Home Think Topics Application portfolio management What is application portfolio management?
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Published: 20 June 2024
Contributors: Teaganne Finn, Amanda Downie

What is application portfolio management? 

Application portfolio management (APM) is a framework to optimize and manage all of an organization’s technology stack and software-based services. The APM business process covers a range of services including inventory, business capabilities between assets, and lifecycle management.

With APM, an organization’s CIO, CTO and other decision makers can make more strategic investments with a better understanding of the total cost of ownership for each part of the portfolio. By using application portfolio management, an organization is supporting its digital transformation and business objectives in a smart and effective way.

Managers and application professionals gain better insight into the organization’s software applications with APM; it provides them with metrics to measure the business benefit for each. Some existing sources of information to assess before APM integration include CMDBS, application portfolio management tools and IT asset management tools.

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Why is application portfolio management important?

The world of technology is moving at record speed, and this is one of the main catalysts of application portfolio management. Organizations with an inventory of assets need a modern mechanism to track and evaluate the success of each business application and alignment across departments. Leaders know that they don’t have time to fall behind or mismanage assets in a way that might have a lasting impact on business. Instead, they are looking to create an environment where technology and application inventory can be monitored proactively.

Application portfolio management ensures that there is the right balance of applications by creating a complete picture of digital assets. It rationalizes each application and analyzes its contributions to the organization as a whole; this data is used to evaluate IT costs and value of each asset. APM takes into account several different optimization metrics, such as functionality, roadmapping and future planning.

Separately, APM is important because it allows organizations to follow audit and security compliance, and regulatory standards through a transparent business application ecosystem without time-consuming manual tasks and spreadsheets. Application portfolio management solutions provide the necessary identification, assessment and risk management across all business applications.

What are the benefits of application portfolio management?

APM puts business value first. It creates an application landscape that is transparent and aligns with the organization’s overarching business strategy. APM looks at every detail of the software stack, cutting down on redundancies and examining the entire enterprise architecture. Below are a list of the ways APM benefits an organization:

Rationalize costs: APM provides decision makers with a clear view of the value of each piece of software by using total cost of ownership to categorize and evaluate. Organization leaders can then make informed decisions and maximize returns on investments.

Eliminate risk: At the end of an application lifecycle, an app can start to malfunction and present potential risks. With APM, stakeholders and decision makers can have an end of life plan for their app and mitigate any potential security weaknesses.

Transparent business processes: APM provides strategic planning for your technology stack by cutting out redundant applications and duplications. APM unearths costly bottlenecks and can provide solutions to streamline an organization’s entire IT portfolio.

Evaluate strategy: The extensive data collection done by APM can support broader IT transformations and support new strategic initiatives. APM gives decision makers real-time reporting to help them fully understand where IT investments should be made. It also helps stakeholders make informed decisions on projects based on estimated impact on the business.

Enable use of strategic platforms: Using APM is a key component when implementing a full-scale digital transformation, such as a cloud-native strategy. APM evaluates the legacy system and helps decision makers understand the long-term impact a change like this might make.

Broaden communication: APM brings all technology assets under one umbrella and creates a single source of truth that allows for collaboration across the business. Bringing in APM can be a cost-saving move for an organization as it channels resources to applications that are being used and serving business needs.

What is the application portfolio management process?

Following the steps, as listed after this, is an example of an effective application portfolio management process. The purpose of APM is to organize and simplify a business’ approach to managing its technology assets and maximizing technology investments. Organizations that don’t have an APM framework already in place can follow this set up:

1. Create an inventory of applications


The first step in the APM process is taking stock of all current applications and software being used by the organization. It’s also at this stage in which application rationalization is done. This is a necessary first step in the APM process as it finds overlap and redundancy between applications before new workflows being instilled.

2. Define application lifecycles


An application has a lifecycle based on its active use all the way through until it is considered inactive. However, these cycles differ from one app to another and are where any dependencies or relationships between IT services should be defined. Once the organization understands what the lifecycle is of each app then it’s easier to figure out where they fall in the process.

3. Assess usage of applications


This step requires strategic decision making as it requires the organization to rank the importance of its applications. Even well-used applications can differ in rank from one team to the next and should be evaluated. In addition, during this step owners and users of the applications should be identified so the business knows who would be impacted if an application should be replaced or elevated.

4. Establish and align business priorities


Another important step in evaluating applications is determining the total cost and business value for each piece of software the organization uses. A framework should be created during this step to establish the business value of each app. By doing so, the organization is creating a baseline to evaluate other incoming solutions.

5. Maintain the process


Once APM has been input, it doesn’t stop there. It’s important to continue evaluating all application software through open communication channels for the application owners, users and IT support staff.

6. Evaluate portfolio content


Continually evaluate how well the application stack is currently working for the organization and where it can improve. Hold meetings periodically to assess underperforming applications and services.

What are application portfolio management best practices?

Proper implementation is a key driver of success for an organization’s application portfolio management framework. By taking the necessary steps, APM can become an asset that drives smart investment and maximizes impact. Best practices for APM implementation and usage include:

Align technology and business roadmaps


For APM to succeed and to deliver on strategic priorities it can’t exist in a silo. It must support current business capabilities and integrate with strategic business roadmaps, such as strategic portfolio management, project portfolio management and project delivery. All of these management tools address different aspects of an application inventory and should be considered holistically.

Understand needs of current users

APM can’t be effective without a clear understanding of the needs of current users. The goal of APM is to better align business capabilities to a company’s overall strategy, which can only be done if there is open communication regarding what users need to do their jobs.

Create a target data list

The only data that should be collected through APM is data that works toward the organizations target output. Decide which data is required for the selected outputs and what data will work toward the overall value. Data collection is time consuming and takes many resources, therefore, try to focus on valuable data and limit the scope of work.

Maintain open communication

APM requires strong communication from all parties involved so that there isn’t confusion outside of the IT organization. Employees need to understand why APM is a necessary, worthwhile investment for the business, and how it can positively impact their jobs.

Application portfolio management FAQs

What is application portfolio management (APM)?

APM is a process that helps organizations identify and organize all of its applications through an extensive step-by-step evaluation process.

What are the steps to APM?

  1. Create an inventory of applications
  2. Define application lifecycles
  3. Assess usage of applications
  4. Establish and align business priorities
  5. Maintain the process
  6. Evaluate portfolio content

How do application portfolio management and application rationalization differ?

APM refers to the entire application management process. Application rationalization, one of the first steps in the APM process, is when stakeholders decide which applications to keep and which to remove.

How can APM align with IT strategy and business objectives?

APM aims to ensure that the optimization of a tech stack is in line with business objectives. For example, if the objective is to reduce operational costs, APM helps identify where the organization can streamline its portfolio to lower costs and reduce wasted money.

How does APM help optimize IT investments?

APM optimizes IT investments by ensuring an IT team knows exactly what apps an organization has, how those apps perform, and how much they cost the business. APM identifies duplicate and redundant assets, such as apps that paid-for but unused. Once an IT team has this information, it can eliminate redundancies and invest more strategically.

Can APM support digital transformation initiatives?

Yes. Implementing APM before major digital transformations is key to success. The analysis, lifecycle management and integration process uncover insights into the potential impact, risks and ROI of any organizational digital transformation.

How frequently should app portfolios be reviewed or updated?

APM should be a continuous process. It monitor the current state of assets, but must also be forward-looking. App performance and lifecycle analysis can help the business avoid application sprawl, thereby saving money and increasing cybersecurity.

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