Along with IT maturity and complexity in organizations comes the question of realizing business value out of the investment in applications. What applications were worth more than others? Which consume the most resources, time, effort and money, but return less business value? We may want to retire some of these applications and replace them with more modern ones, but are they worth replacing? And what are the costs of the proposed applications compared to their business value? These are the questions application portfolio management (APM) addresses.
The APM Process
Application portfolio, projects, programs inventory. In some enterprises, an application portfolio may be a simple list of applications. In larger enterprises, a program can be made of many applications, and an application may consist of many projects. The first step in the deployment of an APM system is creating a complete inventory of projects, applications and programs. This inventory also needs to be maintained. New applications may be proposed, funded and started any time. They all need to be added to the application inventory.
Service request, maintenance management. APM keeps track of an accurate inventory of current enhancements, bug fixes, changes and other efforts that go into maintaining applications. Maintenance is a huge part of application costs and should be performed diligently for meaningful comparisons of initial and ongoing total costs and their business value.
Real-time application management. The real-time application management capabilities of APM tools keep track of changing business objectives and strategies. These help bring in new application initiatives into the comparison. The cost and business value of old and about-to-be-retired applications can be compared with those of proposed ones. This step enables organizations to make sure that capital is allocated in an optimal way.
Real-time financial tracking and management. Following an inventory of applications, accurate cost figures for applications are brought in from existing financial systems. When comparing the business value of an application to its cost, billable and non-billable costs brought in from financial systems help produce more accurate calculations by allocating them properly.
Business value collection mechanisms. Business value is assessed by taking surveys of end users. These surveys assess how valuable and useful an application is to its users. If the application has users outside the company—say, consumers—then they are also surveyed.
Application portfolio visualization, analytics and reporting. Once APM tools collect all the data, powerful visualization capabilities like heat maps and bubble charts are used to represent the money spent on various applications and the business value they provide. Analytics and reporting features do this side by side and also perform deeper analysis for optimal decision making.
Application portfolio adjustments. Once the APM analysis phase is over, the results are used to reallocate resources to applications that provide more business value. Applications that provide marginal business value can be retired and promising new ones taken up for development.
Reduces costs and optimizes value. There may always be a disconnect between what an application costs to develop and maintain and its business value to its end users. APM helps assess this and make sure that any spending maximizes business value.
Business and IT alignment. APM helps rebalance an application portfolio periodically to make sure that every IT dollar spent creates some business value. This forces a constant realignment of business and IT.
Better utilization of resources. APM helps ensure that at any time IT resources are being spent on activities that maximize business value. If IT is working on applications that do not add much business value, their resource utilization can still register a high value, but much of it will be wasted. APM ensures that the utilization is meaningful.
Increase speed to market or deployment. If IT resources are constrained, APM can help use them to get a product or service to market faster. Speeding deployment of applications can be a competitive advantage.
Standardize and streamline processes. APM can standardize and streamline an otherwise arbitrary process of determining which applications IT resources should be directed toward and make it financially and strategically sound.
Applications provide varying amounts of business value for end users. Sometimes the simplest applications can provide a lot of business value, while very complex, expensive applications may provide very little. APM enables the collection and analysis of resources spent on an application and compares that to its business value to end users. It allows for the optimal allocation of IT budgets to maximize effectiveness and efficiency.
This was first published in July 2012