What Is Application Portfolio Management (APM)? The Guide to Success & Best Practices

With the rise of business technologists and cloud-based tools, it's becoming increasingly difficult for organizations to maintain a clear overview of their applications, leading to "application sprawl." 

It is crucial to be able to discern between valuable and extraneous applications. Application Portfolio Management (APM) serves as a pivotal tool in this regard, facilitating the management and optimization of technology resources to achieve organizational objectives efficiently.

This informative article explores what APM means, how it works, and why it’s important for an organization.

What Is Application Portfolio Management (APM)?

Application Portfolio Management (APM) involves developing and governing application strategies to enhance a company's technology stack optimization. The objective is to manage a company’s software applications and services more efficiently to achieve specific goals. This involves taking a comprehensive inventory of your IT landscape and assessing its overall value to the business.

An application portfolio management framework gives full visibility into the organization's IT landscape, equipping decision-makers with insights into streamlining opportunities, inefficiencies, and where to prioritize investments.

What Is the Difference Between Application Portfolio Management and CMDB?

CMDB

CMDB stands for configuration management database, a single repository that stores information about a company’s IT landscape. CMDBs originate from IT Service Management and are pivotal in the ITIL (Information Technology Infrastructure Library) framework. They are primarily dedicated to the operational aspects of IT systems and the administration of IT assets.

CMDBs maintain records or automatically identify applications and infrastructure, oversee their availability, and handle IT incidents. They may also manage system access requests or procurement of IT equipment.

CMDBs are principally focused on the detailed execution of IT systems and the As-Is or present condition of IT systems.

Application Portfolio Management

Application Portfolio Management is a crucial component of Enterprise Architecture. Enterprise Architecture platforms such as Ardoq are designed to facilitate strategic planning by analyzing the current state (As-Is) of your IT landscape and enabling the planning of transformation to the future state (To-Be). This involves developing alternative future architectures or scenarios.

Application Portfolio Management is utilized for strategic decision-making related to application investment, optimization, and rationalization. APM is primarily concerned with strategically managing applications to ensure alignment with business objectives. It specifically addresses software applications, evaluating their value and relevance to the business strategy.

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.

In essence, Enterprise Architecture software focuses on how IT systems contribute to business objectives at a strategic level and facilitate the migration to the target state of these systems.

EA software and CMDBs have separate functions, but Ardoq offers multiple technical options for integrating with your CMDB, such as plug-and-play and information process integration to get in the level of detail and data required for specific objectives.

What A Business Can Achieve With APM

If an organization struggles with application sprawl and shadow IT, APM is an ongoing initiative for getting an up-to-date overview of and streamlining IT assets to future-proof a business.

What Is the Goal of Application Portfolio Management?

APM helps organizations manage large and ever-growing IT portfolios, including on-premise and cloud-based apps and services. The objective is to streamline and optimize the application landscape in alignment with business objectives. This entails identifying redundant, obsolete, and underperforming applications for rationalization or replacement, ensuring the portfolio remains agile, cost-effective, and aligned with overarching business strategies.

The main goal of APM is to give a business the necessary insights to make strategic decisions about IT and to tie these in with wider business objectives. Application portfolio management is also the first step toward building an effective Enterprise Architecture.

Why Is Application Portfolio Management Important? 

Over the years, a company may have purchased or subscribed to multiple applications from multiple vendors. A business may have tried the latest technology or purchased an app to solve a problem that was urgent at the time.

It’s not just IT departments who select new apps—individual teams and employees often install them as well. A company may end up with multiple apps for the same task. As apps age, they may not integrate well with newer tech. If they haven’t been updated, they can also pose a security risk.

When certain apps are no longer used regularly, they don’t add value. Unused apps take up space on the system and waste an organization’s IT budget.

APM Simplifies IT Infrastructure and Spending

In all these cases, an organization spends money unnecessarily on an unmanageable ecosystem with no clear overview. APM clarifies the chaos, developing that overview to make more informed decisions about simplifying and controlling a company’s IT infrastructure and spending.

APM improves visibility by gathering all the data in one place. It helps the IT team understand assets' capabilities, interdependencies, and lifecycles. This knowledge helps an organization decide whether to ditch, update, or replace redundant or inefficient apps.

A business will reduce costs by canceling unused subscriptions and boosting efficiency and productivity, which means more cash to reinvest. Plus, optimizing the tech stack reduces security and compliance risks and paves the way for process optimization.

What Are the Key Features of Application Portfolio Management?

Application portfolio management is a broad domain. One part is application rationalization, which controls costs by consolidating and streamlining the IT portfolio. By removing duplicate or redundant apps, a company has more resources to use elsewhere.

Lifecycle management is also important. It helps companies understand the lifecycle of apps and how this impacts the business. When an organization knows the timescale for renewing, updating, or replacing apps and the potential consequences, it can make those decisions confidently.

Integration management gives an overview of applications and their integration with other systems and tools. An IT team can find out which technologies enable the integrations and how data flows between them, as well as identify the people involved in managing and maintaining them.

Application hosting is connected to IT governance. It’s about maintaining the relationships between applications and infrastructure, which involves identifying the type of infrastructure, its location, and the people responsible for it.

When researching application portfolio management solutions, it is important to choose a platform that can effectively support all the practices within the APM domain, plus real-time reporting, to help organizations make better-informed decisions about IT.

Who Is Responsible For Application Portfolio Management?

This often depends on the size of the organization. CIOs, CTOs, and IT managers are involved in managing application portfolios, or an Enterprise Architect may be employed to carry out APM as part of a broader architecture project.

Some businesses have a dedicated application portfolio manager who monitors the IT environment and works with stakeholders to keep the inventory and information updated. They are responsible for linking APM to business objectives. A company may also have technology managers  overseeing IT assets and tracking lifecycles. 

APM requires collaboration and cross-functional communication, as well as reliable data on usage and spending, for an accurate, data-driven assessment of IT assets. Therefore, business leaders, application owners, and users also have some responsibility—they must supply the IT organization, or the team leading the APM initiative, with inventory information and data on business value, technical performance, and user satisfaction.

Application Portfolio Management Examples

APM has multiple use cases for all organizations. Here are a few examples:

• Implementing Digital Transformation: APM is essential when implementing a full-scale digital transformation, such as cloud migration. It allows an organization to document existing legacy systems, understand the potential impact of replacing them, and measure the effects in real-time.

• Reducing IT Complexity: Another common use case is reducing IT complexity by identifying overlapping and redundant apps. Streamlining applications also boosts efficiency. Enterprise Architecture software creates a swifter, automated process for Application Rationalization to help weed out application redundancies. Consequently, employees are not overwhelmed by the number of apps in the system or worried about which is best for a specific task. 

• IT Security and Compliance: APM can assist businesses in ensuring—and proving—IT security and compliance. For example, the Ardoq platform enabled a public utility company to document its cybersecurity measures and protocols using recorded app data. It could then provide these details quickly to its insurer, avoiding insurance lapses or higher prices.

New generation Enterprise Architecture software like Ardoq is inherently cloud-native and data-driven, primarily focusing on providing comprehensive, contextually relevant insights to the entire organization. Enterprise Architects (EAs) can harness the capabilities of innovative EA tools such as Ardoq to effectively tackle challenges to enterprise productivity

How to Start With Application Portfolio Management

If an organization does not have APM processes, there are a few guidelines for getting started. Here are the key steps to application portfolio management.

Step 1: Establish Clear Objectives for an Application Portfolio

A successful application assessment begins by defining specific objectives. An IT team should consider the following questions:

• What are the desired outcomes of the assessment?
• How will these outcomes be measured?
• Who are the key stakeholders involved?
• What is the purpose behind the assessment? Is it aimed at cost reduction, fostering innovation, or updating outdated technology?
• Is the assessment focused on modernizing a business process or laying the groundwork for a long-term IT strategy?

Addressing these queries helps effectively delineate the assessment's scope, budget, and timeline. Subsequently, a plan—perhaps even a simple slide deck—can be drafted to manage team members' expectations and secure support from senior leadership and decision-makers.

Potential Outcomes

1. Decreased Total Cost of Ownership (TCO) for the Application Portfolio
2. Lower maintenance expenses associated with the Application Portfolio
3. Reduction in the number of applications per business capability

As a general guideline, it is advisable to limit the assessment to a narrow scope initially. Focusing on a single business capability or area allows for a more manageable evaluation, with the possibility of expanding the scope in subsequent phases.

Step 2: Conduct a Comprehensive Review of the Application Portfolio

It is essential to gain a comprehensive understanding of an organization's applications and gather the necessary data for the assessment process. This involves collecting basic information such as application names, descriptions, and ownership and then expanding the dataset to facilitate the evaluation and strategic ranking of applications.

Even if an application inventory exists, it is sensible to perform a quick check to identify any missing applications. Colleagues may have procured some software without involving IT. A survey can help uncover these unmapped applications and ensure their inclusion in the assessment, thereby preventing assessments based on incomplete data.

Ask Questions 

Gather details regarding the applications' business connections, functionalities, criticality, usage, technical attributes, and integrations. Use application portfolio management metrics such as total cost of ownership, strategic value, risk, user satisfaction, and the availability of viable alternatives to evaluate how the apps support your business capabilities and processes. Develop a set of questions to assess both the business and technical values of each application.

Given that relevant data may be dispersed across various sources such as spreadsheets, configuration management databases (CMDBs), or the knowledge of application owners, solution architects, and developers, it's crucial to consolidate this information into a centralized repository and ensure its completeness and currency.

Although this step may seem laborious, it's vital. However, the process can be streamlined and data quality improved using specialized Enterprise Architecture platforms such as Ardoq.

Step 3: Determine Strategic Rankings

With a comprehensive understanding of business objectives and foundational data, the next stage is to assess each application's Business Value and Technical Fit. Identify the top performers and pinpoint any underperformers.

These scores are based on various criteria, depending on the organization's priorities and objectives. Ardoq’s approach recommends assessing business suitability and technical compatibility using a scale ranging from 1 to 5 to derive the strategic rating of each application.

Strategic Rating = Business Value measured against Technical Fit

Step 4: Evaluate the Application Portfolio

Utilize the Gartner TIME model (Tolerate, Invest, Migrate, and Eliminate) as a structured framework for analyzing a portfolio. Plot the business value and technical fit scores into one of the following categories:

• Tolerate: These applications, while of high quality, offer minimal business value and require minimal resources to maintain. Discontinuing them could be costly and inefficient, potentially exceeding the support costs.

• Invest: Applications in this category are deemed worth retaining. They are stable, high-quality applications that deliver significant business value and require minimal support.

• Migrate: These applications are ones the IT team wishes to replace. Although they contribute to business value, they fail to meet IT requirements, resulting in high support costs and potential security vulnerabilities. Migration is recommended for such applications.

• Eliminate: Low-quality applications with minimal business value fall into this category. They are often legacy applications with limited usage and should be phased out.

Collect data on application costs and risk factors to conduct a comprehensive analysis. This information aids in prioritizing initiatives and determining the balance between long-term and short-term objectives.

Challenges When Implementing APM

Discovering the apps an organization has and where the data resides can be grueling—it may be in spreadsheets or a CMDB. If a company has always relied on manual documentation methods, it can take a while to round up the relevant information, and it’ll be harder to understand system dependencies. 

Data-driven EA platforms like Ardoq can make this process faster with automation, engagement, and flexibility features. For instance, an organization can focus on value-adding analysis with agile design by automating data collection and visualization. With Ardoq, a business can collect, validate, and share knowledge by meeting colleagues where they work, doing away with the need for EA knowledge or familiarity with the EA platform itself. Lastly, Ardoq allows for flexibility, which means a business can continuously deliver on its outcomes with architecture that readily evolves with it.

Here are some common challenges when implementing APM

1. Shadow IT: One key issue is “shadow IT,” which describes any computing resource being used in a company without the approval or even awareness of the IT team. For example, the popularity of service-based IT (such as SaaS) allows business departments to obtain their own solutions. In 2022, organizations worldwide were using130 SaaS applications on average.

2. Data Collection and Quality: Gathering accurate and current data for all portfolio applications can be overwhelming. Incomplete or outdated information can hinder effective APM.

3. Stakeholder Engagement: It is crucial to secure ongoing engagement from stakeholders, including business and IT leaders. Misalignment in understanding application value and resistance to change can be significant hurdles.

4. Complexity and Scope: Large organizations with numerous applications face difficulties in assessing and managing their portfolios due to the sheer volume and diversity of applications.

5. Cost and Resource Constraints: Implementing APM requires investment in tools, training, and potentially external consultants. Allocating budget and resources, especially without immediate visible benefits, poses challenges.

6. Integration Issues: Ensuring compatibility and effective integration among new and existing applications is essential. Legacy systems may not easily integrate with modern applications, leading to inefficiencies.

7. Change Management: APM often necessitates changes in how applications are used or maintained, requiring careful planning and execution of organizational changes.

8. Regulatory Compliance and Security: Ensuring applications are compliant with regulations and security standards adds another layer of complexity to portfolio management.

9. Strategic Alignment: Aligning the application portfolio with organizational objectives is essential yet challenging, requiring adaptation as strategic objectives evolve.

10. Technology Evolution: Continuous evaluation of the application portfolio is necessary to ensure alignment with evolving technological trends and organizational needs.

11. Measuring Value and Performance: Evaluating the value and performance of each application requires defining and quantifying relevant metrics and KPIs, which can be complex.

Proving the benefits of application portfolio management can also be challenging, especially when implementing the recommended changes. Without strong communication, stakeholders outside the IT organization may not understand why APM is necessary or valuable.

What Are Application Portfolio Management Best Practices?

Having understood both the advantages and challenges inherent in APM, adhering to these application portfolio management best practices will ensure its successful implementation.

1.       It is vital that APM efforts support current business capabilities and strategic company-wide objectives. Ensure no essential technology is removed as the IT team streamlines the portfolio and asks app users what they need to do their jobs. Put a contingency plan in place to minimize disruption.

2.     Before deciding to renew the license of existing apps or implement new ones, consider the expected ROI. Use free trials to confirm that any new tech will be the right solution. Set up a formal approval process for buying or renewing applications, and document them properly for future reference.

3.     Successful APM requires buy-in from business leaders, so engage them when setting goals and evaluating data. Ardoq offers an ROI calculator that indicates the savings the platform could bring an organization by helping the organization deliver more change faster.

4.   Provide regular reports on application metrics and information about the project, using jargon-free language to engage all stakeholders. It’s not just about updating progress—share successes and milestones throughout the organization to demonstrate the value of APM.

5.     Enable strong communication between EAs and users, ensuring everyone understands the process and the information they need to provide. 

6.     Give everyone the tools to provide app information, from simple surveys to automated data collection. One possibility is to set up APIs to retrieve data from third-party solutions and look at SSO logins to see who uses applications. Ardoq's Engagement features empower organizations to achieve this more effectively.

7.     Application portfolio management is not a singular task but an ongoing project. Use all the facets of APM to monitor and maintain the company’s IT landscape continuously. This will ensure that the business always has the right support for current and future business needs—and that they align with business objectives.

8.   A business cannot deliver continuous management with manual methods and spreadsheets. Use a data-driven EA platform like Ardoq, with a suite of critical integrations to speed up application discovery, data capture and reporting, diagnostics, and automation.

Manage Low-Value Systems Out of an IT Portfolio With Ardoq Application Portfolio Management

Application portfolio management improves efficiency and reduces waste by removing apps and systems that add no value to an organization. The process indicates which apps are necessary for critical business capabilities and ensures alignment with overall goals.

When a business performs APM with Ardoq, the IT team sees a complete overview of all company applications—their costs, the organizational needs they fulfill, who owns them, and where they are hosted. The platform automates data collection to help uncover complex dependencies and redundant software.

A business can then measure the potential risks and cost savings of optimization by modeling various scenarios. Ardoq also updates visualizations, reports, and dashboards automatically in real-time, so stakeholders can make informed business decisions faster 

Request a demo and start the APM journey with Ardoq

FAQs About Application Portfolio Management

How Does Application Portfolio Management Help in Optimizing IT Investments?

APM optimizes IT investments by ensuring an IT team knows exactly what apps a company has, how they perform, and how much they cost. It reveals duplicate and redundant technology, such as paid-for but unused apps. Once an IT team has this information, it can eliminate redundant apps and invest in new ones or upgrades.

How Does Application Portfolio Management Align With Overall IT Strategy and Business Objectives?

One key aim of APM is to ensure that the optimization of a tech stack remains in line with wider business goals. For example, if a business objective is to reduce operational costs, APM pinpoints where the organization can save by streamlining its portfolio and minimizing wasted money. Benchmarking can also ensure a company is as efficient as its industry peers.

Can Application Portfolio Management Support Digital Transformation Initiatives Within an Organization?

Implementing APM before embarking on any major technological change is essential. The rationalization, lifecycle management, and integration management process uncover insights into the potential impact, risks, and ROI of upgrading an organization’s systems.

How Frequently Should Application Portfolios Be Reviewed and Updated?

Application portfolio management should be a continuous process, monitoring the current state of a business’ apps and identifying what a company will need in the near future. Staying aware of app performance and lifecycles helps businesses save money, boost cybersecurity, and avoid application sprawl. Platforms such as Ardoq simplify the process with automated data collection.