Application Portfolio

McFarlan’s Application Portfolio framework allows organisations to analyse their application suite and categorise them into one of four categories

1. High Potential – These are applications that could lead to future business success. Powerful tools such as AI for e.g.
2. Key operational – these are applications that are essential to business functions. Inventory control, accounts, human resources
3. Strategic – applications that are essential for future business strategy such as CRMs, Project Management Tools
4. <br /> Support – valuable and desirable applications that are available but not critical – things like multimedia packages, fancy web apps that aren’t really necessary
   Why use it?
   This framework is a good tool to bring about agreement on what applications are required in the suite of an organisation. Views from IT professionals, regular staff and management can often differ and it can help them reach agreement. The Boston Consulting Group Matrix is another similar matrix. It helps show what roles applications play in a business.
   Many organisations have used McFarlan’s framework throughout the years, as well as Boston Consulting Group’s, largely due to its simplicity. You could critique it for being overly simple and that nowadays with the amount of applications and emerging tech it would be hard to classify everything into the grid.
   What next? After applications decided?
   When the applications for a portfolio have been decided, then it must be decided where the applications will be acquired, and what resources will be assigned to them. Managers must also decide what aspects of the application will be managed in-house and what will be outsourced.What about existing applications?
   An organisation should also consider and analyse the existing applications in their org. Some might be obsolete and no longer required. You may be paying for licenses for a product that no one needs any more. Or running redundant servers. There could be data held that you no longer need or that violates GDPR laws.
   It may seem too simple to interpret the relevance of your application using a simple 2 x 2 matrix. The McFarlan matrix is attractive to use because it reduces a vast number of alternative methods to a number of application options that is a proven way to achieve some high level direction.
   It is vital to consider what areas of the organisation actually require change via application implementation. It is naïve to think that an organisation would overhaul an entire organisational application suite at once for every section and subsection. It is probably better to do it business unit by business unit and learn along the way.
   There are some other categorisations you could look at when planning for applications.

Information systems (IS) are a vital component in modern business organizations as they are used to perform essential functions such as financial management, customer relationship management, supply chain management, and inventory control. However, investing in IS can be expensive and complex, and the effectiveness of such investments can vary depending on various factors. To understand the potential of IS investments, a qualitative view can be taken, which stems from an objective and overarching appraisal of the literature. This approach allows organizations to analyze their application portfolio, consider business function, assess user satisfaction, define user roles, address integration issues, and establish responsibility for IS investments. This paper will discuss the potential of the qualitative view of IS investment from the perspective of McFarlan's portfolio matrix.
Analysis of the application portfolio:
The application portfolio represents the set of applications that an organization uses to support its business operations. These applications can range from enterprise resource planning (ERP) systems to customer relationship management (CRM) systems, and each application has its specific purpose. Analyzing the application portfolio is essential to identify redundancies, inefficiencies, and opportunities for improvement. A qualitative view of IS investment enables organizations to analyze their application portfolio in terms of its effectiveness, efficiency, and alignment with business objectives. For example, organizations can assess the contribution of each application to business processes, evaluate the quality of data inputs and outputs, and determine the cost-effectiveness of each application.
Consideration of the business function:
The business function represents the area of the organization where IS is used to support business processes. Each business function has its unique requirements for IS, and these requirements can change over time due to internal and external factors. A qualitative view of IS investment enables organizations to consider the business function when making IS investment decisions. For example, organizations can assess the impact of IS on the performance of each business function, evaluate the fit between IS and business requirements, and identify opportunities for innovation and improvement. McFarlan's portfolio matrix can be used to categorize IS investments based on their contribution to business functions, which enables organizations to focus their investments on critical business processes.
Assessment of user satisfaction:
User satisfaction is a critical factor in the success of IS investments. If users are not satisfied with IS, they are less likely to use it effectively, which can result in decreased productivity, increased errors, and decreased organizational performance. A qualitative view of IS investment enables organizations to assess user satisfaction and identify areas for improvement. For example, organizations can use surveys, focus groups, and interviews to gather feedback from users, analyze the data, and identify areas of dissatisfaction. This feedback can then be used to improve IS usability, functionality, and performance.
User roles:
IS investments can have different impacts on different user roles within an organization. For example, an ERP system can have different impacts on finance, sales, and manufacturing departments. A qualitative view of IS investment enables organizations to define user roles and assess the impact of IS investments on these roles. For example, organizations can analyze how IS investments affect the workload, skills, and job satisfaction of different user roles. This information can be used to design training programs, job descriptions, and performance metrics that align with IS investments.
Integration:
IS investments can be complex and require integration with other systems, processes, and data sources. Integration issues can arise due to technical, organizational, and cultural factors, and can have a significant impact on the success of IS investments. A qualitative view of IS investment enables organizations to address integration issues and ensure that IS investments are aligned with the broader organizational goals. For example, organizations can analyze the technical requirements for integration, assess the organizational readiness for integration, and develop a roadmap for integration that addresses cultural and behavioral issues.
Responsibility:
IS investments involve significant resources and require clear responsibility for their success. A qualitative view of IS investment enables organizations to define responsibility for IS investments and ensure that all stakeholders are accountable for their roles. For example, organizations can define the roles and responsibilities of the IT department, business units, users, and external vendors, and establish metrics to measure their performance. This information can be used to ensure that all stakeholders are aligned with IS investments and that resources are allocated effectively.
McFarlan's portfolio matrix:
McFarlan's portfolio matrix is a tool that can be used to categorize IS investments based on their impact on business processes and the importance of these processes to the organization. The matrix categorizes IS investments into four quadrants: strategic, factory, support, and turnaround. A qualitative view of IS investment can be used to apply McFarlan's portfolio matrix and ensure that IS investments are aligned with the organization's strategic goals. For example, strategic investments are those that have a high impact on critical business processes and are aligned with the organization's long-term goals. Organizations can use a qualitative view to identify strategic investments and ensure that they receive adequate resources and attention.
Conclusion:
A qualitative view of IS investment enables organizations to analyze their application portfolio, consider the business function, assess user satisfaction, define user roles, address integration issues, and establish responsibility for IS investments. McFarlan's portfolio matrix can be used to categorize IS investments based on their impact on business processes and the importance of these processes to the organization. By taking a qualitative view, organizations can ensure that their IS investments are aligned with their strategic goals and contribute to their overall success.