Implementation of Application Portfolio Management

1. Implementation of Application Portfolio Management IT Advisory Board Meeting January 2006

2. Framework for Managing IT Investments III. Operation, Maintenance, and Renewal, Retirement, or Replacement Applications Portfolio Management - APM I. Strategic Business and IT Planning and Investment Selection and Budgeting Investment Portfolio Management - IPM Life Cycle of IT Investments II. Project Implementation Project Portfolio Management - PPM

3. Framework for Managing IT Investments III. Maintain Operate Assets in the Right Ways and Retire or Replace Them at the Right Times I. Build, Buy, and/or Implement the Right Assets • Identify investments that best: • Enable governmental initiatives or agency missions and strategies • Result in financial returns – revenue generation or cost savings • Provide better constituent services or program effectiveness • Fit technical architectures • Satisfy budget, staffing, and other constraints • Meet risk profiles • Operate and maintain assets so that: • Benefits/costs are optimized over their useful lives through astute and timely renovations, consolidations, or eliminations • Services offered meet availability, reliability, security, quality, and recoverability expectations within acceptable budgets • Retirements and replacements are effected when assets are no longer cost-justified or risk-acceptable Life Cycle of IT Investments II. Build and Implement Assets in the Right Manner Manage projects by: • Clarifying roles and responsibilities • Providing appropriate oversight • Ensuring they are well planned and thoroughly researched prior to starting • Defining, tracking, and evaluating project progress frequently to achieve budget, schedule, scope, and quality expectations • Completing them successfully so that business goals and objectives are realized

4. Portfolio Management is… • Information analyzed in a way that helps decision makers optimally allocate scarce resources. • The purpose is to weigh key factors, such as desired returns or public value, initial and life cycle costs, architectural directions, and risk profiles to meet strategic business goals more effectively and productively. • The objective is to make fact-based, data-driven decisions using a consistent and disciplined approach.

5. Major Portfolio Management Tasks • Inventory and classify items in the portfolios. • Perform relevant analyses – identify problems and opportunities, develop viable options, determine relevant criteria, ask the right questions, and evaluate alternatives using pertinent information. • Make decisions.

6. Agency Missions and Vision and Business Goals and Objectives Overview of IT Portfolio Management Develop Business Drivers and Business Cases Investment Portfolio Management Identify Problems and Opportunities Statewide and Agency IT Plans Analyze Candidate Investments Project Proposals for Applications Renovations, Retirements, or Replacements Select and Plan Investments Funded New Projects Manage Portfolio Adjust Project Portfolio Application Portfolio Management Analyze Portfolio Optimize Portfolio Assess Value of Projects and Portfolio Project Portfolio Management Manage Portfolio Implement Projects New or Renovated Applications Build and Maintain Inventory

7. Phase/Type of Portfolio Management Effort Implementation Status and Timeframe Status of Implementation of Portfolio Management Completed – performed in 2004 and early 2005 Topic Research and Purchase of Tool Project (PPM) Completed – performed summer and fall 2005 Applications (APM) In process - winter and spring 2006 Investment (IPM) In process - initial efforts in winter and spring 2006 as part of applications endeavor; more advanced capabilities will be implemented later as agencies are ready and need them

8. Project Portfolio Management • Provides a workflow process that encompasses project approvals, checkpoint reviews, and periodic status reporting at project, agency, and statewide levels • Provides a “gated” review approach to ensure work done acceptably and project is in position to complete the succeeding phase successfully. • Offers documents and administrative management capabilities that follow industry recognized best practices for system development life cycle (IEEE) and project management (PMI) • 91 projects with estimated cost approaching $850 million being tracked in December 2005

10. Project Portfolio Dashboard

11. Applications Portfolio Management • Collects and analyzes cost, benefit, and strategic value information to evaluate the TCOs of retention, enhancement, or replacement alternatives • Evaluates assets by determining business and technical status; developing remediation, retirement, or replacement approach; and ascertaining priority and timeframe for action • Develops cost estimates for asset modernization, and retirement (with and without replacement) and total statewide • Identifies vulnerabilities, criticalities, return-to-service needs, dependent business processes, public services offered, supporting technical infrastructure, etc.

12. Applications Portfolio Management Builds Upon Legacy Study • In the portfolio of approximately 900 applications: 40% are considered critical for department mission/strategy; 17% are enterprise (statewide) applications; and 75 of the applications processed by the state data center require 1-day return-to-service capability. • The statewide portfolio is relatively young, with an average age of 7.5 years – since 1997, from 70 to 90 new or replacement applications have been added each year to bring down the average age. • Health status is: 23% presenting functional, technical, or both problems; 50% with some problems, but manageable; and 27% healthy, with a prescription for continuing on-going operations and maintenance.

13. Application Portfolio Management Perspectives Alignment (Optimize Portfolio) • Process Inventory, contribution, function association • Core Business Drivers, priorities, process contribution Level IV (Step 4) Level III (Steps 2 and 3) Initial Deployment Focus Financial (Analyze and Manage Portfolio) • Detailed application-level costs and cost-effectiveness analyses Level II (Steps 2 and 3) Assessment (Analyze and Manage Portfolio) • Risk, Operational Performance, Architectural Fit Scope of Keane-Gartner Study Level I (Step 1) Inventory (Build and Maintain Inventory) • Application identity and basic information

14. Transition to Executive Decision Making Process Funding Requests Applications Portfolio Management Process Tool Assisted Decisions Subjective Business Decisions Step 1 – Level I Collect, Validate, and Maintain Data (Build and Maintain Inventory) Step 3 – Levels II & III Determine Dispositions and Life Span Transition Roadmap (Manage Portfolio) Investment Portfolio Management (IPM) Process Step 2 – Levels II & III Perform Assessments (Analyze Portfolio) Step 4 – Level IV Determine Priorities, Timeframes, Costs, and Benefits (Optimize Portfolio) • One-Time Work • Transfer data from Keane/Gartner study • Perform initial collection and validation of remaining data • Ongoing Work • Perform data changes and validations as they occur • Collect and validate data for implementation projects transitioning to applications assets • Major Data Elements • ID • Costs • Business criticality • Business processes enabled or supported • Functional quality • Technical quality • Risk profile • Identify • Business problems/issues • Technical problems/issues • Risk vulnerabilities, probabilities, and impacts • Other problems/issues • Evaluate • Status/Health (Good, Bad, Moderate) • Value to organization (High, Moderate, Low) • Risk of unrecoverable failure (High, Medium, Low) • Identify • Dependencies on other applications and projects • Costs/fiscal requirements • Technical infrastructure requirements • Benefits/value to accrue • Alignment with state/agency priorities • Confirm and/or Develop • Implementation approach • Determine Priorities and Timeframes • Select priority for action (High, Medium, Low) • Select timeframe for action (Immediate, Near-Term, Long-Term) • Potential Benefits for Selected Actions • Cost savings from consolidate/eliminate applications • Improvements in public service, reliability, recoverability, and security resulting from functional/technical renovation or replacement • Consider • Cost-effectiveness • Risk acceptability – status of • Identify • Problems/opportunities • Alternative approaches • Best actions for managing application over expected life spans • Mission criticality/importance to agency • Determine Whether To • Invest additional funds (technical or functional enhancement or replacement) • Sunset/eliminate • Consolidate • Replace and consolidate as part of an agency wide or state wide initiative • Continue maintenance

15. Investment Portfolio Management • Identifies a pool of IT investments that best support core mission functions and prioritized business needs, best fit with approved architectures, have acceptable risks, and are accomplishable within fiscal and personnel limitations • Requires high quality business cases that increase probability of successful outcomes (on budget, within schedule, and meet user and stakeholder expectations) • Enables collaboration and transparency between IT/non-IT executives via an integrated process and better managed decision making activities that optimizes program benefits and public value throughout the enterprise

16. Overview of IT Investment Portfolio Management in State Government • Department Mission • Statutory Mandates • Governmental Initiatives Department Business Strategy • Business/Program Goals and Objectives • Processing and Information Flows • Organization Charts • Business Reengineering Opportunities Department Business Architecture (Business Service Models) Application Portfolio Management Asset Infrastructure Management New Projects • Retirements • Replacements • Modernizations • Maintenance • Refreshment Cycles • Security/Reliability Upgrades • New Applications • Infrastructure Additions/Upgrades • IT Investment Portfolio Management • Identify potential investments and evaluate candidates against defined criteria • Prioritize projects based on analysis results (relative weighted scores) • Balance staffing and fiscal resources • Determine disposition – invest, adjust, or sunset Current IT Project Portfolio Other Plans and Strategies • Status of all projects (schedule, budget, business objectives, etc.) • Projects no longer relevant or with lower priorities • Projects with higher priorities or increased urgency • State CIO IT Plan • Statewide IT Initiatives • Department & Statewide Tech. Architectures • Department IT Plan Funding Requests and Project Approvals

17. Steps for Evaluation of Alternative Investments Develop and prioritize Business Drivers and Impact Measures Build candidate investment portfolio using a consistent business case framework 2 1 Business Drivers Document Business Cases Evaluate the relative impact/linkage of candidate investments on Business Drivers Understand project priorities - based on strategic linkage(business drivers) - to strengthen transparency of rankings for decision making Business Drivers 4 3 Investments Investment Prioritization Business Alignment

18. Steps for Evaluation of Alternative Investments Evaluate multiple variables in concert before making investment/portfolio selection decisions (e.g., priority, cost, benefits/value, architectural fit, and risk) Optimize investment sequence (schedule) by analyzing key staff competencies, supply/demand by month, and regulatory deadlines against the strategic value of the selected portfolio 5 6 L - Priority - H Investment Implementation Sequencing Portfolio Analysis Cost Mathematically calculate the best portfolio selection of investment opportunities considering value/benefits offered for costs incurred under selected constraints 7 Portfolio Optimization Curves

20. Timeline for Implementation and Use of Application and Investment Portfolio Management Capabilities Legend SCIO Deliver Interim Legacy Assessment Report to General Assembly for 90 Projects Needing Immediate Attention APM – Applications portfolio management IPM – Investment portfolio management SCIO – State CIO Agency Submissions to SCIO: 1) Legacy Assessments, 2) Agency IT Plans, and 3) Expansion Budget Requests Agencies Assess Study Findings for 90 Immediate Attention Applications and Report Status, Remediation Approach, and Needs for Assistance • Submissions to General Assembly: • Governor’s Budget Package • SCIO – 1) Statewide Legacy Assessment, and 2) Statewide IT Plan SCIO Review Agency Expansion Budget Requests, Prepare Statewide Legacy Assessment, and Write SCIO IT Plan Agencies Perform Legacy Assessments, Develop IT Plans, and Prepare Expansion Budget Requests APM Configuration and Agency Rollout Plan Development APM and IPM Rollout to Agencies Four Months Five Months Implement APM and IPM Use APM and IPM Jun 2005 Sep 2005 Jan 2006 Apr 2006 Due Date Jun 2007 Mar 2006 Jun 2006 Aug/Sep 2006 Jan 2007 Jan 2008 Today 2007 –2009 Biennial Budget 2005 –2007 Biennial Budget