Adopting an Application

Portfolio Management
Approach
Key principles and good practices

White paper by Fabrice Vila

Consulting Director, Enterprise Architecture Practice Leader
 Content

I.  The need for a sustainable APM process.......................................................4

1.  Why APM is so important.............................................................................................. 4
2.  Sustainable APM and IT governance.............................................................................. 5

II.  Key principles of a sustainable APM approach:.............................................6

1.  Main activities of APM.................................................................................................. 6
2.  Defining roles and responsibilities for APM..................................................................... 7
3.  Establishing governance of the application portfolio......................................................... 10
4.  Choosing the cost analysis model................................................................................... 10

III.  Moving from inventory to transformation.....................................................12

1.  Inventorying applications.............................................................................................. 12
2.  Evaluating the portfolio to identify opportunities for improvement..................................... 14
3.  Proposing transformation initiatives................................................................................ 16

IV.  Adopting the best APM approach ...............................................................19

1.  A project in its own right............................................................................................... 19
2.  Key factors for successful APM...................................................................................... 19
3.  Organization of application portfolios and case studies..................................................... 20

V. Conclusion ................................................................................................22

2 Adopting an Application Portfolio Management Approach – © MEGA 2014

Executive summary

CIOs face the daily pressures of providing high quality IT services, introducing new, innovative
technologies to advance business objectives and keeping costs under control. Along with mee-
ting these demands, they must develop a pragmatic IT budget each year that fits within the
company’s financial parameters. Sometimes, because IT operational costs continue to rise, they
must eliminate or reduce new services or technology plans in favor of keeping existing services
running.

However, when CIOs have better information about the company’s IT assets, they can find ways
to reduce operational costs so that important new IT initiatives can be launched. By managing
the application portfolio on an ongoing basis, identifying the applications that are redundant,
underused, no longer the best technology option, or too costly, CIOs can apply their IT budget to
the most necessary, mission-critical options that will advance the enterprise’s goals.

Many CIOs have used some type of application portfolio management (APM) to monitor IT assets
and make decisions about application retirement, changes or acquisitions. However, companies
often limit their APM approach to a one-time inventory of IT assets or use very limited office
management tools. These approaches aren’t sustainable over time and don’t deliver the rationa-
lization capabilities and decision making support that a mature and well-designed APM program
should provide.

APM should reduce the complexity and cost of an application portfolio, help manage risks and
align the portfolio with business challenges. To achieve these goals, two primary actions are
necessary:
–– regular and special circumstance review and analysis of the portfolio in order to inventory,
evaluate and plan the transformation of IT applications.
–– a governance plan that relates the strategy of the IT department to a common framework
for IT asset review.
Successful APM is an ongoing process, with measurable goals and deliverables. The IT team
must understand:
–– what roles and responsibilities should be established
–– what skills are necessary and where they can be found
–– the best way to effectively initiate the inventory of applications
–– how to keep the inventory updated
–– what governance should be implemented
By combining a sustainable approach with a well-designed APM software solution, and inte-
grating the program with IT governance, CIOs are better able to support fast-changing business
needs and innovation.

Read on to learn about the key principles of effective APM and discover the primary actions to
take in setting an APM approach that will contribute to corporate goals.

Adopting an Application Portfolio Management Approach – © MEGA 2014 3

 I.  The need for a sustainable APM process

1.  Why APM is so important

As companies become more mature and grow, whether through increased market share, merger
or acquisition or geographic expansion, they accumulate large numbers and varieties of appli-
cations. Eventually, many of these become redundant, under-used or obsolete. In addition to
rapidly rising software maintenance fees taking a larger share of IT budgets, these applications
can increase company risks if they lead to vulnerabilities in IT systems or decrease flexibility.

“Despite the need to grow, there is pressure on budgets. The global

REDUCE
complexity weighted average expected change in CIO IT budgets is +0.2%. This
and costs
lack of significant uptick presents challenges for the CIO and IT organi-
zation since there is a need to simultaneously renovate the core of IT
INCREASE systems and services, and exploit new technology options.”
innovation
for business
Source: 2014 Gartner CIO Agenda Report.

Challenges Addressed by APM

Redundant
Lack of application Need for flexible use
applications due
flexibility of new technologies
to mergers / acquisitions

Application portfolio Dependence

size, interrelationships on critical skills
and complexity

Time to market
Aging technologies is too long IT Systems
underperforming
Business strategy
not well supported

Increased risk Inability to

Growing IT of loss of business
maintenance budget share & manage
business information
Costs too high

A formal and ongoing APM program is an important practice today that allows CIOs to:
–– obtain a precise view of the application inventory, dependencies, interfaces between
applications, required infrastructures and technologies, and more
–– evaluate the application portfolio based on different perspectives and needs, such as value,
costs, and risks
–– identify potential improvements in terms of performance and costs
–– organize and manage portfolio transformation initiatives, focusing specifically on reducing
Total cost of ownership (TCO).

4 Adopting an Application Portfolio Management Approach – © MEGA 2014

2.  Sustainable APM and IT governance
For an APM approach to be sustainable, it must be integrated with IT governance. An applica-
tion portfolio can’t be managed without taking into account the related IT project portfolio and
the infrastructure portfolio that support and affect the applications.

Likewise, management of the application portfolio must integrate IT transformation rules, if any,
as well as technology standards and strategic guidelines for IT and the business.

Some APM approaches have shortcomings because of their ad hoc or limited nature:

–– a scope limited to an application inventory. Limiting APM scope to just the inventory process
does not meet a fundamental requirement to optimize the application portfolio and link it
to IT governance.

–– the use of short-lived tools. Spreadsheets, simple diagramming tools, or ’homemade’

databases may be useful and flexible when initializing the approach or for a one-shot
exercise, but they rapidly become limited for repeated and long-term use.

–– the one-time evaluation, often proposed by consulting firms. While this may provide a
relevant analysis of the portfolio and areas of rationalization at a single point in time,
every major change (merger, change of IT/business strategy, etc.) means carrying out a new
inventory, evaluation and identification of opportunities for improvement. Repeating this
process from the beginning is just as costly and time-consuming as the first time.
CIOs need the appropriate tools to manage their assets, which could consist of thousands of
applications used in numerous subsidiaries worldwide, and based on a range of technology.
Today, it is impossible to imagine an accounting department trying to function without accoun-
ting software or a human resources (HR) department without specialized HR tools. Why should
a CIO try to work without a portfolio management solution?

APM should be an integrated process rather than a

siloed approach. The benefits of structuring APM
in this manner become measurable throughout the
life span of the IT department, as application main- Hardware
Projects
tenance fees may decrease year to year, or as staff Assets
time may be devoted to newer and more important
IT
initiatives rather than old application support. Portfolio
To support a sustainable, ongoing evaluation pro-
cess for application portfolios, simultaneous activi- Network
Applications
ties must be carried out to set up an organization, Assets
process, governance and toolset, both appropriate
for the organization and flexible enough to function
through change.

Adopting an Application Portfolio Management Approach – © MEGA 2014 5

 II.  Key principles of a sustainable APM approach:

1.  Main activities of APM

The APM program must analyze the effectiveness of the existing application portfolio in order to
identify the best options for improvement, which could mean application retirement, migration
or adaptation for selected applications. It must also identify risks linked to these changes, such
as end of support for applications, gaps in skills, and more.

To reach these goals, the APM process must include:

1.  Portfolio review and analysis carried out by cycle, and covering objectives, issues and
IT/business priorities. This review will suggest improvements that can be quantified and
prioritized.

2.  Application portfolio governance for proactive and ongoing portfolio management. This
provides a common framework for reviews of the portfolio using standardized evaluation
criteria, rationalization objectives, and IT transformation rules. It enables comparative
analyses and ensures comprehensive portfolio management.

3.  Support Activities, which may include

–– APM training for portfolio managers
–– the provision of specialized APM tools
–– enterprise-wide communication of APM results
–– technology development monitoring

6 Adopting an Application Portfolio Management Approach – © MEGA 2014

 Main Activities of the APM Process

APM Process
Review & Analysis of the Application Portfolio

Inventory Evaluation Transformation

– Plan
– Collect application info
(questionnaires, interview,
and documents)
– Complete the repository
– Verify, compile information
– Validate application details
with application managers
– Score applications (value, – Identify and characterize Prioritized proposals
risks and costs) and classify opportunities for for improvements,
them: invest, migrate, transformation/proposed
replacements,
eliminate… roadmap retirement of
– Analyze the portfolio – Prioritize and quantify applications
(recommended actions, terms of the business case
critical oversight points:
skills, technologies, etc)

IT transformation
Periodic review cycles for
Arbitration
projects
ongoing alignment and
improvement Arbitration, Staffing,
Validation of Planning, Execution
Governance framework of recommendations and Oversight
the application portfolio

Governance of Application Portfolios

– Identification of changes for inventory maintenance – Arbitration of
– Identification of major changes (business/IT) that might transformations
Project feedback
impact plans/integration of the business/IT strategy (master – Measuring results of (renewed
plan) transformations/application applications)
– Taking architecture rules into account portfolio rationalization
objectives

2.  Defining roles and responsibilities for APM

Distinct categories of stakeholders are involved in APM and roles should be adapted to each
organization. In practice, one individual in the organization might play several roles, depending
on the size and complexity of the company.

APM Sponsor (in charge of all company application portfolios)

Responsibility –– the entire application portfolio (budget, performance and timeframe)

Main actions –– sets targets for the rationalization and optimization of the application port-
folio
–– coordinates the team of application portfolio managers and sets their targets

Candidate within –– CIO

the organization –– Enterprise Architecture Practice Leader

Adopting an Application Portfolio Management Approach – © MEGA 2014 7

 Application Portfolio Manager (in charge of a single portfolio)

Responsibility –– the ‘health’ of his/her application portfolio

Main actions –– ensures the quality of information of the portfolio

–– mobilizes the appropriate individuals for the inventory update and scoring
of applications
–– has a clear view of all ongoing projects in the portfolio
–– performs and coordinates the evaluation of the portfolio in order to identify
options for optimization/rationalization
–– prepares the business case describing and supporting transformation ini-
tiatives to perform and defends it before the application review committee

Candidate within –– member of the enterprise architecture team

the organization –– representative of a regional and/or functional IT field, such as corporate
applications

Application Owner

Responsibility –– ensures that the application is in adequate operating condition

–– functional development of application responds to business needs
–– documentation is up to date
–– application performance

Main actions –– provides inventory information related to the application under their res-
ponsibility
–– mobilizes appropriate individuals (business manager, support) to update the
application record if needed

Candidate within –– Project manager

the organization –– Application owner

Other Participants

Responsibility –– provides information related to the applications or their evaluation

Main actions –– provides inventory information related to the applications within the scope
of their responsibility
–– mobilizes other individuals (business manager and support) to update the
application records with relevant information

The following participants may be requested to contribute, as required, by the application owner and/
or directly by the portfolio manager (for example, for applications evaluation)

8 Adopting an Application Portfolio Management Approach – © MEGA 2014

Infrastructure –– provides information on infrastructure (servers, hosting sites, etc.) and tech-
Manager nology components (e.g. SQLServer, IIS and Oracle) required for the suc-
cessful operation of the application

Finance Manager, –– provides cost models applicable to applications

Management –– provides cost information for specific applications
Control

Business Manager –– provides or validates information related to the business coverage of applica-
tions, such as evaluations on user satisfaction and level of business support

Enterprise –– ensures alignment with the target architecture and compliance with archi-
Architect tectural standards and modelling rules. Enterprise architects may provide
experience and best practices gathered from enterprise architecture projects

Supplier Manager –– oversees the performance of providers and fulfillment of service level agree-
ments (SLA)

Support / –– provides information on the history of major incidents related to applications

Maintenance and the difficulties encountered during the IT operations of applications
Manager

Risk Manager –– provides information highlighted by risk assessments or business continuity

plans, such as necessity and recovery time objective (RTO)

Application Review Committee

Responsibility –– decision making body, chaired by the CIO and composed of IT and business
representatives and key stakeholders of APM

Main actions –– agree on joint objectives, scope and limitations (budget and priorities) in IT
transformation
–– validate and prioritize opportunities for rationalization and transformation of
the portfolio presented by the application portfolio manager

Composition –– CIO
–– Enterprise architecture practice leader
–– Business representatives
–– Portfolio manager/infrastructure manager
Additional members may be added depending on the needs and agenda of
the committee.

Adopting an Application Portfolio Management Approach – © MEGA 2014 9

 3.  Establishing governance of the application portfolio
APM governance is intended to provide a common framework for application portfolio reviews
and ensure comprehensive control.

They key principles of APM governance include:

–– establishing the frequency of reviews and analyses
–– enabling the synchronization of APM activities with other processes the CIO coordinates at
the same time, such as IT architecture or management of project portfolios
–– monitoring the performance and results of transformation projects resulting from APM
activities and comparing them with the initial objectives
–– identifying major business or technology changes that could have an impact on APM analyses
and transformation plans
Governance of APM depends on many factors:
–– the business and IT strategy
–– technical architecture and technology standards
–– current and target enterprise architecture
–– conclusions of application portfolio reviews for decision-making
–– project feedback
The main body in this governance process is the application review committee.

4.  Choosing the cost analysis model

One of the basic decisions at the outset is the cost structure that will be used in the APM solu-
tion. This involves finding the right balance between the level of information detail that will
make it possible to make informed decisions and the time necessary to obtain and maintain
this information.

There are two primary cost models: total cost of ownership (TCO) and relative cost of operations
(RCO).

The TCO model is the most commonly used. It calculates the total cost of an IT asset, from
acquisition or development of the solution to its retirement. TCO includes:
–– annual hardware and software maintenance costs
–– lease or lease-credit costs if the hardware is not bought outright by the company
–– insurance
–– installations and migrations
–– procurement/purchase and IT asset management
–– product monitoring and testing
–– costs linked to equipment reconditioning

10 Adopting an Application Portfolio Management Approach – © MEGA 2014

 Total Cost of Ownership Model

Infrastructure
(service) Infrastructure
Infrastructure Licenses (service)
Operating costs (service) (maintenance) Personnel / Service
Personnel / Service (operation)
(operation)

Infrastructure
Licences
Investment costs (procurement)
(acquisition)
Personnel / Service
(development)

Application Preparation Production Retirement

Life cycle

Other organizations prefer the RCO, a simpler model recommended by Forrester Research. It is
short of a complete TCO analysis, but provides more information than a return on investment
(ROI) calculation. RCO is used by IT organizations to compare the impacts of several options
using relevant inputs, but using fewer resources than required to conduct a complete TCO ana-
lysis. RCO can be used to evaluate cost impacts of changes to the application portfolio.

Adopting an Application Portfolio Management Approach – © MEGA 2014 11

 III.  Moving from inventory to transformation
Portfolio reviews and analyses are conducted in order to prioritize suggested options about the
future of each application. These reviews and analyses consist of three main activities:
–– application inventory
–– evaluation of opportunities for improvement
–– transformation planning
A business case groups all of these elements together and helps validate the decisions on which
initiatives to implement.

1.  Inventorying applications Review & Analysis of the Application Portfolio

What does the inventory involve? Inventory Evaluation Transformation

The collection and verification of information gathered from different sources is the founda-
tion of the application inventory, the key element for analysis, cost reduction, identification of
opportunities for improvement and choice of investment.

The application inventory consists of:

–– a list of portfolio applications
–– a set of data and information for each application (name, application ID, functions supported,
geographical use, etc.) with a single ID enabling the cross-reference of information from
multiple sources
–– a set of quantitative and qualitative characteristics used in the different application reviews.

Examples of application information include:

Category Examples
General Information Name, ID description, status, age and type
Responsibilities / Organization User / owner / manager
Functional information Business necessity, processes supported, functions supported and
capacities
Usage Number of users, user entity, frequency, availability and deployment
site
Technology Database technology, programming language, security and status of
technical documentation
Integration Application interfaces, incoming and outgoing (number)
Support Number of support FTEs and incident count
Costs Fixed costs and periodic costs (support, licenses and hardware)

Collecting this data involves interviewing IT and business subject matter experts and having
them formally validate the information that will be used for analysis.

12 Adopting an Application Portfolio Management Approach – © MEGA 2014

The following separate operations are then performed:

1. Planning and preparing data collection

–– identifying sources of information, such as spreadsheets, APM tools and asset
management tools, and any existing collection processes; for example, surveys via email
or intranet
–– validating the data collection approach
–– ensuring that the tools in place enable optimum information collection

2. Collecting data
–– collecting information using questionnaires and interviews
–– organizing and cleaning data, then capturing it in the repository; once this is complete,
providing initial reports to interviewees to validate the information
–– sharing the progress of data collection with executives using dashboard summaries

3. Verifying the data in the application inventory repository

–– verifying the accuracy of information captured in the repository by performing calculations
and aggregation of data
–– comparing information from the repository with what is commonly known within the
organization
–– making the necessary corrections and obtaining a formal validation of the information
from the subject matter experts

Adopting an Application Portfolio Management Approach – © MEGA 2014 13

 2.  Evaluating the portfolio to identify Review & Analysis of the Application Portfolio

opportunities for improvement Inventory Evaluation Transformation

What does the evaluation of the application

portfolio involve?

An analysis of the information collected through the different analysis criteria enables the
evaluation of the portfolio and identifies the subsequent actions to be taken about individual
applications.

Portfolio Evaluation Elements

Business value
– Aligns with the new
business strategy/
operational needs
– Contributes to growth of
revenue
– Improves operational
TCO costs effectiveness, reduces Technical
costs, risks
– Operating and support
efficacy
– Necessity for the business
costs
– Maintenance and – Performance
development costs – Flexibility
– Costs of licenses – Ease of maintenance
– ... Application – Configuration flexibility
Portfolio – Security

Functional Data
condition – Quality
– Usability – Accessibility of data
– Availability – Ease of maintenance
– Productivity – Flexibility

From the inventory information, applications are scored according to each of the chosen ana-
lysis criteria. The evaluation is collective, with the portfolio manager coordinating the efforts.

As with the inventory collection process, the application portfolio manager gathers the scores
from different individuals, using the same collection tools: Excel, Intranet survey, APM tool, or
others.

A pre-defined score sheet sets a company standard for the entire portfolio, leaving as little room
as possible for subjectivity.

Consolidation of scores and cross-referencing of criteria support the classification of applica-

tions. Applications may be categorized based on their importance to the business. This type of
analysis ensures that the most important investments and expenses (maintenance and develop-
ment) are indeed focused on the most critical applications.

14 Adopting an Application Portfolio Management Approach – © MEGA 2014

The first recommendations for improvement of the portfolio can then be made.

The use of graphs and diagrams facilitates the analysis of information and allows effective deci-
sions on the best options for application modernization.

Different analysis perspectives

The primary actions on applications can be grouped into six categories:

Action Reason for Action

Retirement Applications with little value to the organization or impact on the business, such as
those that are seldom used, not critical, replaceable by any existing application or
have excessive maintenance costs
Replacement Applications important to the business but with functional shortcomings and/or
faults in terms of technology quality
Migration Applications adding real value to the business, but their operational performance
is poor, whether they fail to meet technological standards, need to re-engineer the
application platform or required a code review
This is also the case when competent resources to support the application are
scarce, such as when provider support may be at risk for interruption
Re-prioritization Applications whose level of support and maintenance has been over-estimated in
relation to business needs
Re-localization Applications that are candidates for other sourcing methods, perhaps leasing or
SaaS
Maintain High value for the business/technical efficiency

Adopting an Application Portfolio Management Approach – © MEGA 2014 15

 3.  Proposing transformation Review & Analysis of the Application Portfolio

initiatives Inventory Evaluation Transformation

What does this analysis involve?

Recommendations made during the previous phase must now be analyzed in greater detail, in
terms of time planning, costs, risks, benefits and impact.

The preparation of a business case encompassing all of these elements is an essential delive-
rable because it will enable decision makers such as the application review committee or mana-
gement to make informed decisions regarding initiatives and projects to be in the budget. The
CIO must filter the projects using specific, pre-defined criteria. The business case justifies the
investments needed for transformation initiatives, evaluating the benefits generated in terms of
operational performance, improvement in services offered to the business and cost reduction.

Based on the collected information and recommendations, it is appropriate to further refine the
assessment of impacts and risks of high-priority actions.

There are key questions that should be answered before applications are retired or changed in
some way:
–– What would be the impact on the application interfaces?
–– Which functionalities would no longer be available?
–– What would be the impacts on current projects?
–– What impact would these changes have on the IT roadmap?
Before final decisions are made, all of these questions must be answered in order to predict the
full impact of projects.

A prior analysis of transformation scenarios ensures the right decision is made based on the
organization’s capacity for change. This reduces the financial, organizational and human risks
of transformations.

Recommandations ranking

Preliminary
recommendations
1
Prioritization criteria
Business value
Implementation cost
2
Recommendation
grid
3

Weak Strong
Implementation cost

16 Adopting an Application Portfolio Management Approach – © MEGA 2014

Simple tools (see grid p.16) are available to set the priorities of different options: quick win
priorities (high impact, low effort), key recommendations, etc.

In some cases, several transformation scenarios may need to be considered. To do this, and to
have access to all available decision-making elements, APM solutions provide a wealth of tools
and maps to show different options for the future of the lifecycle (for example, retirement date
in the short or long term) and to help in selecting the target roadmap.

APM solutions can also help compare the different transformation scenarios according to prede-
fined analysis criteria (costs, risks, business, etc.) based on business and IT strategies.

Example of a comparison between two scenarios:

Adopting an Application Portfolio Management Approach – © MEGA 2014 17

 Preparation of a business case that encompasses all of these elements will allow sponsors to
agree on decisions regarding which initiatives to implement.

An example of a business case would be:

1. Executive summary
2. Objectives of the business case
2.1. Objectives
2.2. Scope
2.3. Hypotheses
3. Findings on current development areas
3.1. Key business factors
3.2. Key technological milestones
3.3. Description of the current situation
4. Conclusions of the technical evaluation
4.1. Application map
4.2. Technical infrastructure
4.3. Specific needs
5. Recommendations
5.1. Modernization and maintenance proposal
5.2. Other alternatives
5.3. Proposed application map
5.4. Technological recommendation
6. Cost/benefit analysis
6.1. Risk assessment
6.2. Costs
6.3. Benefits
6.4. Value proposal

18 Adopting an Application Portfolio Management Approach – © MEGA 2014

IV.  Adopting the best APM approach

1.  A project in its own right

Management of the application portfolio is not a siloed initiative but a process with its own deli-
verables and integrated activities. It has clearly defined roles and responsibilities, management
indicators, governing bodies and information system (the APM solution).

APM implementation should be understood as an independent project to ensure its success.

The process needs to be carefully designed since the integration of an APM solution is a key
element of the approach.

2.  Key factors for successful APM

Several actions will ensure the successful adoption of an APM project, including:
–– Defining quantifiable cost targets and monitoring the ROI of the APM approach (e.g. 10%
reduction of application maintenance costs per year over five years).
–– Defining the basics effectively: organization, data structure of the APM solution, expected
analysis, etc.
–– Establishing an incremental scope
• Storing just the right amount of information in the APM repository to facilitate inventory
maintenance.
• Performing a pilot project on a realistic number of applications (from 50 to 100) to test
the toolset, process and organization, as well as to validate the benefits of the approach.
• Setting up a simple toolset initially (Excel list, APM software package with a limited
range of implemented functionalities, etc.) and then refining this as the organization
gains experience. Later, the company can integrate a larger number of functionalities
and analyses into the APM software package and focus on interfaces between the APM
solution and other asset knowledge management solutions such as CMDB tools, or PPM,
project management tools, etc.)
–– Driving and facilitating change
• Establishing clear responsibilities for the APM team, expected contributions, governance
structure, etc.
• Putting in place adapted tools for each stakeholder: score charts for the CIO, analysis and
decision-making tools for portfolio managers, information capture forms for application
owners, etc.
• Managing resistance to change. The request for information about applications to
application owners may be perceived as unproductive or even disruptive. It is important
to emphasize the contribution and benefits of APM for management and operations.
–– Setting up control points for information in the repository and gains achieved by the system
(verification, during application reviews, on delivery of projects and update campaign
depending on APM priorities)

Adopting an Application Portfolio Management Approach – © MEGA 2014 19

 –– Not re-inventing the wheel
• If no in-house resource with the required skills in the field of APM is available, there
are many options for expert assistance in consulting firms. They can help provide more
visibility to support the implementation of APM more effectively.
• The adoption of specialist APM software will make help the initiative benefit from
ready–to-use and well-established information models for the management of APM data,
analysis, profiles and pre-configured workflows. This will speed up the implementation
phase and help avoid over-dependence on an external provider.
To sum up, the following phases are recommended in the implementation of the APM process:

– Integration of the business/IT strategy

Defining – Definition of APM objectives/main evaluation criteria
APM objectives – Identification of existing information
– Definition of the scope of applications/ pilot project

– Organization: sponsors, APM team, contributors and committees

– Analysis tools: time and grids
Defining
– Information model, attributes, application keys and definitions
the fundamentals – Reference nomenclatures: process/capacities
– Preparation of the toolset: MEGA APM, imports, etc.

– Collection of application information/initialization of data

– Review and evaluation of information with application managers
Review of the (business applications, technology and risks)/financial evaluation
application portfolio – Analysis of redundancies/divergence from standards
in the scope – Proposed optimization opportunities/prioritization
of a pilot project – Review of evaluations and alternative changes
– Business case of transformation proposals (budget and planning)

– Implementation of governance of the APM: roles, committees, etc.

Preparation – Automation: collection/evaluation/decision-making process
for roll-out of – Improvement of tools: interfaces (PPM, CMDB, EA, etc.)
the APM – Training/change management
– Establishing oversight of ROI

These phases are usually completed in two to three months.

3.  Organization of application portfolios and case studies

To effectively manage an application base, it is necessary to organize it into several portfolios

on a human scale, since application sub-portfolios are the responsibility of portfolio managers.
The grouping of applications into portfolios is generally performed within the functional domain
of the company’s IT (e.g. CRM, HR manager, etc.), by geographical area (e.g. manager for Asia
or Europe), for single-department applications, or according to the organization in place (e.g.
applications in the business export line).

20 Adopting an Application Portfolio Management Approach – © MEGA 2014

Below are some cases that illustrate these principles:

Case International company of 3,000 people across three continents / Media

sector

Context –– newly established corporate CIO

–– target: reduce the number of applications by 35%
–– implementation of SAP (replacement of existing applications)
–– recent merger with a new company

Key figures 800 Business applications / 100 people under the CIO

Organization 15 Portfolio managers responsible for 15 application portfolios broken down into:
of application –– 1 portfolio by cross-sector application: Finance
portfolios –– 8 portfolios by regions: USA, UK, Germany and France
–– 6 portfolios by functional cross-sector: management of rights, management of
the logistics chain and management of catalogues

40 application managers

Governance –– CIO committees: bi-annual / Application review committees: quarterly

–– program led by the enterprise architecture department

Case International company of 100,000 people / Tobacco industry

Context –– implementation of SAP and replacement of existing local applications

–– goal is to reduce the number of applications by 50% over 5 years
–– APM and enterprise architecture plan performed jointly

Key figures 3,000 business applications

Organization 40 application portfolio managers broken down into 40 portfolios by geographical

of application area: Southern Europe, Eastern Europe and Canada
portfolios

Governance –– portfolio review committees: monthly

–– program led by the group architecture department

Case International company of 3,500 people / Financial Sector

Context –– recent implementation of an enterprise architecture system

–– activity ased costing (ABC) system with a cost reduction target

Key figures 350 applications / 200 people under the CIO

Organization 10 Portfolio managers responsible for 10 application portfolios broken down into
of application 10 portfolios by business line: markets, monetary funds and real estate
portfolios

Governance –– program led by the enterprise architect department

–– participation of management control

Adopting an Application Portfolio Management Approach – © MEGA 2014 21

 V.  Conclusion
A sustainable APM approach is no longer a mere “nice-to-have” in the CIO’s toolset, but a key
element to effectively manage assets and the transformation of a company’s IT system.

A clear view of existing applications is a prerequisite for any plan to rationalize and develop IT
systems. APM is the process by which the CIO ensures proper understanding of applications and
makes effective decisions to develop application portfolios.

The information to be collected in terms of portfolio optimization criteria is quite large, so cri-
teria must be adapted to each company. These may include cost, sustainability of the vendor,
legal constraints, user satisfaction, ease of adaptation for future needs or respect for architec-
tural principles. For the different stages of the APM process, the stakeholders, decision-making
bodies and the software solution to be used must be defined and adapted according to the
specific requirements of the company.

Adopting a sustainable APM solution, integrated into other major IT transformation processes,
provides the CIO with a powerful governance tool. It also facilitates better communication
throughout the company about IT resources.

22 Adopting an Application Portfolio Management Approach – © MEGA 2014

About MEGA
MEGA International is a global software solutions company that supports large com-
mercial organizations and government agencies in managing their enterprise com-
plexity by delivering an interactive view of the business. We provide business leaders
with the necessary visibility and information for improved decision-making. Our solu-
tions help companies optimize and transform operations, and ensure that they are
continuously managed in alignment with the organization’s business strategy and
objectives. Today more than 2.700 companies in 40 different countries are using our
solutions.

For more information, visit: mega.com

If you’re looking for a way to improve your Application Portfolio Management,

visit: mega.com/apm

Adopting an Application Portfolio Management Approach – © MEGA 2014 23

www.mega.com © MEGA 2014