Management of the information technology (IT) applications portfolio is an important undertaking for businesses that seek to optimize the IT investment. As Ward and Peppard (2002) state, “The applications portfolio concept, […] is a means of bringing together existing, planned and potential information systems and assessing their business contribution” (Ward & Peppard, 2002). Managing the applications portfolio as a collection of assets and investments, similar to a financial portfolio, enables better understanding of the business value of IT. Following Ward and Peppard’s framework for IT portfolio management, one of the important steps is to classify each application into one of four categories: high potential, strategic, key operational, or support (Ward & Peppard, 2002). Classifying each application is similar to investors categorizing stocks and mutual funds by risk and capitalization (e.g., high risk, small cap) – classification assists in the management and decision making processes. Ward and Peppard’s framework can be better understood using an example. Raytheon Company is an aerospace and defense contractor that leverages several applications to ensure business operations. By categorizing Raytheon’s applications using Ward and Peppard’s framework, the methodology can be better understood.
Raytheon utilizes several key business applications. PRISM is a customized implementation of SAP’s enterprise resource planning (ERP) product. SAP MII is a manufacturing control system that integrates with PRISM. SAPTrack is a materiel move request and tracking system that also integrates with SAP’s ERP. APEX is a customized implementation of Peoplesoft that is used to track employee time reporting information, including billable hours and paid time off. USD is a customized implementation of CA Unicenter’s help desk product that is operated by Computer Sciences Corporation (CSC), a managed IT service provider. Visual Factory and Production Interrupt are custom Java applications developed in-house to provide factory monitoring and notification. BD Workplace is a social networking portal for business development employees to share leads, contact information, and sales techniques.
Ward and Peppard define the driving forces behind a high potential application as, “new business ideas or technological opportunity” and “individual initiative — owned by a ‘product champion’” and “need to demonstrate the value or otherwise of the idea” (Ward & Peppard, 2002). Within Raytheon’s application portfolio, Visual Factory & Production Interrupt are high potential applications. Raytheon’s product managers identified a need for real-time information on the status of factories, including the ability to interrupt production for quality and supply chain issues. Raytheon IT’s business application development group produced a set of custom Java applications to meet these needs. The Visual Factory system utilizes real-time data from each factory plus information from the PRISM (SAP ERP), MII (SAP Manufacturing Controls), and SAPTrack (material moves) systems to provide a dashboard that summarizes the factory, including warnings and thresholds for parts inventories and results from quality tests. By assigning event thresholds to a traffic light color code (green, yellow, red), the dashboard provides a product manager with clear and immediate information on potential problems that may threaten achieving production quotas. The applications are high potential in nature and will change as the product managers utilize the system and provide feedback.
Ward and Peppard define strategic applications as those that are driven by market requirements or result from competitive pressures (Ward & Peppard, 2002). In 2006, customers informed Raytheon that manufacturing must be modernized or contracts would be lost. Customers reported that competitor factories were fully automated and integrated with ERP systems. In contrast, Raytheon’s factories were largely manual. In response to the competitive pressure, Raytheon began a factory modernization effort that utilized SAP’s MII product to integrate ERP and manufacturing information. The project to modernize the factories was a strategic effort to change the way the company performs manufacturing across all current and future product lines.
Key operational applications, “improve performance and avoid disadvantage” (Ward & Peppard, 2002). Raytheon’s Peoplesoft, PRISM (SAP ERP), and SAPTrack (material move request and tracking) applications meet these criteria. Each of these applications manages and tracks resources that are important for the functioning of the business and must be optimized to ensure Raytheon is efficient. Peoplesoft manages the human resources, including time reporting. As a government contractor, accurate time reporting and charging is important to Raytheon. PRISM, Raytheon’s ERP system, tracks and reports on business resources and enables leaders and business planners to make better decisions. SAPTrack provides tracking of Raytheon’s parts and supply chain. The applications in this category enable Raytheon to better, “balance costs with benefits and business risks” (Ward & Peppard, 2002).
The final category in Ward and Peppard’s application portfolio management framework is support (Ward & Peppard, 2002). Support applications are those that, “reduce costs by improving efficiency” (Ward & Peppard, 2002) Raytheon’s use of the CSC USD help desk software is a good example of a support application. The solution is low-cost, with a fixed price per help ticket generated, and required minimal customization, since help desk processes are very similar across all companies. (Ward & Peppard, 2002)
Classification of Raytheon’s application portfolio is shown in Table 1 Raytheon IT Application Portfolio Classification.
Table 1 Raytheon IT Application Portfolio Classification
|SAP MII||Visual Factory and Production Interrupt|
|USD Help Desk|
By classifying applications, IT leaders can better manage the portfolio. For instance, the investment management strategy for a high potential application will necessarily be different than for a key operational application. With the categorization, the leader is better equipped to manage the IT investments and optimize the value delivered to the business.
Ward, J., & Peppard, J. (2002). Strategic planning for information systems (Third Edition ed.) John Wiley & Sons.