Many organizations with large legacy application landscapes can no longer postpone a major overhaul of their IT. But how do you avoid creating tomorrow’s legacy today all over again? And how do you spend your IT budget in the most sensible way? Next to appropriate design and development practices (e.g. enterprise architecture, agile and DevOps, as we addressed in our previous blog) you need to manage your application portfolio as a whole, to decide where it is most important to invest.
Application Portfolio Management is a dynamic decision-making process in which a coordinated set of applications, projects, programs, or products is routinely monitored, analyzed and managed to maximize their effectiveness. Evaluation and prioritization of projects and activities associated with the inventory provide the opportunity to prioritize, accelerate, terminate, or “de-prioritize” portfolio components and to allocate or reallocate associated resources.
When organizations lack strong portfolio management, they are reluctant to terminate projects or exercise end-of-life retirement of applications or products. In addition, project “Go/No Go” criteria are ineffective or non-existent. Weak performing inventories are not evaluated or cut. Some projects take on a life of their own, while others are added with little consideration for resource requirements, management attention, or impact on other projects. Resources may be reallocated to the latest “urgent” project, without full consideration of the disruptive effect this may have on “important” efforts already in flight.
As a result, a true lack of focus sets in — resulting in far too many inventory items for the available resources to manage effectively. Backlogs of work start to accumulate, cycle times begin to increase, and processes that are in place become ineffective. Efforts become more reactive and quality suffers, resulting in increased failure rates. The most significant impact of weak portfolio management is the impact on strategic direction — projects that are not aligned with the business strategy or are strategically unimportant are competing for and consuming valuable resources that should be focused on more strategic efforts. Many organizations suffer from this “innovation squeeze”: all available resources and budgets are used to keep the lights on in the legacy landscape, squeezing out strategically important innovation.
There are several challenges to achieving strong portfolio management:
Generally speaking, Application Portfolio Management is the process of managing a collection of applications to make effective decisions on investment opportunities. Like an investment portfolio containing a collection of assets selected to support specific growth or income objectives, application portfolios should be managed to support the enterprise’s key business strategies and objectives effectively. In general, portfolio assets may include products and services, business capabilities and processes, software such as business applications, middleware, and databases, infrastructure such as servers, networks, desktops, and mobile devices, and finally, resources to support it all. In APM, we focus on software assets.
ALSO READ: Choose the right Enterprise Architecture tool for portfolio management
Unfortunately, many organizations approach Application Portfolio Management as just one-shot application rationalization, primarily focused on cost and short-term technical problems. This has some major issues. First, cleaning up your application landscape just once and then forgetting about it again will result in the same problems you have today reappearing in the near future. Instead, a lifecycle approach to the application landscape is needed. Regular monitoring and governance, including clearly defined business value criteria of the (technical and business) health of applications and assessing options for their future, is necessary to manage the entire application portfolio properly towards the business needs.
Application assessment Time Analysis
Furthermore, applications are often judged on a stand-alone basis, but the landscape as a whole is more important, considering dependencies between applications and with the business processes they support, and the complexity, risks and business value of application landscape as a whole. Simply replacing or switching off an application in isolation is usually not an option.
It is essential to know the business value of applications and how they support the business, its processes and capabilities. But how do you objectively determine this (i.e. not just by asking users)? To this end, you need to use enterprise architecture models across all architecture domains to show traceability to business processes, business capabilities, products/services, and business goals and strategy. This also includes showing use cases, value chains and workflows and how they are supported by the applications, their functionalities, and data objects, e.g. for a product or a customer. This helps in assessing applications in context instead of stand-alone and this may also improve the value of applications by uncovering new potential uses.
Moreover, different categories of applications are judged on different aspects. Innovative front-end applications need to meet different criteria than stable systems of record. Appropriate portfolios should be defined for such categories. You want to ensure a balanced distribution of investments, both within and across portfolios, and both for your assets and your projects and programs. It is important to choose criteria based on business objectives.
Typically, strong Application Portfolio Management relies on five key performance measures:
Portfolio Management in context
As outlined above, strong Application Portfolio Management critically depends on a clear line of sight with the business strategy and a strong foundation in enterprise architecture. One useful way to relate your application portfolios to the strategy is via business capabilities. Business capabilities define what an organization needs to be able to do, in order to achieve the outcomes that are described in the corporate strategy. They are the key building blocks of the business, unique and independent from each other, and tend to be stable over time. As such, they are a very useful foundation for structuring application portfolios and determining the strategic importance of the applications therein. This paves the way for true value-driven architecting.
Moreover, strong Application Portfolio Management needs to be part of the day-to-day processes that maintain and enhance your application landscape. Its value-based approach makes it well-suited for approaches such as the Scaled Agile Framework (SAFe), outlined in our previous blog post. Tying it in to the value streams at the portfolio level of SAFe and funding such streams based on (among others) Application Portfolio Management outcomes is relatively straightforward.
In summary, strong application portfolio management takes a lifecycle approach to the full application landscape, relates it to the business strategy and is founded upon a solid enterprise architecture practice. This may sound easy, but it is still a difficult discipline: switching off applications hurts, and rationalizing decision-making may not be in everyone’s interest. But by focusing on business outcomes, better decisions can be made and more business value attained something every organization strives for.
Managing Consultant & Chief Technology Evangelist at Bizzdesign
Marc contributes to Bizzdesign’s vision, market development, consulting, and coaching on digital business design and enterprise architecture. He also spreads the word on the Open Group’s ArchiMate® standard for enterprise architecture modeling, of which he has been managing the development. His expertise and interests range from enterprise and IT architecture to business process management.
