The environments and missions of different organizations mean that their operations are inevitably also different. They face a variety of challenges, and so the precise ways in which they can benefit from a given best practice will change, depending on the circumstances of each organization. In this article, the second of four, I'm going to consider how the idea of application portfolio management can bring benefits to an organization with a Diversification operating model, as defined by Ross, Weill and Robertson in their excellent book “Enterprise Architecture as Strategy”.
In the classification schema defined by the authors, a Diversification model organization is one where the different business units perform different tasks and do so for completely different customers. An example of a diversification model organization might be the giant conglomerate General Electric, where the business units largely produce different products that they sell to various customers. Another example that they give would be the Carlson group of hotels, where again the various hotel chains target different groups of customers by providing different levels of service.
So what implications does the Diversification operating model have for the application portfolio efforts of the organization concerned? From the definition, one can suspect that there's little or no opportunity for application portfolio consolidation, and the initial comment from Ross, Weill and Robertson seems to bear this out. They predict that “Many Diversification companies will not mature their architecture past stage 2 [defined by the authors as standardized technology but with no enterprise view of applications or data]”
So in this environment, while it is possible that application portfolio efforts might find some duplication that can be consolidated to save cost, the primary opportunities would come from identifying opportunities to consolidate and standardize the underlying platforms that these applications rely upon. The role of the application portfolio in this scenario would be to assist in identifying the standardized platforms and then migrating to the standardized platforms that have been selected.
However, this is not the whole story. As Ross, Weill and Robertson observe, the General Electric model of a collection of largely unrelated businesses has fallen out of favor, and there is more of a move towards favoring some level of synergy between business units, even where the business units operate largely independently of each other.
This opens the door to savings from application portfolio management and possible application consolidation and streamlining, especially in the area of shared services. These would tend to be supporting functions such as finance, human resources, purchasing and information technology – but there could also be other overlaps, depending on the synergies that are in play. In this case, the application portfolio will indeed provide opportunities for rationalization.
An organization with a diversification operating model will generally be the type that receives the least benefit from an application portfolio management effort in terms of savings from rationalization and the and consolidation. Nevertheless, there are still likely to be opportunities arising from such an effort.