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Gain Control and Reduce Costs by Linking Your
Application Portfolio to Business Strategy with APM
David Wright
Most well-established companies have amassed a complex
infrastructure of applications, including both new and legacy
systems. These application portfolios become increasingly
costly to
 support and maintain, and enhancements and integration
of new solutions become more
and more difficult to implement. Businesses routinely invest
almost 70% of their IT spend on maintaining these existing
application portfolios (Gartner Worldwide Benchmark Report). With this level of spending, explicit
linkage from business strategy to application management
strategy is crucial. Application Portfolio Management (APM) is a
best-practice for IT departments to achieve that linkage.
Application Portfolio Management (APM) is the process of
continually assessing and evaluating the IT application
portfolio on the diverse perspectives of business value,
performance, cost, architecture and risk and then managing the
necessary transformations to align the portfolio with these
strategic needs of the business.
APM and Project Portfolio Management (PPM) are closely aligned.
They are built using the same processes to inventory, analyze
and optimize a portfolio using objective methods. They also
use the same organizational strategies and business drivers as
the basis for analysis and to ensure adherence to corporate
governance processes. However, where PPM deals with a portfolio
of projects that may or may not be implemented, APM focuses
on a portfolio of existing applications so is concerned much
more with ongoing costs, architectural fit and risk.
The Benefits of APM
A well executed APM process can provide both strategic
benefits and efficiency gains for an organization. The process
of objectively assessing the fit of current applications allows
for increased ROI from the entire portfolio. The specific
benefits are detailed below.
Application Inventory
A central, standardized application inventory is the
foundation of an APM solution. Applications can be assigned to
portfolios, linked with other applications and their costs
associated to related projects and funding organizations.
Application functionality is mapped to business processes to
assess and quantify strategic impact. Architectural fit scores
are created by measuring applications’ alignment to portfolio
standards of architectural quality. All of these metrics
combined create an analytical platform for managing the
application portfolio on an ongoing basis.
Framework for Managing Application Costs
With an APM solution, IT managers are able to budget and
track the "lights on" cost of applications and link them to the
costs of associated projects to calculate total cost of
ownership (TCO). IT managers can identify cost drivers by
comparing average costs of applications by type, domain,
technology, age, and correlating other attributes to cost.
Correlating application cost elements to other metrics, like
business value, performance and architectural fit, can highlight
cost-effective design patterns and identify best practice
"outliers". Using this process, IT is able to clearly define the
value of its annual maintenance budget in terms of business
value.
Strategic Alignment
 APM
allows a true business-IT partnership. Each application derives
a strategic impact score from its contribution to business
processes and the strategic importance of those processes.
Application costs can be compared to the strategic importance of
the processes they support to illustrate the value added by IT
spend. In conjunction with business stakeholders, CIOs can
create several scenarios to align to business needs by
optimizing the strategic impact of the application portfolio;
subject to constraints of budget, risk and human resources.
Opportunity for Portfolio Rationalization
The process of inventorying and assessing all applications
allows for the identification of both functional redundancy as
well as redundancies in a process context. Application
consolidation opportunities can be identified thereby reducing
the redundancy from the application portfolio. Portfolio
rationalization allows for significantly reduced maintenance
costs.
Architectural Fit Assessment
APM provides an architectural fit score based on standards of
performance, reliability, information protection,
cost-effectiveness, supportability and interoperability. In
particular it exposes organizational skills gaps in terms of
ongoing support and development and the risks associated with
each. This assessment highlights areas to be rectified as well
as identifying the most successful design patterns to be
continued. The architectural fit assessment identifies ways to
reduce support costs and reduce risk in the application
portfolio.
Risk Management
With APM, standardized risk metrics can be correlated to
strategic impact and architectural fit. Compound metrics can be
created by weighting a standard risk score by strategic impact,
or user count. The risk management office can aggregate the
compound risk metric to compare averages by application type,
and quantify the application risk of a portfolio.
Business Decisions
Based on the information from the assessment process,
informed decisions can be made regarding the direction of any
component of the application portfolio. The choices are:
Upgrade:
Get next version of a packaged
application
•
Grow:
Enhance functionality to support the
strategic needs of the organization better
•
Integrate:
Merge or integrate application
functionality with other portfolio components to improve the
cost-effectiveness of IT support to the business
•
Sunset:
Retire the application component and
migrate or consolidate the functionality as required.
If the decisions include growing or integrating applications,
the organization’s current IT skills and tools need to be
assessed and any deficiencies addressed. Then a fully
prioritized action plan can be created. The process is
illustrated below.
The final step is the most important – continuous
renewal.
Every change in business strategy, business processes,
organizational readiness or the application portfolio itself
requires an updated analysis to ensure that the optimum set of
actions is being taken.
Getting Started
The first step in the process is to start building the
Application Inventory. This process builds on Agora’s core
strength in both enterprise application development as well as
project portfolio management.
Agora has expertise with sophisticated APM software tools
and a team of business and technology professionals who can
help your organization start to realize all the benefits of
APM.
David Wright is President of Agora.
He can be reached at
dwright@agorainc.com
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