Application Portfolio Management Introduction and Best Practices (2024)

Dec 27, 2022Paul Estrach Enterprise Architecture

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 By identifying redundant or outdated apps, APM can help organizations save time and resources by streamlining operations and removing non-value-adding applications from their portfolios.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.

Application Portfolio Management Introduction and Best Practices (1)

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.

Application Portfolio Management Introduction and Best Practices (2)

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.

Application Portfolio Management Introduction and Best Practices (3)

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 Introduction and Best Practices (4)

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

  • Map data flows between applications.

Application Portfolio Management Introduction and Best Practices (5)

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 Introduction and Best Practices (6)Get a clear picture of application deployments.

  • Capture the life cycles of applications and their deployments.

Application Portfolio Management Introduction and Best Practices (7)

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

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

Application Portfolio Management Introduction and Best Practices (8)Understand 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.

Application Portfolio Management Introduction and Best Practices (9)

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.

Application Portfolio Management Introduction and Best Practices (10)

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 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

Application Portfolio Management Introduction and Best Practices (11)

Rank 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. 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 that a what-if scenario analysis be performed 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 Introduction and Best Practices (12)Compare and prioritize transformation scenarios based on multiple criteria.

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

Application Portfolio Management Introduction and Best Practices (13)Create an IT roadmap encompassing current and future transformation projects.

Application Portfolio Management Best Practices toAchieve Optimal Results

Critical 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 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 Introduction and Best Practices (14)

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 analyses 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

Application Portfolio Management Introduction and Best Practices (15)

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.

Application Portfolio Management Introduction and Best Practices (2024)

FAQs

What are the best practices for IT portfolio management? ›

Managing an IT portfolio requires four steps: Organize the projects within your portfolio and their key performance indicators (KPIs). Identify the company mission, and establish a prioritization framework. Prioritize the projects and allocate resources. Finally, monitor and review progress continually.

What is application portfolio management? ›

Application Portfolio Management is a framework to identify every IT software applications within the company and to manage these applications in a clear and efficient overview. APM helps the specific managers to illustrate specific business needs or risk within specific departments regarding their IT.

What is portfolio management with an example? ›

Portfolio management is the art of investing in a collection of assets, such as stocks, bonds, or other securities, to diversify risk and achieve greater returns. Investors usually seek a return by diversifying these securities in a way that considers their risk appetite and financial objectives.

What is the PPM strategy? ›

Project portfolio management (PPM) is a strategy that evaluates potential projects by their prospective successes and risks, then designates staff, resources, and timelines in a way that maximizes organizational performance.

What are the 3 key elements of portfolio management? ›

Some individuals do their own investment portfolio management. That requires a basic understanding of the key elements of portfolio building and maintenance that make for success, including asset allocation, diversification, and rebalancing.

What is the primary purpose of portfolio management? ›

The fundamental objective of portfolio management is to help select best investment options as per one's income, age, time horizon and risk appetite. Nonetheless, to make the most of portfolio management, investors should opt for a management type that suits their investment pattern.

What is the difference between application portfolio management and CMDB? ›

In summary, while both APM and CMDB play vital roles in efficient IT management, APM is more strategic, focusing on aligning applications with business objectives, while CMDB is more operational, concentrating on managing IT asset configurations and supporting IT service management activities.

What is portfolio management and how IT works? ›

Portfolio management is the selection, prioritisation and control of an organisation's programmes and projects, in line with its strategic objectives and capacity to deliver. The goal is to balance the implementation of change initiatives and the maintenance of business-as-usual, while optimising return on investment.

What is portfolio management in simple terms? ›

In simple terms, portfolio management is the process of choosing and managing a set of investments to meet the specific financial goals of a company or an individual. There is a science behind selecting the right investment mix for a client and perfectly balancing the risk tolerance.

What are the 5 phases of portfolio management? ›

Steps of Portfolio Management
  • Step 1: Identifying the objective. An investor needs to identify the objective. ...
  • Step 2: Estimating capital markets. ...
  • Step 3: Asset Allocation. ...
  • Step 4: Formulation of a Portfolio Strategy. ...
  • Step 5: Implementing portfolio. ...
  • Step 6: Evaluating portfolio.
Oct 12, 2023

What are the four steps in the portfolio management process? ›

  • Step 1: Assess the Current Situation.
  • Step 2: Establish Investment Goals.
  • Step 3: Determine Asset Allocation.
  • Step 4: Select Investment Options.
  • Step 5: Measure and Rebalance.

What is the difference between PPM and portfolio management? ›

A project portfolio is the group of projects being worked on by an organization. Project Portfolio Management (PPM) is typically a function of the PMO team and is a formal approach to orchestrate, prioritize, and analyze the potential value from a set of projects.

What is PPM workflow? ›

A workflow in a project management (PPM) tool refers to the sequence of steps or activities that are required to complete a task or deliverable within a project. Workflows can be simple or complex depending on the nature of the task and the resources and processes required to complete it.

How do you implement a PPM tool? ›

Here's a cheat sheet of what it takes:
  1. Identify and Categorize Projects. The first step in the PPM process is to identify and categorize potential projects. ...
  2. Evaluate Project Selection. ...
  3. Allocate Resources. ...
  4. Project Prioritization and Sequencing. ...
  5. Performance Monitoring and Control. ...
  6. Portfolio Review and Decision-making.

What is portfolio management in ITIL 4? ›

ITIL service portfolio management is a process used to identify, prioritize, and manage the IT services offered by an organization. It's a core element of ITSM and can be used to maximize value while controlling costs.

What are the six steps to effective portfolio management? ›

6 Steps for implementing portfolio management
  • Step 1 – Define criteria for your projects. ...
  • Step 2 – Define the project initiation process. ...
  • Step 3 – Clearly defined prioritisation method. ...
  • Step 4 – Have an overview of the running projects. ...
  • Step 5 – Compare the planning of upcoming projects with the remaining budget.

What is portfolio management practice? ›

Portfolio management's meaning can be explained as the process of managing individuals' investments so that they maximise their earnings within a given time horizon. Furthermore, such practices ensure that the capital invested by individuals is not exposed to too much market risk.

References

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