2006_030919 - 1 - Prioritising Technology Investments September 2003 © 2003 Sixhills Consulting Ltd & Author Prioritising Technology Investments The Technology Investment Challenge In Financial Services, at least, a significant trend in recent years has been the increasing investment in information technology, for example, replacing manual processing with software applications. Banks and other financial institutions are now heavily dependent on their information processing systems and development can account for a significant proportion of total IT spend Development spending in one year intended to create value through, for example, support for new product features also creates a corresponding ongoing multiyear burden: not only for maintenance of the software itself but also the ongoing operational costs. In addition, if enhancements to the application portfolio are not managed in a rational framework then continued development increases the complexity of the resulting software systems. This lead to a disproportionate increase in support costs compared to the value delivered. This paper addresses the former issue describing an approach to prioritise investments to deliver the best value. Classifying Software Development Spending Application software development projects fall into three categories:  Perfective. Making discretionary changes to add new features and develop new products/markets;  Adaptive. Making, typically mandatory, changes to adapt software to external factors, such as, legal/regulatory compliance, hardware and operating system upgrades, etc.;  Corrective. Fixing faults in the software. These fixes may be to repair either software failures or functional deficiencies (e.g., where the software does not meet its advertised specification) and are mostly unavoidable mandatory changes. Analysis of development portfolios actionGoTo:1,(Exhibit actionGoTo:1,1) often shows that the majority of budgeted spend focuses on discretionary perfective developments (usually aimed at increasing revenue) Exhibit 1 - Classification of Development Spend Disguised Client ExampleSource: Sixhills experienceRevenue EnhancementCost ReductionService/Other8%Small Projects10%Infrastructure79%Sustaining3%Innovation66%Perfective10%Adaptive3%Corrective42%12%12%Investment StreamsProject TypeBenefits100%Total SpendMajority of allocated spend
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