Download Applications portfolio analysis

COM333 Information Strategy Planning
Applications portfolio analysis
In addition to this hand-out, you should read Robson, section 5.3.3 (pp 121-125);
next week we shall discuss Managing the applications portfolio (Robson sections 5.5
and 6.3).
This techniques is derived from two others: firstly, the BCG (Boston Consulting
Group) matrix and secondly, the idea of the product life cycle (see Robson, pp52-53).
The BCG grid is a simple matrix that can be used anywhere where it is possible to
compare two measurable variables against each other
high
low
high
low
The product life cycle is based on the concept that the cash flow from any product (or
service?) follows a similar pattern:
At the start of its life, the product is being designed, developed, launched and
promoted; at this stage, because of the costs involved, the net cash flow is likely to
be negative: there is high investment, but a low rate of return. As there is no
guarantee that the product will become successful, this is known as the wild cat
stage – it may jump in any direction.
If the product is successful, its growth potential is greatest at the next stage: net
cash flow shoots up. A high cash injection is needed, particularly into marketing of
the product, in order to establish the product’s market share. This is the star stage –
the shooting star shoots upwards.
When the product is established, it enters the cash cow stage – it is well established,
and generates income without the need for further cash injection. It is the company’s
breadwinner, earning income and allowing investment in other areas. The
company’s objective is to keep the cash cow for as long as possible so that it can be
milked.
Finally, new products from competitors, or fashion or economic trends, erode the
product’s market share, so that an injection of cash is needed to boost the declining
cash flow. This is the dog (or dead dog) stage – the company will wish to divest
itself of the product.
The life cycle can be mapped on to the grid by labelling the axes market share and
market growth:
high
Wild cat
Star
Dog
Cash cow
Market growth
low
Market share
low
high
The principle can the then be applied to a mapping of the strategic importance of
current IS applications versus the strategic importance of planned IS applications.
Using the horizontal axis for the former, and the vertical axis for the latter (NOTE: be
careful when reading up on this in textbooks: not all authors arrange the low/high
axes in the same direction!), gives us:
high
Turnaround
(or High potential)
Strategic
Support
Factory
(or Key operational)
Strategic importance of
planned IS
low
Strategic
importance
of current IS
low
high
Note that importance here refers to business importance – do not confuse it with
technological complexity or newness.
Given that the objectives of IS applications development are to

Deliver cost-effective applications with sustainable value to the business

Provide a faster development process

Build less prescriptive and more flexible applications

Establish a style for applications development that matches the business style

Enable users to participate more and take more direct control

Support team working or dispersed work groups

Enable more customer contact

Enable more informed decision-making

Increase the value delivered by legacy applications

Maximise re-use of existing applications material

Exploit the useful potential in current technology and tools

Provide a range of information delivery methods and tools
Then we can characterise the different categories of systems as follows:
Strategic systems
Examples: Sophisticated application generators, Prototyping, Advanced database
technology

Based on the corporate model

Fast and flexible development approach

Close partnership between users and IS professionals/new skills

Complex applications built up in increments, sometimes on top of Key
Operational (Factory) systems

Evolving or creating a new business process

External links

Good inter-connectibility with Key Operational (Factory) systems and external
data

Executive support

Limited package availability
High potential (turnaround) systems
Examples: Prototyping, New technology or new development tools

Evaluate technology or business idea

Independent – integration and data management are not appropriate

Rapid low cost iterative development

Business Champion

End-user development or user/IS team

New skills/skills transfer

Focussed pilots/broad potential
Key operational (factory) systems
Examples: Systems development life cycle, Software engineering, Corporate data
management, Industry-specific application packages, Application
generators/CASE/IPSE, Re-engineering

Well designed

Efficient, robust, long life

Complex and integrated, based on corporate model

Strict change control procedures

IS and users’ skills and knowledge high during development, package integration
and ongoing support
Support systems
Examples: Standard packages, Disinvestment/third party support

Minimum intervention

Minimum maintenance

Skills – package selection and implementation/essential interfaces/vendor
management

Compromise business needs rather than modify package

Integration not vital

Efficient/low risk
How to carry out applications portfolio analysis:
1. List the current applications
2. Allocate the applications to the appropriate boxes using the criteria on the
axes of the grid
3. Ask “Is the grid balanced?” This is the thinking process. There is a need to
know why certain boxes may be empty or nearly empty, and why some boxes
are full. For example, if there are no applications in the “High potential” box
then we may ask whether there is no research and development of new
systems that may give rise in the longer term to strategic systems
4. Consider what is required to balance the portfolio. This may be the better use
or management of some IS applications (enhancement) or the introduction of
new applications (investment).
While you may begin with a grid illustrating the current portfolio, you should end up
with a grid showing the desired portfolio.
This method of analysis complements other methods of assessing the strategic use
of IS such as critical success factors – if one uses a number of methods to assess IS
requirements, then the process of triangulation should help focus on the business
needs for strategic IS.