Application Portfolio Management: 6 Key Elements for Success

What is application portfolio management? 

Simply put, APM is a business process that provides a structured way to manage all technology assets. It covers everything from an inventory of all those assets, along with the relationships between them and business capabilities, to the active management of the lifecycle of applications from ideation to retirement and replacement. APM supports improved decision making, helps understand and manage total cost of ownership (TCO) and guides strategic investment decisions for the organization. In addition to supporting IIPA, application portfolio management is an effective decision support tool around technology and business investments. It also provides active portfolio management in support of the organization’s strategic objectives and roadmap. 

Application portfolio management also ensures that there are the right number, and the right mix, of applications to support an organization, now and in the future. APM enables rationalization of the application and optimization of technology in all major metrics – functionality, value, and future planning and roadmapping. Finally, APM also allows organizations to manage regulatory and audit compliance, providing the ability to identify, assess and manage risks across business applications while formally tracking and demonstrating compliance to regulators. 

6 key elements of effective application portfolio management 

Application portfolio management must start with an accurate and complete picture of the technology assets in an organization. But that’s only the start. It needs to also include the effective leveraging and management of that information in support of the business. Let’s look at each of those elements in more detail. 

1. Complete an inventory of IT assets and characteristics 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. 

Organizations are almost assured to have islands of technology – one-off applications that have been forgotten by the enterprise at large but that still exist on standalone servers under desks.  These applications are only used occasionally by a handful of individuals but still perform critical functions, or at least functions that are perceived to be critical. 

Shadow IT has become an increasingly significant problem for many organizations. The growth of service-based IT has allowed business departments to pursue their own technologies outside of the control of IT departments, resulting in applications and integrations that aren’t fully controlled or understood. In some cases, IT may not even be aware of their existence. 

The technology inventory must include all these assets regardless of where they reside, as well as the key characteristics of those assets. That will need to include technical information (versions, platforms, integrations, etc.) as well as business information (departments, functions, and capabilities supported; business ownership; usage; etc.). 

2. Implement processes and tools to ensure the inventory can be maintained effectively and efficiently 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. 

Technology today is highly dynamic and fast-paced, that’s one of the main drivers of application portfolio management. Organizations are looking to create an environment where the technology landscape can be proactively managed to take advantage of emerging opportunities and respond to new threats. 

As a result, it is essential for organizations to not only build their application inventory, but also maintain it with total accuracy in an effective and efficient manner.  That requires the kind of continuous management that can only come from application portfolio management solutions; it can’t be delivered using manual approaches and spreadsheets. 

Application Portfolio Management tools must favor automated updates and management rather than manual intervention wherever possible and must be integrated with the rest of the organization’s information management. In particular, APM must support strategic portfolio management (SPM).  SPM is the only effective approach to successfully ensure strategic planning, investments, execution, and benefits realization are all achieved consistently and completely.  APM must feed SPM, as part of the IIPA process that we referenced earlier in this guide. 

3. Analyze, assess, and rationalize the technology portfolio 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. 

When an organization first develops its application inventory, that inventory will inevitably reveal areas of excessive technical debt, outdated and obsolete applications, duplicated and overlapping assets, solutions that are no longer aligned with business needs, etc. All these areas of concern impact the ability of an organization to consistently optimize business value, and all require understanding and addressing. 

That understanding must establish several different factors: 

Functional redundancy. It’s not enough to understand application redundancy and overlap, there must be meaningful insight into the specific business functions where redundancy exists, as well as the different criteria that impact the nature of that redundancy. 

Capability gaps. The opposite of redundancy, organizations must understand where key business capabilities are underserved by the current technology landscape, and, where those gaps align with key strategic priorities. This analysis must also consider areas where addressing those gaps is resulting in ineffective and / or inefficient use of technology, driving costs, risks, and technical debt. 

Strategic alignment. Organizations must understand which elements of their application landscape are really driving performance, and which aren’t. Applications that are not supporting key business capability priorities must be managed differently to those applications that form a key part of current and future strategic priorities. 

Technical debt. Technical debt is a complex consideration that organizations must fully understand to manage effectively. Organizations need insight into what level of technical debt is appropriate to balance the need for progress with the need to manage risk. They need to develop and implement plans to manage that debt and understand the implications on other priorities of that management. 

Only when organizations have this level of insight can they develop plans to rationalize the application portfolio and address the challenges with appropriate technology investments. At the same time, organizations must recognize that this analysis is fluid, continuously changing due to shifting business landscapes and priorities as well as advancing technological capabilities. As a result, organizations must support these analysis efforts with technology roadmapping tools that automatically update to reflect those applications that are at (or beyond) end of life, those that require greater investment, those that need to be put on a path to replacement, etc. 

With a complete and actively managed analysis capability, those roadmapping tools allow organizations to understand not just where applications require actions, but how those actions impact the ability of the business to deliver current and proposed capabilities. Those plans can then integrate with the organization’s technology lifecycle management solutions to create and manage all applications to the timelines for retirement, replacement, updating, etc. 

4. Synchronize technology and business roadmaps 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. 

The application portfolio doesn’t exist in isolation, it must support the current business capabilities as well as the strategic business roadmap and objectives. While effective application portfolio management is a critical tool in managing the enterprise architecture around technology and business capabilities, where it really springboards an organization is by integrating with the strategic business roadmaps. 

To ensure optimal alignment between technology and business functions, application portfolio management and the larger concept of IIPA must align. This directly ties APM with strategic portfolio management and helps ensure investment decisions, work prioritization, project portfolio management (PPM), and project delivery all address both the issues and opportunities identified in the application inventory, and the strategic imperatives of the business. 

PPM tools, and by extension the work elements that make up the project portfolio, become the execution vehicle for the decisions made within APM. The relationship between project and application portfolios is essential to APM success, and to the ability of the organization to achieve its goals. As a result, APM and PPM must be managed in parallel, as elements of SPM, to ensure there is complete alignment at all times and that changes and adjustments are reflected in both as quickly and efficiently as possible. 

When the application portfolio is tightly aligned with the strategic priorities of the organization, and the portfolio of investments that are being pursued in support of those priorities, it is much easier for an organization to optimize performance in all areas. There is a direct connection between capabilities and value, much clearer insight into the direction that technology evolution must take, and much greater confidence in all technology related decisions. 

Critically, this alignment supports business agility, which is an essential capability for organizations looking to transform their business and better leverage digital assets to achieve consistently higher levels of performance and deliver greater value to their customers and themselves. 

5. Align applications to business capabilities, services, and products 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. 

As an extension of synchronizing technology and business roadmaps, organizations must begin to view their application portfolios as an extension of that business. Increasingly SPM is driving organizations to take a product, service or even business capability-based perspective to managing their business. That means establishing strategic priorities, objectives and investments directly aligned to the specific capabilities that the organization is trying to develop, expand or improve. 

Ultimately the applications used by an organization must also support those capabilities and understanding the relationship between function and software is essential. Applications shouldn’t exist simply to meet tactical needs of the business, nor even to address departmental priorities that don’t optimally align with the enterprise-wide priorities.  Instead, they must be driven by the key business capabilities that are the goal of all strategic investments. 

More than that, managing the application portfolio to consciously support the development and enhancement of those capabilities helps ensure the best possible alignment between business needs and APM. That in turn will ensure that application investments are always optimized in terms of not just current business value, but also future priorities. 

6. Continuously manage current and target application portfolios to ensure alignment 

As organizations have found out, developing an inventory of assets is much harder than it might initially appear. The reason that inventories don’t already exist is that changes to the IT landscape happen in multiple different ways, not always driven by IT. Completing an accurate assessment of the application portfolio is essential, and developing roadmaps that reflect the required target application portfolio to meet business needs is a critical element of successful SPM. But the work doesn’t end there.  

Organizations must develop the ability to continuously attest to the maintenance of that alignment – ensuring that all required applications remain in place and effective, that no unmanaged technology expansion is occurring, and that all changes align with the roadmap from current state to required state. Achieving that requires an integrated approach to APM that builds on the other elements we’ve discussed in this section. 

Why is application portfolio management important? 

In many organizations it is very difficult to develop an accurate and complete picture of digital assets. From ‘forgotten’ and outdated software applications to shadow IT investments, to the use of spreadsheets to try and track everything, there simply isn’t a complete understanding of what exists. Even in organizations where efforts are taken to develop that understanding, it ends up being a snapshot in time that quickly becomes outdated through a lack of maintenance and management. 

That means it is very difficult to successfully implement cloud strategies, address vulnerabilities and optimize TCO. It also makes it harder to drive technology simplicity and efficiency, enable technology integration and collaboration, and understand system and data dependencies.  More significantly, if an organization doesn’t understand the assets it has, then it can’t possibly understand how those assets support – or don’t support, business capabilities and drive business value today and business priorities tomorrow. 

By extension, the organization cannot optimize investment and management decisions to ensure that technology is always enabling the highest level of business performance. It can’t eliminate unnecessary technical debt and confirm that IT expenditure is driving the right results. That’s a serious problem that must be addressed. For highly regulated industries, accurate and complete application portfolio management is essential. They need to be able to demonstrate that they have total control over the systems, data, and information that they are custodians of, and that there are appropriate safeguards in place to ensure the security and privacy of that information. This is an element of APM that is becoming increasingly important to all organizations due to increasing cybersecurity threats and the ever-increasing amount of private information that is stored in enterprise systems. 

Application portfolio management vs application rationalization 

For many organizations, the primary initial purpose of APM is to rationalize their portfolio of applications, solutions, and software. Faced with overlapping, duplicate, and redundant applications, they seek to reduce the number of pieces of software within the application portfolio by eliminating those that are no longer appropriate or that don’t optimally support business needs. 

This is application rationalization, and it is a necessary first step in effective application portfolio management.  However, it is only that – a first step. It is a one time, or at best a periodic ad-hoc, activity that must then be followed by a more comprehensive, strategic, and ongoing APM approach to prevent the same problems of redundant, unnecessary applications from happening again. Ensuring that APM is a continuous discipline to manage applications helps ensure that there is always an optimal mix to meet the current and emerging needs of the business. 

Understanding the challenges with application portfolio management 

Many of the challenges around application portfolio management can be tied back to the inability to manage digital assets effectively and efficiently. The combined reliance on manual maintenance of information, and the absence of the right tools for the job, result in the application inventory being a one-time exercise or, at best, a periodic snapshot. Without an accurate, complete, and current inventory feeding the application portfolio management process, it can never be successful. However, organizations also experience some significant challenges even after they have developed an inventory and implemented tools and approaches to manage that inventory. It’s vital to have an enterprise architecture solution to provide a view of the application portfolio to develop a roadmap for rationalization and modernization. 

That requires an effective technology roadmap and strategy to be in place – something which doesn’t always happen. It also requires that technology roadmap to align with the business capability map that an organization will have developed as part of its business architecture best practices. That then supports alignment between the strategic business roadmap and the technology roadmap. This is an area where many organizations continue to struggle. Finally, organizations struggle to convert application portfolio management into actions through effective execution. The ability to consistently select, manage and deliver the right investments to enhance the digital portfolio while supporting business capabilities and objectives remains difficult for many – especially across the tri-modal reality. 

Delivering world-class application portfolio management 

APM cannot succeed in isolation. It requires organizations to fundamentally recognize the relationship between technology and the ability to deliver on strategic priorities. It also requires an understanding of the inefficiencies and ineffectiveness that currently exist in most organizational technology infrastructures.  When that understanding is there it should also be obvious that world class APM requires world class software solutions. You can’t maintain an inventory in a spreadsheet and you can’t use a standalone diagramming tool to visualize relationships between capabilities and applications. 

Instead, organizations need integrated, automated solutions that tie all these elements together. Within the framework of an integrated strategic portfolio management solution, organizations must be able to tie together their application inventory with technology and business roadmaps, business capability maps, value stream maps and investment portfolios. 

They must then be able to tie specific technology investments back to the required adjustments to the application portfolio and validate performance with tangible metrics to confirm value.  With the right tools, the right approach, and the right mindset, APM can ensure organizations are able to transform to digital businesses that are set up to succeed today, and in the future.