The Big Picture

Like many federal organizations, the Navy operated for years as a decentralized institution-a model thought to provide significant agility and efficiency for both government and its citizens. But as Navy leaders are finding during the implementation of the multifunctional Navy Marine Corps Intranet, decentralization comes at a high price.

In the Navy's case, as the hard work of consolidating services and offerings into one enterprise network got under way, it became painfully clear that the mammoth organization operated tens of thousands of applications-many of them redundant or outdated.

"The problem is that great, innovative minds build innovative solutions but [do so] locally, creating duplication of effort," says Navy Chief Information Officer David Wennergren. "And as you begin to look at how best to spend your money, you find you just can't afford that duplication."

It was at that point, Wennergren says, that Navy leaders finally understood that the only way to meet its mandates of spending more wisely and serving citizens most effectively was to pare back to the most efficient systems.

Increasingly, the Navy's experience is becoming common. The Office of Management and Budget and the Government Accountability Office, along with Congress, have issued mandates and regulations in recent years designed to encourage agencies to manage information technology assets more effectively by standardizing requirements.

The momentum started building in 1996 with the passage of the Clinger-Cohen Act, designed to eliminate redundant systems and to ensure that IT resources are used effectively. Among other things, the law calls for the implementation of a "portfolio investment process" so measurements can be tracked.

OMB also got into the act with its revised Circular A-130, published in 2001. It requires agencies to outline the criteria used to choose IT investments along with the methods they will use to control, manage and evaluate those investments.

GAO bolstered these efforts last year by developing the IT Investment Management Framework, which provides a common structure for assessing IT capital planning in all agencies as well as a full definition of the critical management processes.

Wrapping everything together is the Federal CIO Council's Best Practices Committee, which has written a guide to practices and lessons learned in portfolio management, and is working on a survey to assess agencies' progress. It also is setting up a best practices exchange on the Federal CIO Council Web site, www.cio.gov, where agencies can explain their tools and processes, says Wennergren, who also is co-chairman of the committee.

Knowing What You Have

To meet oversight goals and requirements, agencies must tally their systems and functions, and understand how each works and where overlap exists. For many years, that difficult task was laboriously performed manually, with varying degrees of success. Often, this seat-of-the-pants approach led agencies to duplicate programs or systems.

Today, agencies are turning to increasingly sophisticated portfolio management solutions.

True portfolio management is a combination of technology, processes and analysis, providing ways to delve both vertically and horizontally into an organization. The goal is to create a common understanding of what is owned, allowing leaders to make informed choices about which processes, functions and programs to keep and which to phase out.

Portfolio management allows IT departments and business organizations to learn more than just which IT projects are being requested and funded, says Jim

Rinaldi, the Food and Drug Administration's chief information officer. "It gives us more analytical capability and shows promise in helping us change how we invest, so it's easier to determine investments that are similar and those that can be merged or reduced," he says.

Better commercial tools for portfolio management have made this process infinitely easier. Market leader ProSight of Portland, Ore., which aims to give leaders the information they need to make more informed decisions about technology portfolios, has won customers at the U.S. Mint and departments of Veterans Affairs, Health and Human Services, Treasury and Homeland Security.

The FDA is using a combination of three tools. Analysts use Microsoft Project to gather information about what each IT system is used for by various organizations within the agency, while ProSight captures data related to a specified set of tasks and compares information on various projects. Metis, a visual modeling tool for enterprise architecture from Computas of Sammamish, Wash., is the third tool, recording the rules a business unit sets up and allowing those rules to be standardized throughout the agency.

Authorized employees can use Pro-Sight to view a dashboard with information from Metis to determine the financial and operational risks of a given investment and how much of the budget that investment takes up.

"In the past, there was so much information that executives had a hard time digesting [it]," says Rod Bond, director of the strategy and planning staff in the FDA's CIO office. "Now we can look across our different investments and find ways we can combine them and maybe save money."

The Navy has combined the concept of portfolio management with the creation of IT functional area managers, each of whom leads a single area such as logistics, personnel or acquisition. Functional area managers use portfolio management tools to choose which software and other applications they want to make available to users of NMCI. The Navy uses a variety of portfolio management tools, including the custom-developed Department of Navy Application and Database Management System.

The processes seem to be working. The Navy started with 100,000 applications for a variety of functions such as logistics, personnel and acquisition, migrated down to 60,000, and then to 38,000 over the past two years. "We're now down to a set of about 5,000, and we continue to work that down even further," Wennergren notes.

Although the benefits are significant, setting up a full-fledged portfolio management solution is challenging. Not only does it take time and money, but it may require special training.

The biggest challenge often is cultural. "It's hard for system owners to accept because they see their systems being compared against others. It can cause them to get defensive," Bond points out.

To help ease the transition, he recommends starting with small wins. Gaining converts slowly, especially among executives, can show the benefits of portfolio management. "It's important to know your culture," he says.

As oversight organizations continue to push federal agencies to manage assets more effectively and tools continue to develop, more agencies will embrace portfolio management.

META Group, a Stamford, Conn., consultancy, believes that the portfolio management tool market, which totaled about $85 million in 2002, will reach $480 million by next year.

Greater functionality also will contribute to greater adoption, says John Cimral, ProSight's chief executive officer. He says more sophistication in collaborative analysis as well as the ability to perform scenario generation and impact analysis will attract more customers to portfolio management.

"You'll be able to have an automated system that can look at changes OMB is requiring and come back with a coherent response within two days that reflects portfolio management thinking," he says. Cimral also predicts that over time, enterprise architecture and outsourcing and security management also will be better integrated into portfolio tools.