What is application portfolio management (APM)?

What is the goal of application portfolio management?

The goal of application portfolio management is to provide visibility into an organization's software portfolio and make it possible to evaluate each software asset in terms of its alignment with the organization's strategic business objectives. An effective APM initiative enables organizations to reduce IT costs, mitigate the risks associated with unmanaged software and make data-driven decisions about whether specific apps and software services provide enough business value to justify their continued use.

For example, a company may discover that managers in different departments have purchased three different data visualization apps over the years, but employees in different roles across the organization are only using one of the apps on a consistent basis. This information can help stakeholders decide whether to keep all three apps or standardize operations on the most popular one.

How application portfolio management works

Application portfolio management works by creating an annotated inventory that documents each software application and service in use. This type of inventory typically contains details about each software element's purpose, usage frequency, technical dependencies, cost and overall contribution to business operations.

APM inventories can be conducted manually or programmatically, depending on the organization's size and IT resources. Manual inventories are often conducted through surveys, and results are documented in spreadsheets. In contrast, programmatic inventories are conducted with automated discovery tools that can be integrated with the organization's configuration management databases (CMDBs) or IT service management (ITSM) tools to provide real-time data.

Once the inventory has been completed, it can be analyzed. Most APM tools still use rules-based scoring to assess each application's business value. Based on the evaluation, stakeholders can determine how to manage each application. Typical actions include the following:

• Maintain. Continue using the app or software service in its current state.
• Upgrade. Develop or purchase additional software features.
• Consolidate. Eliminate redundancy by merging overlapping applications and services or standardizing usage on one service.
• Replace. Research a more efficient or cost-effective tool and transition to it.
• Retire. Decommission applications and software services that are obsolete, underused or no longer deliver adequate value.

It's important to understand that APM is not a one-time activity. Once an application portfolio has been documented and analyzed, each element in the portfolio needs to be evaluated on a regular basis to manage risk and ensure the software landscape remains closely aligned with changing business needs.

Importance of application portfolio management

In a typical enterprise, it's common for hundreds of applications and software services to be used across different departments. Without a clear understanding of what software apps and services are currently being used, employees in large organizations may end up purchasing the same software multiple times or requisitioning the same app more than once.

Without proper oversight, the widespread adoption of software-as-a-service (SaaS) delivery models for digital transformation initiatives can lead to application sprawl. In the context of cloud computing, application sprawl may also be referred to as SaaS sprawl.

SaaS sprawl is a problem because it creates a bloated application landscape that makes it harder to streamline workflows in large organizations. APM can help eliminate application bloat by providing stakeholders with the data they need to make informed decisions about application lifecycle management (ALM).

What are the benefits of application portfolio management?

The detailed insights into an organization's application landscape that APM provides enable IT personnel and senior decision-makers to understand whether or not individual apps and software services in the portfolio provide a good return on investment.

Additional benefits include the following:

• Making it easier for DevSecOps teams to identify applications that contain known vulnerabilities.
• Providing developers, stakeholders and managers with empirical evidence that can be used to guiding future decisions about application lifecycle management.
• Enabling stakeholders to compare the cost and business value of similar applications and determine each app's total cost of ownership (TCO).
• Reducing waste by identifying multiple applications that do the same thing.
• Helping stakeholders determine whether a new software service will fill a functional gap.
• Facilitating the inclusion of shadow IT apps in the APM inventory.

Application portfolio management and shadow IT

In the context of application portfolio management, shadow IT refers to software that is being used without the knowledge of the organization's IT department. Before the widespread adoption of cloud services, most software had to be installed, configured and maintained by IT. With the rise of SaaS, however, any employee can purchase a cloud app or service and use it immediately without IT's involvement.

Employees often acquire SaaS apps to solve immediate business problems. However, the convenience this purchasing model provides enables internal information governance processes, including security reviews and compliance checks, to be bypassed. As a result, large enterprises can end up with hundreds -- or even thousands -- of unauthorized and unmonitored cloud applications, many of which may store sensitive data or introduce regulatory compliance risks.

APM addresses shadow IT by providing a structured way for IT managers to discover, document, and evaluate applications and software services acquired outside formal channels. APM tools support this process by automating application discovery and integrating with other enterprise systems to collect relevant data.

Key features of application portfolio management tools

Application portfolio management tools are specialized software platforms that help organizations inventory, evaluate and optimize the software applications and services in use across the enterprise. This type of management tool gives IT and business leaders a centralized, data-driven view of the organization's entire application landscape.

The method an APM tool uses to capture each app's business value depends on whether the tool is integrated with other enterprise systems. In general, the more tightly integrated an APM tool is with other IT systems, the more accurate and up to date the insights it provides are.

Arguably, the best APM platforms include the following key elements:

• An intuitive executive dashboard interface that is easy to use.
• Diagnostic features that can identify application conflicts and cloud misconfigurations.
• Digital experience features that monitor how users interact with specific applications and software services.
• Planning features that enable decision-makers to minimize cloud software licensing costs.
• Machine learning algorithms that can detect usage anomalies and automate responses to potential security risks in real time.

Some of the most well-known tools used for application portfolio management are the following:

• Datadog. Datadog offers a variety of monitoring and observability tools that can be used to understand and manage an organization's application landscape.
• Splunk AppDynamics. This platform provides full-stack observability into hybrid and on-premises applications.
• SAP LeanIX. LeanIX is designed to make it easy for organizations to compare the cost of each software app with the business impact it provides.
• ServiceNow APM. ServiceNow's APM platform facilitates application rationalization by providing a complete picture of the application estate, including the underlying technology and business relationships.
• Ardoq. The Ardoq APM platform can be used to create a baseline for an organization's software landscape and gain insights that facilitate app optimization.

Application portfolio management frameworks

An APM framework is a collection of guidelines and best practices for managing software apps and services throughout their lifecycle. While there isn't a single industry-standard framework for application portfolio management, many organizations use the principles contained in The Open Group Architecture Framework and/or Gartner's Tolerate, Invest, Migrate, Eliminate model to assess the strategic value of applications and categorize them based on business function, usage or technical characteristics.

Ideally, the core components of an APM framework should include the following:

• Discovery and inventory. The framework should provide methods for identifying and cataloging all applications and software services across the organization.
• Classification and categorization. The framework should facilitate inventory analysis by enabling apps and software services to be grouped by business function, ownership, technical platform, usage patterns or importance.
• Assessment criteria. The framework should clearly define the criteria for how each element in the application portfolio is evaluated.
• Governance structure. The framework should outline application management roles and responsibilities and document the decision-making processes for overseeing the application portfolio over time.
• Scoring models and heat maps. The framework should standardize application scoring and use data visualization tools, like heat maps, to make assessments easy to understand.
• Optimization strategy. The framework should tie usage metrics and application scoring to specific remedial and optimization actions.
• ALM. The framework should ensure that applications and software services are continuously monitored and managed throughout their lifecycle.
• APM tools and technology integration. The framework should encourage the use of APM tools and platforms that can automate network scans, data collection and reporting.

Application portfolio management vs. application performance management

Application portfolio management and application performance management share the same acronym (APM), but they serve distinctly different functions within IT:

• Application portfolio management is a strategic discipline that supports long-term IT planning and cost rationalization efforts.
• Application performance management is an operational practice that monitors how quickly, reliably and efficiently a software application works.

Essentially, application portfolio management helps stakeholders decide which software applications and services to keep, while application performance management helps IT operations teams provide high availability and ensure software performs as expected.

Project portfolio management (PPM) software and tools play a pivotal role in advancing strategic project management and Agile methodologies. Check out our PPM list for clear guidance on the capabilities of each tool -- you're sure to find exactly what you need to succeed. Also, find out the questions to ask about cloud applications to determine the level of availability businesses need and whether all that availability is necessary.