In today’s IT dependent world organisations have accumulated an array of applications from the modern to the ancient. Successive mergers and acquisitions have further added to the inventory. What’s more, because they accumulated over time, these IT portfolios are often patchy, redundant and lacking proper management oversight. The resulting IT portfolio has become complex and difficult to manage. According to reports, almost 70% of the IT budget is consumed by sustaining business-as-usual activities. When CIO’s are increasingly being asked to “do more with less”, it is absolutely necessary to optimise the IT portfolio.
Increasingly executives are using Portfolio Management methodology to tackle this challenge. IT portfolio management concept is not dissimilar to managing financial assets. In both, the aim is to collect data on the assets to be able to enhance returns and reduce risks. There are two types of IT portfolios, namely, IT asset portfolio and IT projects portfolio. Although the principles of portfolio management are similar there is great deal of difference in the processes used.
Organisations are using Applications Portfolio Management (APM) to make rational decisions about reducing the cost of application ownership, improving the functionality and the strategic alignment and reducing portfolio risks. The reason for the rapid growth in the use of APM is that organisations have achieved successes in cost reduction, managing the complexities of hundreds of established assets, and improving budget effectiveness.
Application Portfolio Management is a periodic objective assessment of organisations’ applications. Determining which applications receive same, lower or increased levels of funding optimises portfolios over time. The assessment helps refine application management practices, namely, which applications to eliminate, which to keep, which to renovate. The focus is to ensure that the business value and ownership costs are appropriately aligned and the portfolio is streamlined by rationalising duplicate or obsolete applications. Over time, the applications portfolios as a whole should reflect the greatest business value and closest architectural fit with the lowest costs and risks.
APM generally consists of the following elements:
- Applications Inventory: Identify and catalogue what applications you have and what they do and how much they cost.
- Applications Assessment: Assess applications in terms of business value, alignment with strategy, technical architecture or standards and cost and ability to support. Identifying cost saving opportunities via removing duplication or overlaps.
- Recommendations and Roadmaps: Develop changes to the application management strategies and create potential application transformation initiatives or roadmaps. The goal is to get prioritised action plans for tailoring maintenance spending, rationalising or migrating applications and addressing health risks.
- Portfolio Governance: Assign responsibility for governance including managing the repository and tracking recommendations. Track and communicate the benefits.