Application Portfolio Management

What is application portfolio management?

Since the mid-1990s, application portfolio management has helped mid- to large-size IT organizations govern and optimize inventories of software applications to reach specific business objectives. APM was widely adopted in the late 1980s and through the 1990s as Y2K approached and organizations wanted to address the potential threat of application failure. 

Typically, application portfolio management in 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 for the future  

• Assessing the function and technical value of applications 

APM uses a scoring algorithm to generate reports that detail the value of each application. 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. With these quantifiable metrics, managers have the right information to make an informed decision on whether they should keep, modify, or remove an application. 

Report: Gartner's 2020 Market Guide for Marketing Work Management

Whitepaper: The Manager's Guide to Avoiding 7 Project Portfolio Pitfalls

Why is application portfolio management important? 

Application portfolio management is a forward-looking approach to managing applications. This is particularly important for growing organizations. As these organizations grow, their employees and IT departments purchase applications to fill needs as they arise. 

As apps are on-boarded one by one, procurers don’t always put enough thought into how the new apps will integrate with existing tech solutions and their long-term impacts. APM empowers organizations to take a methodical approach to app management, ensuring they’re not wasting money on redundant or seldom used applications. 

By using APM, organizations can: 

• Take a full inventory of their apps 

• Quantify the value of their apps 

• Keep the useful apps 

• Update apps that are useful but need to be modified to fit current needs

• Remove apps that are no longer useful 

One of the most important benefits of APM is that it helps organizations identify what they need before making any new software purchases. Organizations can ensure they’re making mindful decisions as they select the tools and platforms that suit their short- and long-term goals. 

The two approaches to application portfolio management.

There are two main approaches in application portfolio management: top-down and bottom-up. These approaches help organizations quantify the importance of applications they currently have to ensure they’re not wasting money. 

Top-down 

This method helps organizations track all of the applications they have and inventory their main characteristics. 

Bottom-up 

This method focuses on understanding the applications by parsing source code and any related components into a repository database. 

How to evaluate applications. 

Keeping unused software can prevent your organization from potential technical gains. Since maintaining licensing for applications can add up and quickly become expensive, it’s important to ensure that 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 of time. 

• TEI: The total economic impact (TEI) considers potential technology investments across four dimensions: cost (impact on IT), benefits (impact on the business), flexibility (future potential of the investment), and risks. 

Report: Forrester's Total Economic Impact of Workfront Study

Ebook: PPM Software, Evolved: A Buyer's Guide for Today's Project Teams

Things to think about while evaluating applications.

When evaluating applications, teams should consider what a successful implementation will look like. They should also run through any drawbacks or difficulties that may come along with the implementation of the application. 

Also consider usability. Software that is too difficult to understand or implement will result in low adoption rates and a wasted investment. Reading case studies and customer references can be a great way to determine how user-friendly the application is. 

If possible, test a full-featured version of the application before purchasing it. Not all companies will offer full-featured testing, but it’s worth looking into. If a company doesn’t offer technical papers, data sheets, trials, etc., when you ask for them, you should move on and look for another vendor. 

Find the right Application Portfolio Management tool. 

Luckily, Application Portfolio Management is not something that you have to do manually or in a complicated Excel spreadsheet. You can use APM software to track and manage all of your other software. Look to independent evaluators like Gartner for a list of the functions and features to look for an APM tool, as well as a ranking of the best options available on the market today. 

Learn more: Workfront for Portfolio Management