IWSM 2008 - Portfolio €ontrol
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Transcript of IWSM 2008 - Portfolio €ontrol
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Local Touch ‒ Global Reach.
Where the numbers really count
Frank Vogelezang, Sogeti Nederland B.V.International Workshop on Software Measurement – November 19, 2008
Portfolio €ontrol
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Local Touch ‒ Global Reach.
About portfolios
Project portfolio• Investment decisions
Application portfolio• Budget decisions• Replacement decisions
It’s all about (inancial) €ontrol
€ontrol€ontrol€ontrol
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Local Touch ‒ Global Reach.
About Portfolio €ontrol
Portfolio €ontrol is the use of metrics
about relevant portfolio aspects
to support and justify
management decisions
about the portfolio
€ontrol€ontrol€ontrol
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Local Touch ‒ Global Reach.
Which projects will be funded and which projects will be canceled?
Project Portfolio €ontrol
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Local Touch ‒ Global Reach.
Quick portfolio decision
You are managing a project portfolio of severalhundred projects. You have to decide about:
Project cost: 10 M€ Duration: 3 years Expected profit: 30 M€
AGREE DISAGREE MORE INFO
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Local Touch ‒ Global Reach.
$anity €heckC
osts
(in
million
s o
f €u
ros)
Duration (in months)
www.cs.vu.nl
200 projects750 M€
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Local Touch ‒ Global Reach.
MaxNPV-MinNPVRDiff= Mean NPV
NPVPI= CAPEX
Project Value vs Project Risk
Proj NPV
A 2,000,000
B 1,600,000
C 1,600,000
D 1,000,000
E 900,000
Proj NPV CAPEX PI
A 2,000,000 2,200,000 0.91
B 1,600,000 5,000,000 0.32
C 1,600,000 900,000 1.78
D 1,000,000 2,000,000 0.50
E 900,000 500,000 1.80
Proj MeanNPV CAPEX PI Min NPV Max NPV RDiff
A 2,000,000 2,200,000 0.91 1,500,000 2,500,000 0.50
B 1,600,000 5,000,000 0.32 200,000 3,000,000 1.75
C 1,600,000 900,000 1.78 1,100,000 2,100,000 0.63
D 1,000,000 2,000,000 0.50 950,000 1,050,000 0.10
E 900,000 500,000 1.80 0 1,800,000 2.00
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Local Touch ‒ Global Reach.
Project Value vs Project Risk
0.00 0.50 1.00 1.50 2.000.00
0.50
1.00
1.50
2.00
2.50
Relative Difference NPV (Risk)
Pro
fita
bilit
y I
nd
ex
E
Abandon
Add flexibilityInvest
Postpone
C
A
DB
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Local Touch ‒ Global Reach.
Which applications are healthy and which applications need management attention
Application Portfolio €ontrol
€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol€€ontrolontrol
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Local Touch ‒ Global Reach.
Functional size as base metric
With the functional size different aspects
of applications in a portfolio can becompared as a compound metric
≠
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Local Touch ‒ Global Reach.
Application Portfolio Mgmt
Possible relevant portfolio aspects:• Service Level• Application Complexity • Application Age• Application Size• Number of applications• Architecture fit
• . . . . . . . . . . . . . . . . . . . .
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Local Touch ‒ Global Reach.
The agreed service level has anoften underestimated impact:
Electronic banking Service level : 24/7 1,000 function points
Management reporting Service level : 2 working days 9,000 function points
Service level
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Local Touch ‒ Global Reach.
Service level – the costs
Electronic banking Weekly capacity 168 hr Average cost level 125 €/hr 1,000 function points 21 €/FP
Management reporting Weekly capacity 20 hr Average cost level 95 €/hr 9,000 function points 0.21 €/FP
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Local Touch ‒ Global Reach.
How to decide what budget is needed for which applications
Application Portfolio €ontrol
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Local Touch ‒ Global Reach.
Do I get enough budget?
Most used way of budgetting:• Take last year’s budget• Correct for inflation (in good times)• Reduce it (in bad times)
There is a better way . . .
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Local Touch ‒ Global Reach.
Activity Based Costing
0
500
1.000
1.500
2.000
2.500
3.000
Applications
Co
st (
EU
R/F
P).
Maintenance budget can be based on portfolio characteristics by means of Activity Based Costing
Implementation
End-of-life
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Local Touch ‒ Global Reach.
Measurable budget
Investments in the portfolio can be mademeasurable
Implementation workflow package• Implementation is a one-off peak• Costs per fp decrease when more
functionality will be implemented
End-of-life applications• Invest in migrating functionality• Savings on yearly license fees
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Local Touch ‒ Global Reach.
Impact for the organisation
No mea$ure, no €ontrol
Application or project size• Make fairly precise size estimates• Document these estimates
€osts• Good design of time registration• Out-of-pocket via Control or project office
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Local Touch ‒ Global Reach.
Portfolio €ontrol
By making the portfoliomeasurable you will get more gripfor your (internal) control
By expressing measurable aspectsin financial terms investments in theportfolio can be “sold” much easierto the budget holder
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Local Touch ‒ Global Reach.
metrieken.sogeti.nl
metrieken.sogeti.nl
Local Touch ‒ Global Reach.