As we have described before, few organizations have a systematic and reliable way of translating a business strategy into action. This requires aligning various disciplines along the same desired business outcomes. This is at the core of BiZZdesign’s approach to business change.
As stated by Gartner (keynote ITXpo 2013): “In 2017, every company will be a digital company. Capabilities to change fast and remain agile will be imperative.” Hence managing your IT landscape effectively and efficiently is a key part of your change capability, in which application portfolio management (APM) plays an important role.
Often, organizations deal with hundreds of applications, and each of these may in turn spawn a multitude of projects and other change initiatives. How do you then decide where you want to rationalize (Application Rationalization) and where you need to invest your IT budget? A structured overview is needed, by grouping these investments in categories: portfolios. There should be a balanced investment in the types of projects (e.g. long-term vs. short-term, high-risk/high-gain vs. low-risk/low-gain) and the categories of assets (e.g. stable back-office vs. innovative front-office applications). Decision making is facilitated by grouping these investments in portfolios according to these characteristics, e.g. ‘innovation’, ‘new product introduction’, ‘going concern’, or ‘retirement’. For example, this helps to avoid the ‘innovation squeeze’: an ever-growing maintenance budget that eats up other investments.
This way, senior management can decide on investment allocation across whole portfolios instead of looking at each individual investment. Authority for decision-making on priorities within each portfolio can then be delegated to a lower level in the organization. With APM you can make more informed and coherent investment decisions, improve alignment with strategic goals, and monitor the progress of changes.
APM requires a clear picture of the enterprise’s structure and development, from different viewpoints. Enterprise architecture (EA) provides this holistic view on all relevant parts of the enterprise and its development in the various stages of the transformation process. The combination of APM and EA offers actionable information: next to establishing the impact of a proposed change on the business and IT landscape, an organization can now quantify this impact and get an integral view across many changes at the same time.
The figure above summarizes BiZZdesign’s view on application portfolio management, visualized in the shape of a house. Business outcomes are of course the ultimate goal; the ‘roof’ that needs to be carried. The strategy provides direction to APM; its objectives are directly derived from that. Financial and other data are used as inputs. The design of portfolios consists of their content, metrics to measure these against the objectives, and dashboards to present the outcomes in a user-friendly way. This supports various analyses and the business decisions that follow from those.
A solid enterprise architecture foundation for your portfolios ensures organization-wide coherence and a clear view of the various dependencies involved. Finally, the basis is formed by a strong capability for portfolio management, with the right processes, knowledgeable people with the requisite skills, and optimal tool support to ensure an efficient and effective operation.
The ‘house of APM’ summarizes the different elements, needed to perform APM in an effective way. Some important lessons:
- APM goes further than Application Rationalization; it is about making smart investment decisions.
- APM is not just about IT; it is all about business strategy, business decisions and business outcomes.
- APM is not just about tooling; it requires a strong capability including a process, people and skills.
- In today’s complex environment Enterprise Architecture is essential to provide the insight, needed to make the right decisions.
Good luck with APM in your organization!