Application Portfolio Management Introduction and Best Practices

Dec 27, 2022Paul Estrach Enterprise Architecture
what is application portfolio management

Technology has revolutionized how companies manage their applications, and Application Portfolio Management (APM) is at the forefront of this shift. APM provides a comprehensive approach to managing all applications in an organization, from the initial design and development stages to ongoing maintenance and optimization.  

IT departments manage thousands of applications but must know which ones are strategic and bring less value. The number of these applications has grown significantly over the last decade, incurring increasing IT costs and risks. 

With APM, IT managers can efficiently rationalize their application portfolio while ensuring their IT systems are ready to accommodate new business projects.  

In this post, learn more about Application Portfolio Management, how to implement an APM project, and the best practices. 

What is Application Portfolio Management?

Application Portfolio Management (APM) is a process that helps organizations to identify and manage their applications. It involves understanding the various components of the application portfolio, including hardware, software, infrastructure, and services. Furthermore, APM can help identify opportunities for cost savings by eliminating redundant or unnecessary applications. 

Lastly, APM enables organizations to monitor their applications' effectiveness and ensure they meet their users' needs.  By leveraging APM, companies can allocate resources better and improve the efficiency of their IT environment. 

Making Sense of App Portfolio Management Strategies

APM tool manages the entire lifecycle of an organization's applications, from development to deployment and maintenance. It provides visibility into the performance of existing applications and the ability to develop new ones more quickly and efficiently. APM enables organizations to understand their application landscape better, prioritize investments, and identify areas for improvement. 

 It helps identify which applications are most critical for business success and provides insights into how those applications can be optimized for better results. By identifying redundant or outdated apps, APM can help organizations save time and resources by streamlining operations and removing non-value-adding applications from their portfolios.  

APM ultimately provides organizations with a comprehensive overview of their application landscape that can be used to optimize performance and drive value. 

Why is application portfolio management important?

Application Portfolio Management is an invaluable tool for any organization dealing with the complexity associated with multiple applications. 

By mastering the complexity of multiple applications through APM, organizations can ensure their systems are always running efficiently and effectively. APM helps identify and report on performance issues within an application so that IT staff can quickly diagnose problems and take action to remedy them. Furthermore, APM can help identify potential bottlenecks before they become major problems, allowing for proactive solutions that save time, money, and resources.

IT Departments' challenges: Main examples of APM

Increasing complexity and a lack of flexibility

IT departments are often burdened with applications from past mergers and acquisitions, geographic expansion, or organic growth. These applications have been accumulated without a planned roadmap; many are redundant, under-used, or obsolete. This results in complexity and a loss of agility, preventing IT departments from supporting new business projects. 

Growing IT costs and IT risks

In addition to soaring IT maintenance costs, these applications can induce obsolescence or non-compliance risks. In many cases, IT teams can only downsize these applications with precise business value knowledge. They cannot assess the impact of change when adding or removing an application. They may also need help migrating applications from on-premise to the cloud.  

No central repository to store information on applications

Using Excel spreadsheets or home-grown portfolio management solutions is valuable and flexible when initializing an application rationalization project or for a one-time exercise. However, they rapidly become limited for repeated, long-term use, challenging rationalization efforts.

“CIOs understand that cost optimization initiative is important for the efficient delivery of IT services, but often struggle to maintain momentum and end up in a repeated cost-cutting cycle.” (Gartner, Three-Year Roadmap for Cost Optimization, 2019)

To go further, read the Main Benefits of APM.

Why do organizations need an application portfolio management practice?

Get visibility into all applications used in the organization

  • Create, in a single repository, a comprehensive inventory of applications 
  • Get a clear view of how current applications support the business 
  • Identify and reduce risks 
  • Impose a formal process around new application approvals 

Assess the application portfolio to identify rationalization projects

  • Understand how and where existing applications are used and by whom 
  • Identify redundant applications 
  • Understand the critical applications and the ones to be retired or modernized. 
  • Analyze the impact of change. 

Transform applications to consolidate the application landscape

  • Reduce application costs 
  • Improve business alignment 
  • Keep IT systems flexible for new business projects 
  • Regiment and impose better governance on the application portfolio 

Methodology: Achieve Optimal Results with Application Portfolio Management Best Practices 

Creating and managing an effective application portfolio is a challenging endeavor that is essential for any organization. With the correct planning, resources, and best practices in place, businesses can ensure that their application portfolios are well-managed and current with their needs. The following is an overview of best practices for effective APM to achieve these goals. 

Analyses of the application portfolio

How do you get started with application portfolio management?

Learning and mastering Application Performance Management (APM) can initially seem daunting, but it doesn't have to be complicated. The key to success is breaking down the process into manageable steps. With a few simple steps, you can master APM quickly and effectively. 

1st step: Perform IT Inventory

With APM, IT departments create a detailed inventory of their assets, including applications, technologies, data flows, and business capabilities, to provide a comprehensive view of their IT landscape. Based on this inventory, they can link business capabilities, applications, and technologies together to perform impact analysis. They can add other perspectives, such as application costs, deployments, lifecycles, supported processes, and risks. 

What does Application Portfolio Management Provide?

Inventory applications under multiple perspectives  

  A. Define roles and responsibilities

Managing the application and technology inventory is a teamwork effort. Distinct categories of stakeholders are typically involved, and their responsibilities vary from organization to organization. Typical roles include: 

  • Application portfolio managers monitor the application portfolio, provide reliable information about it, and work with application and business line owners to keep the data updated. 
  • Technology portfolio managers look after the technology assets, monitor technology obsolescence, and identify when changes are necessary. 
  • Application owners, who manage one or more applications, provide updated business and technical information about their applications for the inventory and monitor application performance. 
  • Business owners who provide information about the business value of the application and their satisfaction through surveys. 
  • IT owners provide information on the technical fitness of an application through surveys. For example, they can describe the level of complexity of the architecture required by an application. 

B. Plan and prepare for data collection by defining the data needed

Before collecting the application information, create corresponding reference objects linked to applications, including organizational and site structure, business capabilities, business lines, and business processes. 

Define the scope of inventory, including application systems, applications, software technology, portfolio structure, and portfolio criteria. When making a list, look at these specific items: 

  • How applications support business activities (lines of business, business processes, business capabilities) 
  • How applications interact with each other through data flows 
  • Where applications and technologies are deployed (company branch, site, server, consumers) 
  • Application costs, including recurrent, non-recurrent, maintenance, and labor costs 
  • Application lifecycles and their corresponding deployments 

C. Collect data

Speeding up and automating the collection process at that stage is essential. You can use and set up APIs to connect and retrieve data from third-party solutions available in your organization. The collection process can also be crowdsourced to application stakeholders that will provide accurate information on their applications. Speeding up and automating the collection process at that stage is crucial.  

  • Identify existing sources of information, such as spreadsheets, CMDBs,  application portfolio management tools, IT asset management tools, and any existing collection processes (for example, surveys via email or web). 
  • Collect business data using a collaborative approach (crowdsourcing) with key stakeholders and deposit all information into a centralized repository for use company-wide. 
  • Design and submit relevant questionnaires to various stakeholders, including application owners. 
  • Validate the data collection process and the information collected by checking the accuracy of the new information. With what is already commonly known and by having stakeholders and subject matter experts verify it. 

D. Enrich Application Data Inventory

Once the initial data collection has been performed, there are several ways to enrich the application inventory: for example, by linking business capabilities to applications and applications to underlying technologies and by defining application lifecycles, dataflows, costs, and deployments. 

  • Map business capabilities to get a clear picture of the current state from a business perspective. Link applications to business capabilities to view the applications that support business capabilities. 

what is the concept of application portfolio management

View how applications support business capabilities over time.

  • Map underlying technologies to applications to get a better understanding of the technical fitness of an application. 

Application Portfolio Management Best Practices

In this example, .NET Framework 4.8 technology supports the listed applications on the right. 

  • Map data flows between applications. 

Map Data flows Applications portfolio management

Monitor data flows between applications to understand the effort needed to remove or update an application. 

  • Map application deployments in the different branches and departments of your organization 

Application Portfolio Management deploymentsGet a clear picture of application deployments. 

  • Capture the life cycles of applications and their deployments. 

application portfolio management roles and responsibilities

View application lifecycles as well as deployment and underlying technology lifecycles.

  • Over the years, capture application costs, including labor, infrastructure, license, and service costs.

Understand application costsUnderstand application costs

E. Define the approval process for new applications and technologies 

Once the inventory of the IT landscape has been performed, implement a formal approval process for new applications and technologies so the application portfolio management (APM) practice is the single source of truth for applications and technologies   

2nd step: Assess the application portfolio to identify the applications to be removed or modernized 

Application portfolio management (APM) enables IT leaders to assess their applications and get a consolidated view of their application portfolio using various factors such as costs, application lifecycles, and deployments.  

They can also send surveys to business and IT owners to measure various legacy applications' business value and technical efficiency. Through this assessment, IT leaders can make well-informed decisions to eliminate some applications that no longer fit the company's strategy or modernize applications with substantial business value but with poor technical fitness. They can even decide to outsource some applications that are too costly to maintain but still support vital business processes. 

A. Run objective analysis 

In that stage, you can run an objective analysis based on the collected data to assess your application portfolio. It will give you a first insight into the value of your applications. 

  • Using collected data, applications can be assessed based on objective KPIs such as lifecycle, cost, risk, supporting technologies, and vendor dependency. 
  • Align applications to business capabilities to ensure the IT roadmap supports the organizations' goals and helps meet business objectives. 
  • Identify redundancies as well as applications requiring attention in business capability maps. 

Enterprise architecture application portfolio management

Show the results of application assessments in business capability maps.  

B. Run subjective analysis

Subjective analysis is performed by stakeholders who assess their applications' business value and technical efficiency. Questionnaires are sent to business and IT owners and other stakeholders who provide the required information. Again, the assessment can be crowdsourced with the portfolio manager coordinating the efforts. 

Submit questionnaires to company and IT owners to evaluate their applications

Submit questionnaires to company and IT owners to evaluate their applications.  

C. Rank applications

Rank applications are made by consolidating scores and cross-referencing KPIs. This analysis ensures that the most important investments and resources are focused on the most critical applications and become the first recommendations for improving the portfolio. 

  • Applications can be ranked into four categories: 
  • Eliminate: Applications with little value to the organization or impact on the business, such as those that are rarely used, not critical, replaceable by any existing application, or have high maintenance costs 
  • Tolerate: Applications with functional shortcomings and low business value but with no technical issues or low maintenance costs. 
  • Modernize: Applications adding real value to the business but with poor operational performance –failing to meet technological standards, requiring re-engineering the application platform, or needing a code review (also the case for candidates to be moved to the cloud) 
  • Invest: High value for the business or high technical efficiency 

Rank applications to rationalize the application portfolio technical efficiencyRank applications and view candidates for rationalization 

3rd step: Transform the application portfolio to reduce costs and increase flexibility

The last step of the process is to initiate and prioritize the transformation projects based on the identified applications to be removed or modernized. An essential deliverable is a business case that explains why the project should be done, how it supports business objectives, the related costs, a timeline, and possible risks because it enables decision-makers to make informed decisions.

Projects are prioritized based on their alignment with the business objectives and criteria defined above. Once projects have been prioritized, they can be put in a timetable, forming the IT roadmap. With a clear IT roadmap, IT leaders can comprehensively view future IT modernization projects and plan resources and budgets accordingly.

A. Create rationalization projects (retirement, modernizing)

Through the assessment of the application portfolio, rationalization projects have been identified. The related projects must now be created as a first step to transform the application landscape. 

  • Create an IT portfolio of potential transformation projects based on identifying applications to be removed or modernized. 
  • Build a business case stating the benefits of operational performance and cost reduction. 
  • Link projects to business capabilities to assess the project's impact on the business and strategic objectives. 
  • Understand the impact of retiring an application from the portfolio by monitoring data flows between applications and removed functionalities. 

B. Prioritize rationalization projects using what-if scenarios

Because all tasks can not be performed simultaneously, it is essential to prioritize them first. The prioritization can be performed based on the criteria you have defined. It is also recommended to perform a what-if scenario analysis by combining multiple projects to prioritize the best mix of projects. 

  • Prioritize projects based on various factors, such as financial (ROI, initial investment), resources, deadlines, risks, and strategic alignment. 
  • Build what-if scenarios based on a mix of different projects. 

 Application Portfolio Management best practiceCompare and prioritize transformation scenarios based on multiple criteria. 

  • Build an IT roadmap that includes the planned transformation projects. 

application portfolio management strategyCreate an IT roadmap encompassing current and future transformation projects. 

Application Portfolio Management Best Practices to Achieve Optimal Results

Key Strategies for Optimizing Your App Portfolio:

  • Avoid trying to do too much too soon – a steady and measured approach to setting up Portfolio Management and broader Enterprise Architecture practice – it is essential to take the wider stakeholder community along the journey to help them understand as maturity increases over time. 
  • Establish a core APM team and set clear roles and responsibilities 
  • Set up an executive board that defines and monitors the inventory, sets technology standards, and identifies significant business or technology changes that could impact the application portfolio and transformation plans 
  • Ensure accurate data is being populated and is updated regularly 
  • Avoid integrating with other solutions too soon, namely CMDB, Service Manager, and Discovery Tools (SCCM, DDMI). 
  • Focus on crucial data metrics at first, and expand to enhance analysis as necessary. 
  • Ensure KPIs are relevant to operational and strategic goals 
  • Set quantifiable objectives, e.g., a 10% reduction in application maintenance costs per year 
  • Use dashboards suited for each stakeholder, such as cost reports for CIOs and portfolio assessments for portfolio managers. 
  • Implement a communication plan sharing the vision with the broader stakeholder community. 

application portfolio management metrics

Use dashboards to monitor critical indicators such as costs, application by status (in production, retired), and application inventory completion percentage. 

Key learnings about effective Application portfolio management

APM is not a simple inventory; it's a single source of truth where applications are described from multiple perspectives, providing a comprehensive understanding of the organization's IT landscape. Indeed, because of this extra visibility, IT leaders can identify the applications to be removed or modernized by performing impact analyses and sending questionnaires to the different organizational stakeholders. 

An application portfolio management (APM) practice will help IT leaders maximize their application portfolio governance while ensuring IT systems are ready to embrace new business projects. It will help organizations regain control of their application landscape, resulting in an increase in agility and a reduction of costs. 

How Can HOPEX Assist in Application Portfolio Management?

Exploring Cloud Migration Options

HOPEX offers a range of analysis providing smart recommendations for cloud migration that can help organizations effectively manage their application portfolio. Organizations can achieve greater scalability, flexibility, and cost savings by migrating applications to the cloud.

Leveraging HOPEX Services for Rationalization

Organizations can leverage HOPEX services, such as HOPEX AI-Driven APM, and HOPEX Smart Analysis, to assess their application portfolio, plan their migration strategy, and streamline the rationalization process.

Maximizing Business Value with HOPEX

HOPEX provides a wide range of services and solutions that enable organizations to maximize their business value through application portfolio management. By leveraging HOPEX's capabilities, organizations can optimize their application portfolio, reduce IT costs, enhance security, and improve overall operational efficiency.

Steps to select an application portfolio management tool

how to select application portfolio management tool

In conclusion, application portfolio management is an invaluable tool for any organization. It assists with resource allocation optimization, alignment of strategic goals, and improvement of development processes.

Most importantly, it gives decision-makers a clear picture of the application landscape to best utilize resources and improve performance. With this information, organizations can make sound decisions that will benefit their business for years. 

Increase visibility and rationalize your IT portfolio with APM

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