Application Portfolio Management – lower IT complexity & costs2016.01.26
Application Portfolio Management allows assessing the value of application infrastructure in the context of organization’s needs and to prepare the plan of transformation of the application portfolio, focusing on their business value, costs and technical risk.
Today’s market demands rapid changes in the application portfolio as a response to the changing business environment. Typical factors having a negative impact on the agility of the IT are:
- Legacy Applications (with a long history in the organization)
- Improper functional decomposition of applications
- Duplication of applications
- Complex integration architecture
It’s often a result of mergers and acquisitions or lack of strategic approach to the development of application infrastructure. Mature & large organizations are often facing complex application infrastructure, including both legacy and new systems. Having been focusing on the automation of business processes, the organizations have extended already existing infrastructure and considerably increased their complexity.
At the same time we still have to do with the increasing disproportion between the cost of maintaining already existing application infrastructure and delivering new applications. Forrester Research* emphasizes the cost allocated to a new application projects is only 20 % of IT budget. However, according to Gartner**, every dollar spent on delivering new application requires each year next 18 cents for the maintenance and 17 cents for enchantment of it .
Application Portfolio Management (APM) as part of broader Enterprise Architecture Management is focusing on solving these problems by pointing the methods of transforming application architecture to the state of alignment with business (lowering TCO and IT Complexity), at the same time filling the gap between Enterprise Architecture (EA) and Project Portfolio Management (PPM).
We recommend performing the APM as a cyclic process of application infrastructure analysis that allows to create a consistent, up to date assessment and to prepare a plan of portfolio rationalization and transformation in order to balance it in the three perspectives:
- Business value
- Technical risk
- Costs of maintenance and enhancement
Application Portfolio Assessment
The first stage of APM is the assessment of application portfolio performed in three dimensions:
- Business value – applications alignment with the current business strategy
- Technical risk – technical quality and application’s technical risk
- Financial dimension – TCO of applications
The result of the assessment is a projection of application portfolio on the APM matrix and identification of portfolio’s and applications’ problems.
Application Portfolio Management recommendations
The next step is preparing APM recommendations. Doing the Application Potfolio Management it is usual to build two types of recommendations:
- Portfolio recommendations – concerning recommendations solving the horizontal problems of application portfolio (like integration architecture, complexity, application platform capabilities and problems)
- Application recommendations – concerning recommendations solving problems of particular applications in the portfolio (ability to maintain, cost effectiveness, cost of modification, operational risk
On the grounds of analysis results and concluded recommendations, the application infrastructure transformation plan is created. The goal of the transformation is to balance the business value, technical risk and costs.
Eventually doing the APM provides:
- Inventorying of applications
- The assessment of applications from the business, technical and financial perspective
- Identification of problems in applications and application portfolio
- Classification of applications on the APM matrix
- Portfolio and application recommendations
- Transformation plan for the portfolio
- Reduction of the complexity and TCO of the whole application portfolio by building a strategy of application reduction and consolidation
- Inventorying of application portfolio
- Reduction of costs of maintenance and support
- Identification of the IT resources essential for proper support of the business
- Streamlining of the IT investment by linking business goals with the application capabilities
- Arrangement of the architectural landscape