As organisations scale and teams take on increasingly specialised roles, software tools can quickly multiply, often without centralised oversight. It’s common for individuals or departments to adopt applications out of immediate necessity, only to realise 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.
This post will cover:
- 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, analysing 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
- Categorising the applications based on their business capabilities
- Arranging IT components into technology stacks
- Documenting all applications currently or previously deployed in an organisation, 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 organisations 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 organisation. 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.
Rationalisation
This involves analysing 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.
Optimisation
This phase ensures that the remaining applications align with business objectives and deliver maximum value. It may involve modernising 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, from acquisition to retirement, is crucial for ongoing APM success. This includes defining standards for application development, deployment and maintenance. Evaluating governance is vital as organisational 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 organisations quantify the importance of applications and ensure that they’re not wasting money.
Top-down
The top-down approach begins with a business-centric view. It involves catalog 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, analysing applications from the inside out. It often involves parsing source code, scanning dependencies, reviewing configuration files and mapping infrastructure components into a centralised 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 organisation 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 organisations:
- Improved IT efficiency and reduced costs. Organisations can significantly reduce IT spending on licensing, maintenance and infrastructure by identifying and retiring redundant or underutilised applications.
- Enhanced business agility. A streamlined application portfolio allows faster response to changing business needs and market demands. Modernising 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. Rationalising the application landscape simplifies IT management, reduces integration challenges and improves 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. Organisations 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, emphasising measuring and maximising 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. Organisations 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 organisations migrate to the cloud, managing cloud-based applications and optimising cloud spending are critical to APM.
- Focus on sustainability. Organisations 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) programme can reduce costs, eliminate redundancy and align technology investments with business goals.
Workfront is important in operationalising APM by connecting strategic planning with day-to-day execution. With Workfront, you can streamline the workflows required to inventory applications, assign rationalisation 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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