As organizations scale and teams take on increasingly specialized roles, software tools can quickly multiply, often without centralized oversight. It’s common for individuals or departments to adopt applications out of immediate necessity, only to realize later that the tool no longer meets evolving business needs.
Rather than letting inefficiencies and budgets suffer, application portfolio management (APM) gives teams a structured and scalable way to evaluate, streamline, and align their software investments with long-term goals.
In this guide:
- What is application portfolio management?
- Application portfolio management framework.
- The two approaches to application portfolio management.
- How to evaluate applications.
- What are the benefits of application portfolio management?
- Trends in application portfolio management.
- Take control of your application portfolio.
What is application portfolio management?
Application portfolio management (APM) is the strategic process governing a company's collection of software applications. It involves creating a comprehensive inventory of all applications, analyzing their business value and technical health, and making informed decisions about their future, whether to maintain, replace, or retire them.
Think of your application portfolio as an investment portfolio. Just as you wouldn't hold onto underperforming stocks indefinitely, you shouldn't maintain applications that no longer contribute significant value or pose unnecessary risks. APM provides the framework for making these critical investment decisions about your digital assets.
Typically, application portfolio management in a large-scale business includes:
- Identifying and automating changes to the application service life cycles
- Categorizing the applications based on their business capabilities
- Arranging IT components into technology stacks
- Documenting all applications currently or previously deployed in an organization, as well as those planned
- Assessing the function and technical value of applications
APM uses a scoring algorithm to generate reports detailing each application's value. This algorithm also details the overall health of the IT infrastructure so that organizations can take a proactive approach to improving their businesses.
APM provides metrics like how often teams use an app, its age, how much it costs to maintain, and its ability to integrate with other apps. These quantifiable metrics give managers the information they need to decide whether to keep, modify, or remove an application.
Application portfolio management framework.
Application portfolio management frameworks vary based on business needs. However, common elements include:
Inventory and assessment.
This initial phase involves creating a detailed inventory of all applications within the organization. This includes technical details (versions, platforms, integrations), business context (supported functions, users, business value), and cost information. Regular assessments are crucial to evaluate each application's performance, usage, risk, and alignment with business goals.
Rationalization.
This involves analyzing all applications a business pays for to identify redundancies, overlaps in functionality, outdated technologies, and underperforming applications. In some instances, teams may need to create a business case to keep a particular application if many teams do not use that application. Decisions are then made regarding which applications to retire, consolidate, or upgrade.
Optimization.
This phase ensures that the remaining applications align with business objectives and deliver maximum value. It may involve modernizing applications, improving their performance, or integrating them more effectively. It may also include teams clearly identifying what service, process, or insight they need from an application that provides inherent value.
Governance.
Establishing clear policies, processes, and responsibilities for managing the application lifecycle is crucial for ongoing APM success. This includes defining standards for application development, deployment, and maintenance. Evaluating governance is vital as organizational priorities can shift over time.
The two approaches to application portfolio management.
There are two main approaches to application portfolio management: top-down and bottom-up. These approaches help organizations quantify the importance of applications and ensure they’re not wasting money.
Top-down
The top-down approach begins with a business-centric view. It involves cataloging all known applications and documenting key attributes such as cost, business value, technical fit, user base, and vendor relationships. This method enables stakeholders to quickly assess which applications align with strategic goals, which are redundant, and where there may be gaps or inefficiencies.
Bottom-up
The bottom-up approach is more technical, analyzing applications from the inside out. It often involves parsing source code, scanning for dependencies, reviewing configuration files, and mapping infrastructure components into a centralized repository. This method helps uncover hidden risks, technical debt, and performance issues that may not be visible from a business-only perspective.
How to evaluate applications.
Keeping unused software can prevent your organization from potential technical gains. Since maintaining application licensing can add up and quickly become expensive, you must ensure you’re using the right applications. Here are some of the most common methods for determining the value of applications:
- ROI: The return on investment (ROI) measures the gain or loss generated by an application related to its cost.
- EVA: Economic value added (EVA) measures system performance. EVA is based on the residual income technique, a performance measure typically used to assess the performance of divisions.
- TCO: The total cost of ownership (TCO) is the purchase price in addition to the cost of operations over a defined period.
- TEI: The total economic impact (TEI) considers potential technology investments across four dimensions: cost (implications for IT), benefits (effect on the business), flexibility (future potential of the investment), and risks.
What are the benefits of application portfolio management?
Implementing a robust APM practice yields significant benefits for organizations:
- Improved IT efficiency and reduced costs. Organizations can significantly reduce IT spending on licensing, maintenance, and infrastructure by identifying and retiring redundant or underutilized applications.
- Enhanced business agility. A streamlined application portfolio allows faster response to changing business needs and market demands. Modernizing key applications can improve their flexibility and scalability.
- Better alignment of IT with business goals. APM ensures that IT investments directly support strategic objectives and deliver tangible business value.
- Reduced IT complexity. APM practices simplify IT management, reduce integration challenges, and improve overall operational efficiency.
- Improved security and compliance. Identifying and addressing outdated or unsupported applications helps mitigate security risks and ensures compliance with relevant regulations.
- Informed decision making. APM provides stakeholders with the data and insights needed to make informed decisions about IT investments and the future direction of the application portfolio.
- Increased innovation. Organizations can invest more in innovative technologies and strategic initiatives by freeing resources from maintaining legacy systems.
Trends in application portfolio management.
The field of APM is constantly evolving. Staying abreast of the latest trends is crucial for maintaining relevant and effective practice. Some key trends include:
- Increased focus on business value. APM is increasingly seen as a strategic business discipline, emphasizing measuring and maximizing the business value delivered by applications.
- Integration with strategic portfolio management (SPM). APM is becoming more tightly integrated with SPM to ensure that application decisions align with overall strategic objectives and resource allocation.
- Adoption of hybrid management approaches. Organizations increasingly adopt hybrid methods that combine traditional APM practices with more agile and product-centric delivery models.
- Leveraging AI and automation. AI-powered tools are emerging to automate application discovery, risk assessment, and anomaly detection tasks, improving efficiency and providing more profound insights.
- Emphasis on cloud portfolio management. As more organizations migrate to the cloud, managing cloud-based applications and optimizing cloud spending are critical to APM.
- Focus on sustainability. Organizations are considering the environmental impact of their application portfolio and looking for ways to reduce their digital carbon footprint.
Take control of your application portfolio.
Application sprawl is a growing challenge, but it can be managed with the right strategy and tools. A structured application portfolio management (APM) program can reduce costs, eliminate redundancy, and align technology investments with business goals.
Workfront is important in operationalizing APM by connecting strategic planning with day-to-day execution. With Workfront, you can streamline the workflows required to inventory applications, assign rationalization efforts, track progress, and collaborate across teams. It helps ensure that insights from your APM process lead to actionable outcomes.
By combining a strategic APM framework with robust work management capabilities, you gain complete visibility and control over your application ecosystem and transform software sprawl into an engine for agility and growth.
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