 3 Dimensional Portfolios <ul><li>Everything maps back through the business requirements </li></ul><ul><ul><li>RTB, GTB, TTB </li></ul></ul><ul><li>Start with business information and process requirements </li></ul><ul><ul><li>Business units and processes </li></ul></ul><ul><ul><li>Technology Alignment Focus </li></ul></ul><ul><li>Categorize current IT portfolios </li></ul><ul><ul><li>Asset and Projects </li></ul></ul><ul><ul><li>Business stage (RTB, GTB, TTB) </li></ul></ul><ul><ul><li>Identify cost, risks, returns, and timelines </li></ul></ul><ul><li>Determine what changes should be made </li></ul><ul><ul><li>Evaluate business information requirements pain points and opportunities </li></ul></ul>The IT Portfolio Is Driven By The Business Requirements And Prioritized By The Investment Model (RTB, GTB, TTB) Portfolio Mgt. Dimensions
    11. 11. An Iterative and Maturing Process – (Example Applications Portfolio) <ul><li>Adhoc: No Portfolio Inventory or Management Process </li></ul><ul><li>Foundational: Application/Project Inventory Performed </li></ul><ul><li>Evaluation: Optimization and Rationalization </li></ul><ul><li>Management: Application Portfolio Transformation Process </li></ul><ul><li>Maturity: Application Portfolio Management is Implemented Enterprise Wide </li></ul>Source: UMT Consulting - Application Portfolio Maturity
    12. 12. Coeur Group’s P f M Process High Level View Portfolio Plan Categorize Business Stage Needs Create Asset/Project Portfolios Assess Portfolios Consolidate Eliminate Reinvest Measure Value Gov. & Org. Develop Financial Views
    13. 13. Where do we need to be? <ul><li>Developing Application and Project Portfolios as the Starting Point: </li></ul><ul><li>Offering agencies the opportunity for individual agency ratings (providing agency focus) </li></ul><ul><li>Offering state government focus (providing direction to meeting various Culver administration goals) </li></ul>IT Portfolio Management is the methodology and associated processes that provide highly leveraged selection, prioritization, implementation and measurement of Business/Technology investments. Are We Changing Our Investment DNA?
    14. 14. Maximizing Value Accretion with Portfolio Management <ul><li>What’s the Problem? </li></ul><ul><ul><li>Uncoordinated Value Management </li></ul></ul><ul><ul><li>Project, Application and Asset, replacement cost and business values are unknown </li></ul></ul><ul><ul><li>Governance and measurement processes are rudimentary and manual </li></ul></ul><ul><li>What’s the Solution? </li></ul><ul><ul><li>Online Inventory Projects and Applications </li></ul></ul><ul><ul><li>Select Groups for Portfolios based on Business Stage Needs </li></ul></ul><ul><ul><li>Integrate Portfolio Management Automation </li></ul></ul><ul><ul><li>Development of Project and Application Portfolios </li></ul></ul><ul><ul><li>Develop Financial Views – (Core, Non-Discretionary, Discretionary, Growth and Venture Investment Portfolios) </li></ul></ul><ul><ul><li>Prioritize and Cull Investments – a continuous process </li></ul></ul><ul><ul><li>Governance must include Measurements, Dashboards and Scorecards </li></ul></ul>
    15. 15. Coeur Group - Recommended Steps <ul><li>Analysis Of Iowa’s Current Portfolio Management Methods, Processes And Tool </li></ul><ul><li>Identify Critical Business Needs And Required Processes </li></ul><ul><li>Identify and Inventory Applications and Projects </li></ul>Coeur Point: Develop one or two Portfolio’s, then develop processes and define business value with Key Performance Indicators (KPI’s) <ul><li>Identify Available Tools In The Market For “Portfolio Management” And “Investment Performance” Tracking </li></ul><ul><li>Select Vendor And Portfolio Management Application(s) That Meet Iowa’s Requirements </li></ul><ul><li>Develop Baseline Dashboard & Measures </li></ul>Project Portfolio Status Success = Simplicity and Limited Scope
    16. 16. Questions