how does iowa get to value based portfolio management? iowa technology governance board may 10, 2007...

How Does Iowa get to Value Based Portfolio Management?

Iowa Technology Governance Board

May 10, 2007

Mark A. Peterson – Managing PartnerCoeur Group – St. Louis

[email protected]

2© 2007 Coeur Business Group, St. Louis MO – USA :: CoeurGroup.com :: All materials are confidential and proprietary. Iowa TGB May, 2007

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Managing Partner – Mark Peterson

Experienced Executive (SVP, CIO, CEO)

Methodology DeveloperOrganizational Agility

Business Value Alignment

Enterprise Portfolio Management

Innovation and Commercialization

Organizational Expertise

Technology Background (US Navy, Honeywell, Digital Equipment Corporation, QORE Business Solutions, Sentry Technology, META Group, EVP Partners)

Innovator in Cost Reductions and Value Mgt.

Experienced Practitioner, Local, State, Federal

Author – 3 Dimensional Portfolio Management (J. Ross Publishing , Fall 2007)


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Technology Governance Board – Portfolio Futures

Building The States Asset Value

Portfolio Management (>Plan > Invest >Govern For Value And Alignment)

Constructing Portfolios

Realizing Maximum Value Accretion


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TGB Key Questions to Ask

The Objectives Of Portfolio Management Are To Address These Questions.

The Objectives Of Portfolio Management Are To Address These Questions.

Are we selecting the right projects in order to best maximize business value?Are we deploying our resources appropriately? Are we developing the capacity to understand, and learn from, our project failures?What are we doing to increase the probability of achieving expected benefits from our projects?Do we have a framework for institutionalizing program and project management best practices?


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What is TGB’s Real Role – Increasing Asset Value

What is the Agenda?•Invest for Modernization, Efficiency and Effectiveness of the State’s Business

•Oversee Increasing the States Technology Asset Value

•Select High Value Investments

•Build Portfolios for Value Accretion Management

•Oversee Investment Portfolio Performance

SOAArchitecture

Teams

PMOPMO

ArchitectureArchitectureReview BoardReview Board

ArchitectureArchitectureTeamTeam

TechnologyTechnologyGovernance BoardGovernance Board

Business & Technical

Project 1

Project 1

Project 1

Project 2

Project 2

Project 2

Project …

Project

Project ……

Coordination, not execution

Enterprise Portfolio Enterprise Portfolio ManagementManagement

(EPfMO)(EPfMO)

SOAArchitecture

Teams

PMOPMO





Project 1

Project 1

Project 1

Project 2

Project 2

Project 2

Project …

Project

Project ……



(EPfMO)(EPfMO)

SOAArchitecture

Teams

PMOPMO





Project 1

Project 1

Project 1

Project 2

Project 2

Project 2

Project …

Project

Project ……



(EPfMO)(EPfMO)

SOAArchitecture

Teams

PMOPMO





Project 1

Project 1

Project 1

Project 2

Project 2

Project 2

Project …

Project

Project ……



(EPfMO)(EPfMO)

TGB Mission: “Facilitate information technology

decisions within the executive branch of Iowa State

Government, basing these decisions on business drivers

supporting customer requirements.”


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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

CustomerCustomer

CustomerCustomer

’IT Governance and Investment Performance

TGB Vantage Point for Portfolio Management


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Two Interacting Portfolios Must Be Managed For Value

Principal Process Focus: Generation of Business Value

Projects change the IT Assets Portfolio

Project attributes:Project attributes: Add assetAdd asset Modify assetModify asset Delete assetDelete asset

Project attributes:Project attributes: Add assetAdd asset Modify assetModify asset Delete assetDelete asset

Projects Portfolio

Business DataBusiness Data Business ApplicationsBusiness Applications Technical InfrastructureTechnical Infrastructure StaffStaff KnowledgeKnowledge Governing InfrastructureGoverning Infrastructure

Business DataBusiness Data Business ApplicationsBusiness Applications Technical InfrastructureTechnical Infrastructure StaffStaff KnowledgeKnowledge Governing InfrastructureGoverning Infrastructure

Assets Portfolio

Both Applications And Projects Must Be Managed Simultaneously For Maximum Value Accretion and Business Alignment


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Portfolio Categorization Based on Business Stage Needs

High risk,hopefully high reward

TransformTransformThe BusinessThe Business

NPV – Net Present Value

Identify and size projects critical to established strategy

GrowGrowThe BusinessThe Business

ROI – Return on Investment

RunRunThe BusinessThe Business

BusinessContinuity

CostControl

AssetsAssetsAssetsAssets

Applic’sApplic’sApplic’sApplic’s

ProjectsProjectsProjectsProjects








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Financial Views and Value Categorization

No

nd

iscr

etio

nar

y C

ost

s

Risk

Dis

cret

ion

ary

Pro

ject

s

Ris

ks

Val

ue/

Tim

ing

VentureVenture

GrowthGrowth

DiscretionaryDiscretionaryEnhancementsEnhancements

Non-Non-DiscretionaryDiscretionary

CoreCoreRTB

TTB

GTB

Developing the Financial Views of The Portfolios is Essential for Gaining Value and Aligning to the Departmental Business Needs. Results:

•10% to 35% Increase in Project Returns•10% to 20% Cost Avoidance•5% to 15% Improvement in Resource Utilization

What business stage?Run The BusinessGrow The BusinessTransform The Business

IT Investment Portfolios

10% To 25% Cost Reductions Overall Are

Fairly Normal For First Pass Portfolio Management

Implementations Source: Gartner Group


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Building the 3 Dimensional Portfolios Everything maps back through the

business requirements• RTB, GTB, TTB

Start with business information and process requirements• Business units and processes• Technology Alignment Focus

Categorize current IT portfolios • Asset and Projects• Business stage (RTB, GTB, TTB)• Identify cost, risks, returns, and

timelines Determine what changes should be

made• Evaluate business information

requirements pain points and opportunities

The IT Portfolio Is Driven By The Business Requirements And Prioritized By The Investment Model (RTB, GTB, TTB)

Portfolio Mgt. Dimensions

GTB

TTB

RTB

Business PortfolioBusiness Portfolio

GTB

TTB

RTB

Business PortfolioBusiness Portfolio


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An Iterative and Maturing Process – (Example Applications Portfolio)

Adhoc: No Portfolio Inventory or Management Process Foundational: Application/Project Inventory Performed Evaluation: Optimization and Rationalization Management: Application Portfolio Transformation Process Maturity: Application Portfolio Management is Implemented

Enterprise Wide

Source: UMT Consulting - Application Portfolio Maturity

Coeur Group’s Pf M Process High Level ViewPortfolio Portfolio

PlanPlanPortfolio Portfolio

PlanPlan

CategorizeCategorizeBusinessBusiness

Stage NeedsStage Needs

CategorizeCategorizeBusinessBusiness

Stage NeedsStage Needs

CreateCreateAsset/ProjectAsset/Project

PortfoliosPortfolios

CreateCreateAsset/ProjectAsset/Project


Assess Assess PortfoliosPortfoliosAssess Assess


ConsolidateConsolidateEliminateEliminateReinvestReinvest

ConsolidateConsolidateEliminateEliminateReinvestReinvest

MeasureMeasureValueValue

MeasureMeasureValueValue

Gov. &Gov. &Org.Org.

Gov. &Gov. &Org.Org.

DevelopDevelopFinancial Financial

ViewsViews

DevelopDevelopFinancial Financial

ViewsViews


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Where do we need to be?

Are We Changing Our Investment DNA?

Developing Application and Project Portfolios as the Starting Point:

Offering agencies the opportunity for individual agency ratings (providing agency focus)

Offering state government focus (providing direction to meeting various Culver administration goals)

IT Portfolio Management is the methodology and associated processes that provide highly leveraged selection,

prioritization, implementation and measurement of Business/Technology

investments.


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Maximizing Value Accretion with Portfolio Management

What’s the Problem?• Uncoordinated Value Management• Project, Application and Asset, replacement cost and business values

are unknown• Governance and measurement processes are rudimentary and

manual

What’s the Solution?1. Online Inventory Projects and Applications2. Select Groups for Portfolios based on Business Stage Needs3. Integrate Portfolio Management Automation4. Development of Project and Application Portfolios5. Develop Financial Views – (Core, Non-Discretionary, Discretionary, Growth and Venture Investment Portfolios)6. Prioritize and Cull Investments – a continuous process 7. Governance must include Measurements, Dashboards and Scorecards


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Coeur Group - Recommended Steps

1. Analysis Of Iowa’s Current Portfolio Management Methods, Processes And Tool

2. Identify Critical Business Needs And Required Processes

3. Identify and Inventory Applications and Projects

Projects in Workbook

(Subline Level)Percent with ATP Updates

Percent with Project Status

Updates

Projects tied to IT Key Initiatives

(A0 Level)Percent with

Status Updates

Artz 514 100% 82% 21 43% Artz - eTRAK 73 100% 4% 11 91% Bott 226 100% 35% 10 90% Green 80% - 100%Bradley 8 100% 0% 1 0% Yellow 60% - 79%Fremont 239 100% 80% 12 58% Red Below 60%Gupta 95 100% 71% 9 78% Higgins 1 100% 0% 4 100% Thompson 19 100% 53% 4 100% Total 1175 100% 66% 72 69%

Use of PM Workbook (only ATP updates required currently)

Data as of 6/30/01 Data as of 8/8/01

Portfolio

Project Portfolio Status

Success = Simplicity and Limited Scope

Coeur Point: Develop one or two Portfolio’s, then develop processes and define business value with Key

Performance Indicators (KPI’s)

Identify Available Tools In The Market For “Portfolio Management” And “Investment Performance” Tracking

Select Vendor And Portfolio Management Application(s) That Meet Iowa’s Requirements

Develop Baseline Dashboard & Measures


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Questions

how does iowa get to value based portfolio management? iowa technology governance board may 10, 2007...

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