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Enterprise Architecture

Application Portfolio Optimization: Value Up in a Down Economy

Published By Dominique Trimino

application-portfolio-optimization

Application portfolio optimization has never been more important than today. The practice can lower operating costs as well as foster innovation and growth. Companies that emerge strongest from economic downturns do both.

According to the latest Fortune CEO survey, nearly 80% of CEOs have “significantly accelerated” digital transformation during the pandemic. The biggest areas of investment over the past few months, besides workplace safety, are IT infrastructure/platforms (40%), innovation (36%), and the consumer/end-user experience (35%).

As organizations of all sizes rush to expand their digital capabilities, enterprise architects and application portfolio managers are key players. Their application portfolio management (APM) proficiency can determine how well these digital transformation initiatives progress. As we discussed with RPI Consultants during a recent Webinar, APM is more than an inventory of applications.

APM today connects technology with business context. The ultimate goal of application portfolio optimization is to deliver a flexible, cost-effective application and technology portfolio aligned with business strategy and impacted capabilities. Whether that is your objective, or you simply need to lower costs, there are several areas where you can realize the benefits of APM.

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Drive Cost Out of IT Portfolios

APM reveals duplication, complexity, and business context of your applications, reducing costs and risks. According to Gartner, application rationalization can save companies between 15 to 25 percent of the application budget (which is typically a large portion of the IT budget). For example, you can use APM to:

  • Determine which applications are candidates for rationalization due to functional redundancy
  • Ensure faster, lower risk rationalization initiatives by understanding the interdependencies of applications, capabilities, and supporting infrastructure
  • Optimize current and future spending by understanding costs such as maintenance spend across on-premise applications versus public cloud
  • Increase utilization of existing technology through re-use

Reduce Risk and Improve Compliance

Application portfolio optimization also enables proactive management of application lifecycles, changes, and standards. For example, translating business requirements into technology standards enables you to enhance governance. By fully understanding the enterprise architecture, you can avoid disruptions to ongoing operations. For instance, use APM to determine:

  • How decommissioning an application would impact other applications and the business operations
  • Which widely used and highly interconnected applications would be difficult to upgrade, replace, or scale
  • What applications are in jeopardy due to unsupported, out-of-date or end-of-life software technologies, which can lead to sensitive information breaches

Align Investment with Business Strategy

The importance of technology to the business has elevated the role of enterprise architects and application portfolio managers in recent years. By understanding how the application and technology infrastructure supports the business, you can more effectively manage complex digital initiatives and help create interconnected products and services. APM helps calculate the strategic value of each application to make better decisions on what applications bring the most return on their investment.

As business leaders change strategies or request new projects, APM helps you identify the impact of proposed changes. You can determine what new investments are needed to enhance or create new capabilities. In addition, APM enables you to evaluate new demands against current strategy and operating model.

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Enhance Planning and Execution

By using APM to avoid non-strategic IT projects, you can achieve business objectives faster and achieve application portfolio optimization. As you find application capability gaps and recommend investments, you can also prioritize the projects critical to achieving the organization’s strategic goals. APM facilitates scenario planning to identify the least disruptive options as you initiate new projects.

Working more closely with stakeholders, you can help develop plans and roadmaps that will drive corporate strategy. In addition, you can accelerate implementation of the roadmap by collaborating with your PMO to define the programs and resources needed to deliver.

The Value of APM in Action

APM is enabling organizations in every industry to optimize applications, reduce costs and risks, and drive strategy. Here are two examples.

A large healthcare insurer used APM to cut its applications by more than half: from 1,300 to 600. The process has not only lowered costs but also engaged the enterprise architecture team to take a more strategic approach to APM. A PMO representative said, “Our hope is to start driving strategy based on business need versus the business deciding they want a tool and are bringing it in.”

A major retailer had a list of 5,000 different software product versions and a large, outdated spreadsheet of applications. The IT department had no insight into which ones were still being used or who owned the information. Using APM, the enterprise architecture group rationalized the entire application portfolio.

Today the IT team makes application retirement assessments based on objective technology plans and risk assessments. Senior leaders can ensure application portfolio optimization by prioritizing and planning based on a list of all the obsolete technologies per manufacturers’ recommendations, plus all the technologies going obsolete in the next 18 months. The solution architect remarked: “We helped business leaders see the risk exposure of using outdated applications and where the risks are if an application isn’t upgraded.”

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“Stewardship is the New Normal”

Writing for CIO back in November, Mark Settle discussed the risks of application proliferation among SaaS apps alone. He urged IT departments to be stewards of the application portfolio: “That’s the new role that IT needs to embrace in managing the crazy quilt of SaaS applications that is being stitched together in every corporation.”

Enterprise architects and application portfolio managers must embrace this stewardship role as application portfolio optimization grows more difficult. To meet today’s challenges, organizations are bringing in more cloud-based apps, developing home-grown applications, acquiring IT portfolios via acquisitions and mergers, and attempting to integrate legacy applications into new digital initiatives.

APM software can help streamline and optimize the application portfolio. By contextualizing technology into the capabilities that deliver strategic outcomes, you can bring business value to the organization. APM provides the information leaders need to understand what’s possible and the resources required to move forward. They can make better decisions about business strategy and delivery.

It’s vital to create the agility needed to quickly change and adapt the portfolio while keeping current operations running smoothly. Elevate your ability to not only lower costs and risks, but also drive innovation, growth, and revenue.

Application portfolio management is part of the Planview solution for Enterprise Architecture. Learn more about how we help application portfolio managers and enterprise architects understand the dependencies between an organization’s program and application portfolios, the underlying technology stack, and business capabilities, projects, and products.

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Dominique Trimino Written by Dominique Trimino Product Manager

Dominique loves data. As product manager, she uses quantitative data, along with user experience to inform product decisions. She knows she does not know everything, but trusts she will learn just enough to be useful. With 10 years of experience in the Enterprise Architecture space, Dominique has seen many trends in this market. She applies this knowledge, along with unrelenting detail and her astute listening ear, to uncover product opportunities. Dominique is a graduate of The University of Texas at Austin.