If You Had an Application Strategy, What Would It Look Like?

Andy Kite delivered a great and funny session about application strategy.

He started with a simple question: what is the value of your application portfolio? The point being that the business must start to see IT as an asset and not only an expense. This means that the CIO should also report the IT asset value (not only the expense) and the value of what IT delivers to the business.

A first step to estimate the asset value would be to measure the cost of replacement (what would it cost if you had to re-build your IT from scratch?). According to Andy, the application portfolio represents a value of about 10 times the annual IT budget in financial services (3 to 5 times in other industries).

As for any other, "material", assets, the IT assets (the applications, the "information", the processes...) depreciate over time and should be amortized, in a meaningful way.

IT planning is often only budget planning but there are many other issues to take into account, including, for example, "people": when the baby boomers retire, there is a major risk and associated cost (the issue being in the knowledge of the "system": even if the legacy applications are outsourced to someone with the right skills, this deep knowledge disappears and then the quality of service degrades).

Historically, IT is good at acquiring applications but these applications are "good" for how ever long they will last: that implies maintenance, upgrades, keeping a skill set...The role of the application strategy is to have a plan covering the full lifecycle of the applications. And this will also affect the ROI.

Recommendation (rule of thumb): the application strategy should plan for 7 years or, if longer, half the life expectancy of the applications.

Application strategy is about planning for change and implies trade-offs between conflicting demands. To help make the right choices, the CIO needs the right measures and metering, he has to know the current state and decide the future desired "state" of the IT.

How to build an application strategy: the planning must be based on documented assumptions (about 10 to 20, shared among the entire organization) and it should have options (the assumptions may prove wrong and the CIO has to be prepared to revise the strategy over time).

The first step is to build a simple application inventory (using an APM - Application Portfolio Management - tool), measuring the value of the applications (based on their utilization, the user satisfaction...), their cost (over time), the risks associated...

By the end of the session, the rain had stopped and we had a bright sun for a few moments...