Portfolio Management Development Techniques in Today’s M&A Environment

Application Portfolio Management (APM), also known as Legacy Support, is no longer as simple as “sunsetting” an application after you’ve implemented a new EHR, nor is it as easy as hiring one employee to maintain an old system. With the rapidly changing dynamics of the healthcare provider market – inclusive of mergers, acquisitions, affiliate solutions, and increasing competition – healthcare organizations find themselves juggling a more robust application portfolio than their team’s bandwidth can realistically support. To put all of this into perspective, organizations need to understand the current market state; why there’s a need for portfolio management; and how to start carving a path to a comprehensive APM structure.

Current Healthcare State

Healthcare merger and acquisition deals remained strong in 2016, and the first quarter of 2017 alone drove forward more than 200 such agreements in the U.S. health services space. This continuing trend underlines the market pressures for provider organizations to focus on cost management opportunity and brand survival to avoid succumbing to market consolidation.

Foundational “Why” for Portfolio Management

Organizations are increasingly making their IT resources available to their neighbors, essentially becoming service providers overnight. These strategic business partnerships are often viewed from the boardroom as a necessary and beneficial move to protect revenue and increase market share. However, as a downstream effect, the amount of software and hardware vendors that IT middle management is now required to manage increases, sometimes to a factor of two- and three-fold, and a “keep the lights on” struggle ensues. Unwieldy application portfolios can effectively and detrimentally reduce an organization’s time-to-market response. Maintaining effective change control in a lean application portfolio is already a difficult endeavor; overstuffed portfolios are exponentially more complex to update and maintain. The ability to recognize aspects of environmental change that bring little to no business value is key to accurately documenting an initial push to a more strategic rationalization process.

Moreover, the ability for an executive committee to agree on an objective application rationalization strategy ultimately improves the customer service perceptions within an organization and adds transparency to key metrics for operation stakeholders.

Steps Toward Successful AMP Structures

Many core transition and APM development techniques exist, but we’ve identified five key steps vital to standing up a successful portfolio management program:

  1. Start with Your Inventory. An established asset management capability – meaning you not only know what you have, but you also know how you obtain it – is key to determining your current state of physical and software packages within your portfolio.
  2. Have a Risk Quantification Strategy. Implementing a reliable risk management solution throughout the enterprise is often limited to service line expansion or contraction; Risk Quantification as a solution not only analyzes risk but also alerts organization’s senior management of potential issues at an early stage.
  3. Invest in Quantitative Risk Analysis Software. Utilizing risk analysis software can statistically process data from readily available qualitative methodologies. Most quantitative risk analysis tools perform Monte Carlo simulation to determine how risks will affect project schedule and target completion.
  4. Schedule a Repetitive Cycle of Technical Analysis. During technical analysis, focus on:
    1. Providing a tangible business objective for any change to your current system topologies
    2. Performing the assessment as a point-in-time snapshot repeated periodically
  5. Consider a Cost Transparency Initiative. With manager- and project-level resourcing visibility and accountability, ownership starts to take shape, and dependencies become less obstacle in nature.

As an organization, consider a current state analysis of your portfolio management process by asking these questions:

  • Is there business strategy alignment with each application at our organization?
  • Does our organization have the accountability at the portfolio level to manage and oversee each system effectively?
  • Are the run costs of each application visible throughout the organization?

Taking the time to prioritize your current application return on investment (ROI) under the pressures of market expansion and protection remains at the center of effective application portfolio management.

Interested in a deeper dive on this topic or have questions around application portfolio management? Email your questions and comments to dan.ulatowski@divurgent.com.

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