Application Portfolio

Management

Reference: IT Strategy (J.D. McKeen & H.A. Smith)

What is Application Portfolio
Management (APM)?

APM is the ongoing management

process of categorization, assessment,
and rationalization of the IT
application portfolio.

APM allows organizations to identify

which applications to maintain, invest
in, replace, or retire (i.e., avoid
maintaining applications quagmire).
What are Applications Quagmire?

Built-over-time application systems that

support the key operations of the
organization.

They are often obsolete and

unsupported by any vendor; host to
countless “workarounds”; remain poorly
undocumented; are often duplicated.
Issues with Applications Quagmire

More than 80% of IT spending is used

in these applications.

Line-of-business managers are

reluctant to change these applications
to avoid the agony of change.

They restrict the enterprise vision of

IT.
The Solution: A Portfolio Perspective

This perspective evaluates the existing

applications (i.e., the applications
portfolio) against a set of potential
applications that can be used across
business units (i.e., the project portfolio).
The Solution: A Portfolio Perspective
Continued

Application portfolio – identifying

the value of existing applications
against corporate profitability, stability,
usability, and technical obsolescence.
The Solution: A Portfolio Perspective
Continued

Project portfolio – identifying the

value of future spending on
applications, attempting to balance IT
cost-reduction efforts and investments
to develop new IT capabilities.
Benefits of Application Portfolio
Management (APM)
Visibility into where money is being spent,
which provides the baseline to measure value
creation.

Prioritization of applications across multiple

dimensions – value to the business, urgency,
and financial return.

A mechanism to ensure that applications map

directly to business objectives.
 Making APM Happen – The Capabilities

To deliver value with APM, three interrelated

capabilities are needed:

Capability 1: Strategy and governance.

Capability 2: Inventory management.

Capability 3: Reporting and rationalization.

 Making APM Happen – Capability #1
Strategy and governance
“If strategy is the destination, then governance is
the map”

Application portfolio governance answers this:

What decisions need to be made?

Who should make these decisions?

How are these decisions made?

Making APM Happen – Capability #1
Strategy and Governance Continued

Positioning APM within an enterprise IT governance

framework
Making APM Happen – Capability #1
Strategy and Governance Continued
Common barriers during initial phases of
APM:

Lack of accountability in the

governance process (i.e., what
governance practices should be
applied).
Application assessments are not taken
seriously.
Business managers lack awareness and
Making APM Happen – Capability #2
Inventory Management

Identification of applications to be
included in the portfolio to be managed
(e.g., limiting the portfolio to business-
critical applications).

The inventory is determined by the

strategy and governance outlined in
capability #1.
Making APM Happen – Capability #2
Inventory Management Continued
The identification can start by gathering
the following information about
applications:

General application information (i.e.,

functionality).

Application categorization (e.g.,

business capability provided, life cycle
status)
Making APM Happen – Capability #2
Inventory Management Continued

Technical condition (e.g., development

language, operating system,
architecture).

Business value (e.g., business criticality,

user base, effectiveness).

Support cost (i.e., maintenance and

upgrades).
Making APM Happen – Capability #3
Reporting and Rationalization

A set of standard parameter-driven

reports should complement the
application inventory.

Reports help to monitor the status of all

existing applications so that
management
can ascertain the health of the portfolio
applications.
Making APM Happen – Capability #3
Reporting and Rationalization Continued

Reports should
compare
applications on
the basis of
business value,
technical
condition, and
cost.
Making APM Happen – Capability #3
Reporting and Rationalization Continued

The reports should provide

information to meet the needs of
various stakeholders.
IT • Mapping and assessing business
organization functionality against applications
Risk, audit, • Assessing regulatory compliance and
and security risk management
teams
Business • Assessing the costs and business
teams value of the applications used
Key Lessons Learned

Balance demand and supply – regulate

enhancements and releases for APM
reporting.

Look for quick wins – identify immediate

and visible wins that impact the bottom
line.

Capture data at key life stages –

capture data in the approval, testing,
production, modification and retirement
Key Lessons Learned Continued

Tie APM to TCO initiatives together

The information captured by the APM

initiative should support the total cost of
ownership (TCO).

Provide application “end-state” view

Current and future information about

applications are key for business
planning.
Key Lessons Learned Continued

Communicate APM benefits

Communicating the goal of the APM

initiative, the results, and the next
stages are essential for the effectiveness
of the APM.
Conclusions
APM promises significant benefits to
adopting organizations.

The benefits require the development

of three mutually reinforcing
capabilities:
 Development of a strategy but reinforced with
governance procedures.
 Creation of an application inventory.
 Reporting capability built to align the application
portfolio with the strategy.