An article from CIO agenda: 2009 publication.
Businesses that adopted technology early gained significant advantages, ranging from automation to more sophisticated products, as well as an ability to connect with internal functions and external audiences. However, after those initial advantages, many face problems when new developments render the technology obsolete or constraining, and, in order to meet ongoing demands from customers and regulators, systems have to be replaced or new functionality bolted on.
As a result, many organisations have a tangled web of systems comprising a proliferation of new applications integrated with heavily modified legacy applications. It is no wonder then that the CIO faces a continuous stream of difficult decisions and challenges on how to manage the diverse and multifaceted IT portfolio, each element of which brings financial, business, and reputational risks. Challenges include ensuring IT supports the business’s ambitions for new products and services, it meets regulatory and compliance requirements without adding yet more complication. Also, as certain technology skills are disappearing, there needs to be resources available to manage aging systems. Finally, there is pressure from the board who wants IT to deliver enhanced operational efficiency, at an increasingly lower cost.
The obvious answer is to simplify the IT portfolio, but with today’s business realities, the costs – and risks – of a big bang approach are too high for most businesses to contemplate. Instead, the CIO needs a clear strategy and management approach to untangle the portfolio that recognises the complexity of the current environment, the future business needs, and provides a framework for decision making that will support the goal to simplify and modernize the IT portfolio.
So what are the key elements in that portfolio strategy? The starting point is to identify the backroom ‘routine’ elements of the portfolio and those that are central to the business retaining its competitive edge (‘business critical’) to position the business to make it through a rough economic climate. The former could be managed by a program of continuous improvement, the latter is likely to justify significant investment in radical solutions. Both are important, but separating the two helps bring clarity to the overall strategy and the drivers of investment decisions. Once the appropriate strategy is selected, the CIO needs to put a governance in place that will support the execution by aligning and optimising all IT projects.
Once these key elements have been identified, there are primarily two options: continuous improvement or radical change. Continuous improvement can involve the development of new front ends or process layers through solutions that can effectively glue existing systems together and, at the same time, create new capabilities to fill the gaps in existing applications. Another approach is to augment current legacy functionality with solutions that can be integrated with existing systems. Furthermore, the CIO can look for better utilisation of existing IT assets, by increasing virtualization, for example.
These options can deliver cost reduction and simplification for the end user but they do not solve the underlying issue of complexity or support major business transformation. For that, more radical approaches are needed.
One of those radical options is to rationalise and replace major functional applications or technologies. Another approach is to adopt a serviceoriented architecture (SOA) approach. This requires organisations to look at what new common services or building blocks will be required in the future and then set out a plan to develop and integrate these as part of new initiatives, and, in this way, gradually transition toward the new services while decommissioning the old.
A strategy alone is not enough – robust and proactive portfolio management is required to deliver the strategy. The core element of this is a comprehensive view of projects and services that is updated through a standard, highly disciplined enterprise-wide process with clear governance. This supports planning and forecasting of required resources (people and financial), benefits, and risks, which in turn supports informed decision making – too often commitments are made before the full and long-term impact on the portfolio is understood.
There are many options for managing your IT portfolio. Clearly, the more radical options are higher-risk undertakings but they can solve the underlying problems of complexity if there is a businesswide commitment to change. In the current economic climate, and with the complexity of the puzzle, the CIO’s natural response may well be to focus on short-term improvement and low-cost, low-risk options alone. That would be a mistake. Now, more than ever, organizations need a clear strategy and foremost, it must be supported with a robust portfolio management approach to simplifying the IT portfolio. This will position themselves to succeed once the economic turbulence is over.
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