Identifying and selling enterprise-wide strategic project initiatives

Lynn Clemmons Steele, Partner, CSC


The Importance of IT and Business Process Asset Management

Competition for project resources is fierce at all levels, in most if not all organizations. Those aspiring to raise their maturity level with regard to identifying and selecting the “right” projects are in need of tools and techniques for earning the highest return on every investment dollar. This paper presents an enterprise-wide approach for identifying strategic initiatives and provides project sponsors with the ammunition needed to promote their initiatives in competition with other possible uses of scarce project resources. It also presents a governance framework for improving the effectiveness of the decision-making process surrounding investments in IT. This enterprise-wide approach recognizes the IT role in supporting business processes and the “corporate” mission. This approach requires proactive engagement at the “C” level and is designed to produce increased strategic yield on project investments. This approach can be applied to major programs (i.e., large, one-time initiatives) and/or on-going portfolio management governance processes.

To provide context, the approach described is linked to Project Management Institute’s (PMI)®. A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth Edition, The Standard for Portfolio Management—Second Edition, CSC’s Catalyst Methodology, and the CSC M5®Service Offering.

Comparison with Financial Asset Management

Putting assets to work and maximizing the performance of those investments has always been the goal of portfolio managers. This is just as true for investments in IT applications, infrastructure, and the business processes they support, which are just as much tangible assets as are financial assets, such as stocks and bonds. The portfolio of existing assets must be reviewed periodically and kept “fresh” by retiring faltering assets and making investments in new assets.

Managers of financial portfolios seek to balance risk and returns associated with existing assets, as well as targeting new investments to keep the portfolio in balance. They do this by diversifying investments across investment categories (e.g., market sectors), time horizons (i.e., short-term vs. long-term), and risk categories (e.g., high-yield / high risk vs. lower-yield/lower risk). Managing a portfolio of IT assets and investments presents exactly the same challenge.

Limitations of Frequently Used Approaches

The objectives of many projects are poorly, if at all, aligned with the strategic direction of the organization. Without clearly documented business and related IT strategies, coupled with executive alignment around strategic direction, the results are disconnected point solutions, fire-fighting, and micro-managing by supposed “governance” bodies. The ultimate result of this approach is a failure to realize the full benefits of investments in business and IT projects.


  • Understand the concept of metric-driven IT/business process portfolio health – Clearly stated objective characteristics can be defined against which portfolio “health” can be measured.
  • Identify investment strategies that will improve the strategic yield of the portfolio – Strategies that lead directly to improving the overall state of the portfolio can be defined.
  • Be able to employ proxies when faced with incomplete data – When faced with incomplete source data, how to look for alternative or proxy sources.
  • Be able to employ graphical analysis techniques to illustrate alternatives – Pictures are truly worth thousands of words and help frame the analysis in a way that is easily grasped by a wide audience.


Business Value

Application software exists to support business processes. For example, a payroll system should facilitate compensating a company’s employees in an efficient, timely, and accurate fashion, filing tax reports, and so forth. The business value of the application is a measure of the extent to which the application performs this support role. An application would be said to have high business value if it did an excellent job of supporting a business process. Conversely, low business value indicates poor process support. Examples of less than perfect business process support include:

  • Data managed by the application are unreliable
  • Operating steps in the application do not match the steps in the business process
  • Gaps in the application’s functionality create the need for manual interventions and workarounds.

Technical Health

The technical health of an application is a measure of the extent to which the application adheres to the architectural standards adopted by the organization, its ease/cost of maintenance, ease/cost of enhancement, and overall reliability and quality. An application would be said to have high technical health if it was highly reliable, conformed to standards, was easy and low-cost to maintain, and so forth. Conversely, low technical health indicates the opposite. Symptoms of low technical health include:

  • Complex and convoluted source code, also known as “spaghetti” code
  • High volume of help desk tickets
  • Shortage of technical staff with the programming skills necessary to support the application
  • Out-of-control maintenance costs
  • Cost of change challenges the return on investment needed to make the change

Strategic Yield

The strategic yield of an opportunity (candidate project) is the extent to which a proposed project contributes to achieving the overall strategic goals of the organization. Raw yield is best measured/scored against a list of objective criteria agreed upon by executive leadership. The resulting ratings/scores can then be comparatively ranked to assess potential portfolio impact. This presumes the existence, quantification, and alignment of strategic goals by executive leadership, along with the “scoring guide” to be used for opportunity assessment.

Portfolio Management

Portfolio management is a process for governing investments across an organization to optimize their value. It includes making investment decisions, monitoring those investments, and making adjustments as needed. Portfolio management manages portfolio components to:

  • Create better alignment of investments with enterprise strategies
  • Increase management understanding of initiatives and investment decisions
  • Generate higher total portfolio value (e.g., stop, or don’t start, low-value projects; maintain the “health” of applications and infrastructure)
  • Reduce overall portfolio risk (e.g., rescue high-value projects in trouble; retire certain applications; avoid risky ventures)
  • Achieve greater total business impact with fewer investments (reduced redundancy)
  • Improve project delivery because of increased enterprise-wide visibility of project performance
  • Provide an effective means to quantifying the expected investment and a framework for assessing benefits and risks

Project Portfolio Management

More specifically, project portfolio management is a governance framework for making initial decisions on project selection and continuation of in-flight projects to:


  • Alignment with and achievement of business and IT strategies
  • Anticipated net financial benefits
  • Internal improvement of the organization’s people and business processes
  • Effectiveness of the technology environment


  • Uncertainty of achieving strategic goals
  • Uncertainty of project cost
  • Uncertainty of achieving anticipated benefits
  • Risk of negative organizational impact
  • Risk of technology failure
  • Risk of implementation difficulty or failure

Recognize relative importance of decision criteria

  • Variability by contribution to enterprise performance

Activity-Based Cost Analysis (ABC)

In addition to evaluating the business value and technical health of the various applications in the portfolio, activity-based cost analysis can be utilized during the evaluation activities to assess the processes associated with utilizing, maintaining, and updating/enhancing the applications.

Activity-based cost analysis provides the following advantages:

  • Enables costing of processes and value streams
  • Supports performance management and scorecards
  • Provides a better understanding of overhead
  • Integrates well with Six Sigma and other continuous improvement programs
  • Provides visibility into wasteful and non-value added activities
  • Facilitates benchmarking


Application Portfolio Management (APM)

The methodology described herein is rooted in CSC’s Catalyst Application Portfolio Management (APM) approach. Application portfolio management aligns enterprise technology to business strategy, delivers a broad current state assessment with focused deep dives into problem areas, and defines a roadmap approach to optimizing the client’s applications and IT portfolio. The optimized portfolio aligns business need, cost, performance, and the technology solution mix in the most efficient way to support the clients’ business strategy.

This approach provides a robust toolset to help executives with four major issues:

  • How can we focus and prioritize our future investments to optimize the value from IT?
  • How can we foster a dynamic dialogue and understanding between our IT and business management groups?
  • How can we best utilize our existing IT infrastructure and budgets?
  • How can we reduce the costs of operation and maintenance?

CSC’s APM approach is founded on the following principles:

  • Alignment of business and IT strategies
  • Business value driven
  • Maximize current investment (infrastructure, systems, and processes)
  • Balancing today’s imperatives in conjunction with moving toward the future state “art of the possible”
  • There is no predisposed solution
  • Identification and prioritization of “quick wins”

Initiating APM in an organization does not require that it immediately address the entire set of enterprise applications. It can be phased in by focusing first on a targeted subset of applications and processes to pilot the approach and refine the processes and governance based on lessons learned during the pilot.

Create and Validate the Assessment Framework

Business Process Mapping

The first step in the process is to map business processes to the current population of software applications. It is important to know which applications support which business processes. The processes and the applications are the assets in the portfolio.

Business Value

In order to measure the business value of an application, a variety of characteristics or attributes can be assessed. The list of business value attributes can be relatively short (3 to 5 high-level items) or extensive (20+ detailed attributes, which can be grouped or summarized). The more granular the measurement data, the more useful it can be to identify specific problems and to point toward specific ways that business value can be increased.

It is beyond the scope of this paper to define all the attributes, scoring algorithms, weighting, and grade scales associated with business value measurement. For our purposes, it is assumed that business value scoring mechanisms exist and that data have been collected for the applications in the portfolio. It is also assumed that the applications have been mapped to the organization’s core business processes.

In addition to measuring Business Value at a given point in time, it is also useful to develop a trend history of measurements over a span of time. This can be done according to a planned schedule but should also be performed following significant events in the lifecycle of an application (e.g., completion of an enhancement project or major change to a related business process).

Technical Health

As previously mentioned, the technical state of a portfolio of IT assets is another key factor in assessing the state of a portfolio of IT assets. As with business value, it is beyond the scope of this paper to define all the attributes, scoring algorithms, weighting and grade scales associated with technical health measurement. For our purposes, it is assumed that technical health scoring mechanisms exist and that data have been collected for the applications in the portfolio.

Sample technical health assessment factors may include:

  • How reliable and responsible is the system?
  • What is the condition of code and documentation?
  • How much repair work is required?
  • To what extent have standard components been used?
  • How adaptable is the architectural design?
  • How clear and simple are the interfaces?

Business process and application operation and maintenance costs

Activity-based cost (ABC) analysis is a method organizations can use to compute the cost to conduct various activities and to benchmark/compare those costs with other organizations’ experience. For example:

  • What does it cost to produce a paycheck?
  • What does it cost to issue a purchase order?
  • What does it cost to deal with the average customer support line call?
  • What does it cost to operate and maintain a particular application (usually a component of some discreet business process, e.g., issuing a purchase order)?

The ability to perform a detailed ABC analysis presumes that cost data are available in sufficient granularity. For all but organizations with the most sophisticated financial/labor accounting systems, gathering data to support ABC analysis is a major project unto itself; however, creative analysts are undeterred. When detailed data are not available directly, proxies can be used to provide sufficient support for effective decision-making. For the purposes of this paper, the following proxies were employed (Exhibit 1):

Proxies Employed

Exhibit 1 – Proxies Employed

The important concept here is that precision is less important than the relative cost data. The other important concept is that there is a one-on-one relationship between the business process and its supporting application. In the event that an application supports more than one business process, the application data should be “split out” by business process.

Gather Data for Portfolio State Review

Collecting data to perform the analysis can be done in a variety of ways, depending on the situation and data availability.

  • Surveys addressed to user groups are a very effective way of gathering data quickly. There is an art to the crafting of the questions, but this is an excellent way to collect a standardized set of data pertaining to business value.
  • Focus groups are another excellent way to collect data regarding business value of both applications and business processes. Representatives from the various stakeholder groups can be led by a moderator to facilitate the discussion around the selected topics.
  • One-on-one interviews, although more time-consuming, allow for in-depth probing of details.
  • Extracting data from repositories, such as help desk systems, accounting systems, and hardware/software inventory control systems can be the quickest way to capture high-volume data.

Unless the amount of data captured is massive, ordinary spreadsheet tools can be used to perform all of the remaining manipulation and analysis.

Analyze and Chart Results

The specific purpose of this paper is to illustrate one particular way to identify strategic initiatives, which will support the organization's business processes and the “corporate mission” by improving the “health” of the application portfolio and the efficiency (doing things right) and effectiveness (doing the right things) of the business process.

Armed with the relevant business value, O&M cost, and related business process cost data, the process starts with the calculation of the “leverage ratio” of each business process and its supporting application. The leverage ratio is defined as follows:

LR = O&M Cost/(O&M Cost + Business Process Cost)

Whereas business value scores are intrinsically “better or worse,” leverage ratio values should not be viewed as high-is-good or low-is-bad. They are simply a measure of the software O&M cost as a component of the total cost to execute a business process. In other words, it is the extent to which a business process has been automated. For example, a business process that is 100% automated would have no other business process cost, thus the leverage ratio would be 1.0. A business process with no automation support would have a leverage ratio of 0.0. This portfolio of software applications can then be depicted graphically in terms of leverage ratio (x-axis) and business value (y-axis), as shown in Exhibit 2, below. Size of the bubbles is a function of the business process cost for each application. For business value scores, high is good and low is bad. Again, how the scores compare across the population of applications is more important than the precision of any one single score.

Leverage Ratio versus Business Value

Exhibit 2: Leverage Ratio versus Business Value

Derive List of Potential Strategic Initiatives
Depending in which domain the applications fall by charting (e.g., low BV/high LR), different strategies are suggested for increasing the overall health of the portfolio and the efficiency/effectiveness of the business process. Exhibit 3 below, provides a strategic framework for each quadrant of the LR/BV chart.

Potential Strategic Strategies

Exhibit 3 – Potential Strategic Strategies

Document Business Case(s)

The final step in the approach is to document the business case for the proposed initiative. The business case framework presented below organizes the benefits, costs and risks of the initiative into a standardized input to an objective governance decision-making process.

Strategic Benefits

The strategic benefit is a measure of how well the proposed project advances strategic business objectives. Business cases should specifically identify which business strategy or corporate initiative this project is aligned with as well as how this project advances that strategy or support attainment of that goal. For example, a project that builds the infrastructure necessary for supporting a key business initiative could be considered important strategically, as it is one of many key components necessary to support the strategy. A system that supports a new customer interface program might be considered critical, as it is the critical component of the strategy and represents the majority of the effort.

Financial Benefits

Determining economic impact varies and is unique between companies. Financial benefits may arise only from cost reduction (current costs or savings in future costs) or avoidance. Some cases will seek benefits from both cost saving/avoidance and revenue increases. Awareness of the type of financial case and the economic conditions, which support both and/or either, provide the necessary perspective for accurate assessment. For example:

Economic Impact = (Economic Benefit + Operating Cost Reduction - Ongoing expenses/# Years/Project investment

Organizational Benefits

Organizational benefits are those that provide internal improvements to the effectiveness of the organization’s (enterprise-level, not just the impact at the specific business unit or functional area) people and processes. For example, even though a project impacting all the members of a single department might still be considered to have a very narrow scope of impact due to the small number of associates impacted when compared with the number of associates within the total enterprise. Organizational dimensions to consider:

  • Ease of work
  • Job attractiveness
  • Quality improvement
  • Customer satisfaction
  • Efficiency and time savings

Technology Benefits

Technology benefits center on the contributions that the proposed project will make to the effectiveness of the technology environment. Consider effects on technology as a whole (enterprise level), rather than the technology environment of the specific business area in which the project is focused. For example, a project that proposes to replace one software tool for another due to the vendor dropping support for the older version might be considered low benefit in this area as it maintains the current environment—no more or less complex. A project that proposes a new method/software for distributing updates to many remote servers with greater speed, higher quality, and less user intervention might be considered a much higher technology benefit. Key factors in improvement in technology effectiveness can include:

  • Elimination of redundancies
  • Ease of future development
  • Ease of maintenance
  • Reductions in overall complexity
  • Security and reliability

Where the proposed project involves the introduction of a technology new to the environment, inexperience could lead to additional cost implications. Extra scrutiny might be placed on the total costs of ownership, as reflected in the financial business case, to ensure that they accurately reflect these implications.

Financial Costs

When assessing the financial cost aspects of an application business case, it is important to consider the total cost of ownership (TCO). These various costs may include:

  • Software License and Maintenance - During new application implementation, the purchase price, and maintenance fees for new software are the most commonly noted costs. However, as part of the application enhancement process, costly software version upgrades may be required.
  • Hardware and Network - In order to improve the performance of an application, updates to supporting servers, operating systems, and network may be required. Additional costs associated with hardware include acquisition, facilities, installation, maintenance, cooling, and power.
  • Personnel for Enhancements, Maintenance, and Help Desk - Personnel costs should include the number of personnel required to perform the supporting tasks, the skill levels required, and any training needed by new software or hardware components.
  • Performance Availability and Downtime - If the user and business communities are inhibited from doing their day-to-day work, the financial costs of these impacts should be included in the business case.
  • Recovery - This cost element can be assessed by determining the current frequency of outages multiplied by the number of users impacted by the outage. It should also include the manpower required to recover the application, to address corrupt data, to fix application errors, or to manually re-enter transactions not captured during the outage

Lost Opportunity

Lost opportunity can have a tremendous impact on the organization and can be utilized to guide the decision-making process when evaluating project initiatives. Lost opportunity costs can include the value of:

  • Reduced productivity
  • Lost revenue opportunities
  • Lost new clients pursuits
  • Lost new product launches
  • Lost new service offerings

Lost opportunity costs can be calculated using either a cost method or a value contribution method.

Risks - Uncertainties of costs and benefits

The most reliable cost and benefit estimates presented in the financial business cases are those substantiated by real data or experience. The accuracy inherent in these projections relies heavily on the quality and relevance of the data used. Uncertainty and risk stem from reliance on data that may not be directly applicable or relevant to the proposed situation. For example, cost or benefit data derived directly from an internal, or other related industry might be considered more reliable than data from unrelated industries or dissimilar projects.

Smaller projects are typically easier to determine the full cost and benefit impact versus larger more complex and time-consuming efforts. Evaluating the cost uncertainty and benefit uncertainty risks equally for small and large projects would favor the predictability of the smaller projects. A large project would most likely never be able to achieve a minimal risk rating, thus limiting the range of possible scores.

Cost uncertainty is reflected in the business case as a measure of the ability to accurately predict the cost implications of a proposed project. Labor costs tend to be more variable as a factor of project duration, whereas costs associated with the asset components of the project are more predictable (e.g., hardware tends to be a more predictable cost component and can represent a significant portion of the overall costs). Key factors to consider:

  • Validity of assumptions
  • Source and quality of data
  • Stability of the cost components

Benefit uncertainty is measured in much the same way as cost uncertainty. The score judges the uncertainty inherent in the benefit predictions contained in the business case. Two components make up the financial benefit case: expense reductions and revenue growth. Key factors to consider:

  • Validity of assumptions
  • Source and quality of data

Risks - Uncertainties of achieving strategic alignment

In considering strategic risks, uncertainty of outcomes is again important. Is there a risk that a successful project implementation may not result in the desired strategic benefit? Does a clear cause-and-effect relationship exist between the project and the desired outcome? Dependence on external factors or strategically related projects is a key factor. For example, the business strategy may be based on market, product and company assumptions, and projections that may not materialize, become less valid as time passes, or be subject to severe disruptions from events, such as unanticipated political actions. Potential users or customers may see less value or utility than anticipated. Alternatives and competitors that had not been considered may emerge. Mergers, acquisitions, and divestitures may change many assumptions and negatively impact the beneficial outcome of this project.

Other Risks

The key question to ask in assessing organizational risk is: Is the organization able to adopt the necessary changes? Successful project planning includes strategies to ease and promote organizational adoption. An effective transition is critical when fundamental changes are made to the organization’s people and processes. Project planning must first recognize the proposed changes and their implications. Key questions to consider include:

  • Does this change the way people do their jobs?
  • Does this require a realignment of organizational relationships and structure?
  • Is work that has traditionally been done now devalued or eliminated?

Important dimensions in the ability to affect change include:

  • Communication plan
  • Ability to provide ongoing support
  • Direction and backing provided by management
  • Available skills
  • Experience in change adoption
  • Overall organizational readiness to change

Projects that have not included resources, time, or funding for the creation, support, or consideration of these organizational dimensions may incur delays and or additional costs during the course of the project to rectify related issues.

When assessing such a broad risk factor, higher risk scores will result from projects with the largest scope of impact and those that affect many dimensions of organizational adoption risk.

Potential technological risk factors are introduced whenever a new project is injected into the current environment. Experience level with the technology and the degree of integration required are critical factors. Unproven technologies and/or high dependence on outside third parties for key components of the project or support should be considered for potential risks (e.g., outside data suppliers, application service providers).

Technological risks from the user/support perspective are critical. If the project requires technological change that directly affects diverse locations (e.g., multiple geographic sites), special considerations must be made to ensure integration into these diverse technological environments. For example, a project that utilizes a newer technology with which internal staff have little expertise, or there is limited depth of skilled resources, or that has mixed reviews in the industry, might be high risk. Technology that already exists within the enterprise and is being deployed into additional areas and that has adequate numbers of support staff might be much lower risk.

Implementation risk measures the ability of the proposed project to adhere to the planned scope and implementation timeline. Any deviations to key milestone dates may pose significant risk to the realization of intended benefits. Specifically, the presence of any dependencies on preceding projects may pose additional levels of risk should that preceding project slip deadlines or deliverables.

The lack of relevant prior implementation experience leads to potential implementation risks. Ability to execute the plan, including the ability to secure the proper resources, are equally important. Projects that are being scored prior to establishing even a high level plan should be scored based on the criticality of dates. For example, a standalone project (no dependencies) utilizing well-established technologies with no drop-dead delivery date and with a detailed implementation plan might have little or no implementation risk. A project with many unknowns (newer technology, unclear specifications, broad range of implementation locations/organization components, outside vendors/services are involved, and so forth) with a due date, which is fixed, might have a very high implementation risk.



The example concerns a financial services organization in the investment banking arena. The applications and business processes reviewed are all associated with customer service, billing, and management of accounts receivable.

Analysis Framework

The framework described in this paper was applied with very little need for customization. The population of business processes and related applications was easily discerned and mapping of process to application was straightforward.

Data Gathering


The biggest challenge in collecting data was the fact that the data contained in the organization’s internal cost accounting system lacked the fine granularity, which would have increased the credibility of the analysis and subsequent recommendations. Lacking specific cost data, head counts of users and support personnel were used as proxies for the process and application operating costs.

Business value scoring was accomplished via focus groups of users. Company executives participated in the development of the focus group discussion and scoring guides. The executives also validated the business value results.


It was assumed that all users and support staff were being charged at the same standard cost.

Raw data

Exhibit 4 below depicts an example of the leverage calculation using user and IT support head counts as proxies for business process and IT O&M costs, respectively.


Exhibit 4 – Leverage Calculation

Results of the Analysis

Exhibit 5 below illustrates the graphical results of the analysis. The Trapko and GASP applications fell into the Low Leverage/High Business Value quadrant, suggesting an approach of lowering Business Process cost without raising O&M cost or reducing Business Value.

The large user-count applications Mesher and Haanet fell into the High Business Value/High Leverage quadrant, suggesting an approach of lowering O&M cost without reducing Business Value or raising Business Process cost. The low user-count applications AMU and Z-con fell into the Low Business Value/High Leverage quadrant, suggesting an approach of raising Business Value and lowering O&M cost without raising Business Process cost.

Graphical Analysis of Leverage Ratio <i>versus</i> Business Value

Exhibit 5: Graphical Analysis of Leverage Ratio versus Business Value

Potential Project Initiatives

Two specific projects were initiated on the basis of this analysis:

  • GASP, the financial portfolio management application and its related manually intensive business process, was targeted for re-engineering of the business process to increase efficiency (lower cost). Functional enhancements to the application were also identified, which would increase throughput without increasing operating costs.
  • Z-con, the billing module, was targeted for a replacement. The unique nature of the organization’s business model precluded a COTS solution. A custom system development project is underway.


The purpose of this paper has been to present an approach for identifying strategic initiatives and provide project sponsors with substantiation needed to promote their initiatives in competition with other possible uses of scarce project resources. This enterprise-wide approach recognizes the IT role in supporting business processes and the “corporate” mission. This approach requires proactive engagement at the “C” level and is designed to produce increased strategic yield on project investments.


CSC (2007) Catalyst Methodology Retrieved from

CSC (n.d.) M5®Service Offering Retrieved from (The CSC documents are held for internal use only)

Project Management Institute (2008). A Guide to the Project Management Body of Knowledge (PMBOK Guide®) —Fourth Edition . Newtown Square, PA: Author

Project Management Institute (2008) The Standard for Portfolio Management—Second Edition . Newtown Square, PA: Author

© 2011, Jim Blankenheim and Lynn Clemmons Steele
Originally published as a part of 2011 PMI Global Congress Proceedings – Dallas, Texas



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