10 Best Practices of Application Portfolio Management


Application Portfolio Management (APM) is a vital process that enables organizations to align their software application portfolio with their business and IT strategies. Effective APM ensures that the applications are optimized to deliver maximum value and efficiency. Here’s a look at the ten best practices of application portfolio management.

1. Develop a Clear Strategy and Objectives with Application Portfolio Management

Before you dive into managing your application portfolio, you must clearly understand your business and IT strategy. The goals of APM need to be put in the context of your organizational objectives- efficiency, cost reduction, innovation, compliance, etc. The metrics you use to measure Application Portfolio Management success shouldn’t be APM specific but rather the financial, business and IT metrics you use to manage your business operations.

2. Conduct a Comprehensive Inventory of Applications

A thorough inventory of all applications across the organization is essential. This should include details like functionality, costs, dependencies, users, technology stack, etc. Managing and optimizing the portfolio becomes an uphill task without a clear picture of what you have. It is common for application inventories to reveal data collection issues, incomplete information about applications and issues with application lifecycle management (retired and proposed applications showing up in inventory). The big thing here is that you need to understand what you know and, more importantly, what you don’t know about your application portfolio. You can only fix gaps if you know where they are.

3. Assess Business Value and Technical Fitness

Every application in the portfolio should be evaluated in terms of business value and technical fitness. Understanding the value an application provides to the business and its technical health (age, compatibility, maintainability) helps make informed decisions about retaining, upgrading, or retiring applications. Your Enterprise Architecture can help you identify the relationships between applications and business functions, processes and product lines, but assessing value and technical fitness often requires subjective assessment. Establishing a clear set of assessment guidelines is essential to support future analysis across the portfolio.

4. Implement Strong Governance and Oversight in Application Portfolio Management

Effective Application Portfolio Management requires robust governance. This includes setting clear roles and responsibilities, creating and enforcing policies and standards, ensuring compliance, and establishing a decision-making framework. This governance helps maintain control and ensure that the portfolio is managed according to organizational goals and best practices. Application Portfolio Management is not just a data analysis exercise. It must be integrated into your decision-making processes for acquiring and managing applications through their lifecycle. 

5. Embrace a Lifecycle Perspective

Applications go through various stages, from inception, development, deployment, and maintenance to eventual retirement. Managing them through this lifecycle requires different strategies, metrics, and tools. A lifecycle approach ensures that each application is handled appropriately at each stage of its life, optimizing both costs and value. Technology changes (such as cloud, AI and mobile) and shifts in business objectives can cause the lifecycles of certain applications to accelerate or slow down. A structured application lifecycle management approach will help you understand and model the impacts of environmental changes more effectively so you can respond faster.

6. Focus on Security and Compliance in Application Portfolio Management

In a highly technology-dependent business environment, application features and technology fit are not the only factors that Application Portfolio Managers should be looking at. Security and regulatory compliance should be integral to APM. Assess and continuously monitor the security posture of applications, ensuring they meet all legal and industry regulations. This helps in mitigating risks and maintaining the trust of customers and stakeholders.

7. Facilitate Collaboration and Communication in Application Portfolio Management

Application Portfolio Management is not a solitary exercise. It requires collaboration across different stakeholders such as IT, business units, vendors, etc. Effective communication and collaboration ensure that decisions are made with a complete understanding of both business and technical aspects, minimizing conflicts and enhancing efficiency. Application Portfolio Management can help you better understand the stakeholders for your applications – who created the application, who supports it, who uses it, and what business functions/leaders benefit. Once you identify these people, APM provides a purpose for collaborating with them to make holistic decisions about your application portfolio and technology investments.

8. Leverage Technology and Automation

Utilizing modern tools and automation can dramatically streamline APM. Technology can provide insights and efficiencies that manual approaches can’t match, from inventory management, performance monitoring, cost tracking, and predictive analytics. Some of the key capabilities you should look to integrate are application discovery to find applications you aren’t aware of; your CMDB (within your ITSM platform) to identify technical dependencies; software asset management to understand what software is loaded on end-user machines; and identity and access management systems (SSO logins) to understand who is actually using applications vs who has access. (you’re likely to be surprised)

9. Regularly Review and Adapt the Application Portfolio

The business and technological landscape is continuously evolving. Regularly reviewing the application portfolio ensures it remains aligned with current business strategies and technology trends. Regular audits, performance tracking, and stakeholder feedback are vital in this continuous alignment. How frequently you need to review your application portfolio will depend on the size of your organization, the pace of technology change and the degree to which applications provide you with strategic differentiation in the marketplace. Annual reviews are sufficient for small organizations, while large enterprises may want to review application portfolios monthly or quarterly.

10. Foster a Culture of Continuous Improvement

Promoting a culture of continuous improvement within the organization drives ongoing optimization. Encourage feedback, experimentation, and learning. Embrace failures as learning opportunities. This culture ensures that APM is not a static process but an evolving practice that keeps improving. Using APM as input into corporate continuous improvement initiatives can help you identify where you have redundancies or unneeded complexities that can be driven out.

Application Portfolio Management – Final Thoughts

Application Portfolio Management is not merely an operational task; it’s a strategic function that significantly impacts an organization’s efficiency, agility, innovation, and bottom line. Successful APM is an ongoing effort that requires a comprehensive approach, integrating strategic alignment, technical insight, collaborative decision-making, continuous monitoring, and a willingness to adapt and improve. When followed diligently, these best practices provide a roadmap that can turn an organization’s application portfolio into a powerful strategic asset, ready to support and drive its success in today’s highly competitive and ever-changing business environment. Contact us to discuss your APM needs.

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