Chapter 13 • Leading the Information Systems Function 549resources are involved in the development and mainte-
nance of such “local” applications.
Managing an IT application portfolio also involves
knowing what software the company owns, where it is
located, what it does, how effective it is, and what risks are
associated with its continued use and maintenance.
Organizations need to treat software maintenance similar to
the way they treat plant or other physical asset mainte-
nance: It is an activity that is necessary to preserve the value
of the asset, based on a regular assessment of the return that
this asset provides to the company.
Other issues that applications portfolio policies
should deal with include the organization’s preferences (or
policies) for purchased packages versus custom-developed
applications. As discussed in Chapter 10, the implementa-
tion of a software package frequently requires major
changes in business processes and workflows that would
not be necessary if a custom application were being imple-
mented. However, for many organizations the benefits of
more quickly implementing a software package that may
already have been installed in other organizations that
other users have reported to be a well-designed application
that met their needs may outweigh the cost-benefit trade-
offs for a custom-developed application.
All but very small organizations typically have a
formal process for making any IT investment decision.
Most of these organizations also require that some kind of
return on investment (ROI) and feasibility assessment be
performed before funds are approved. The payback period
for a given investment then becomes one of the criteria
used by a committee of business and IT representatives
that is charged with approving and prioritizing project
requests on an annual or more frequent basis.
Sometimes it is difficult to quantify the potential
benefits from a new application, especially when it will be
custom-built with new technologies. In these situations,
prototyping and pilot techniques are typically used to help
assess the benefits. Organizational guidelines should also
exist for evaluating IT investments for smaller projects that
may not need a rigorous approval process—including poli-
cies and guidelines for application development by employ-
ees who are not IS professionals. (For a discussion of
guidelines for user-developed applications, see Chapter 9.)
Metrics for IT Applications Management
The performance metrics for IT projects to initially imple-
ment new applications are well established: both custom
and packaged system: (1) a high-quality application,
(2) delivered on time, and (3) within budget. However,
new applications should also be tracked to ensure that the
potential benefits calculated at the time of the investment
decision are actually realized. The responsibility for
ensuring that the benefits are achieved over time resides
primarily with business managers, and for large IT proj-
ects a one-year time lag after the initial implementation is
not unusual.
To improve the quality of an IS organization’s processes
to manage and deliver IT applications, many IS leaders have
adopted the process guidelines embedded in the five-level
Capability Maturity Modeldeveloped two decades ago by
the Software Engineering Institute (SEI) at Carnegie Mellon
University. Descriptions of the five levels are provided in
Figure 13.11; as noted in this exhibit, a revised version of the
model, named CMMI, was released in 2002.
Although by 2003 very few U.S.-based organiza-
tions had reached level 3 or higher, recent researchers have
reported that many organizations seek to achieve certifica-
tion up to only CMMI Level 3. That is, moving to Levels 4
and 5 requires a significant amount of additional IS devel-
opment discipline and IS specialist time to document and
test systems. Level 5 processes are certainly appropriate
for certain types of systems (e.g., government defense
systems), but may not be appropriate for many other types
of business applications (Adler et al., 2005). Nevertheless,
several IT outsourcing firms in India have used their Level
5 certifications to good advantage in winning application
development contracts.
Another common practice to improving performance
metrics is to invest in process improvements for managing
IT projects under the direction of a project management
office (PMO)or similar program management structure. In
addition to improved performance metrics due to training in
project management techniques, benefits have also accrued
to those firms that have developed repeatable processes,
change management capabilities, and post-project reviews.
(See also the PMO discussion in Chapter 11.)Managing IT Human Resources
The most important asset in the IS organization is clearly its
people—and personnel costs are typically the largest item
in an IS organization’s annual budget. The specific skills
needed for effective IT service delivery and IT application
solutions vary based on the IT infrastructure standards and
nature of the business. However, IT skills needed for
today’s organizations can be classified into five categories
(Zwieg et al., 2006): technical, project management, busi-
ness domain, sourcing, and IT administration. A listing of
knowledge areas for each of these categories can be found
in Figure 13.12.
The IT field is diverse and includes some highly spe-
cialized technical skill needs as well. Although senior IS
executives are more and more becoming general business