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The definitive Guide to

Application Portfolio Management

Application Portfolio Management (APM) is the practice of governing and optimizing inventories of software applications to achieve precise business objectives. This is accomplished by creating transparent overviews of IT application landscapes to evaluate IT costs, standardize software throughout business units and promote agility and innovation.


In recent years, the practice of APM has largely evolved to help manage mixed portfolios of on-premises and cloud-based IT applications.

By generating clear, actionable metrics on decentralized applications and monitoring rapid software development cycles, enterprise architects and cloud architects perform APM via increasingly automated means to evaluate enterprise-wide services and ensure the availability of diverse supporting technologies.

APM in large-scale enterprises typically involves the following:

  • Documenting past, present, and future applications deployed or planned to be, inside an organization.
  • Identifying and/or automating changes to application service lifecycles.
  • Organizing applications according to business capabilities.
  • Arranging IT components into technology stacks.
  • Grading the technical and functional value of applications


What you need to know about Application Portfolio Management

Application portfolio management is like taking a proactive approach to managing your wardrobe. That t-shirt you bought on impulse before arriving home and realizing it doesn't match anything you already have? Chances are it’s still gathering dust in the back of a drawer. Things would have worked out better had you taken a more methodical approach.

For example, you could have looked at your existing clothes before you went shopping, identified the gaps, and selected items to fill them.

Coincidentally, it’s the same story with enterprise applications. As organizations grow, IT departments and even individual employees buy applications to solve urgent problems without giving any (or at least enough) thought to the implications.

As a result, unmanaged apps pile up that are difficult or impossible to integrate with existing apps or other systems. Similar apps for completing the same tasks are purchased multiple times. Others fall out of favor and are no longer used, but are still paid for, and never uninstalled or canceled. And still, others are bought and never used at all!

The methodical approach to avoiding these scenarios looks like this:

  • Take a full inventory
  • Decide the value of each app
  • Keep the great ones
  • Update/alter the apps that are useful but don’t quite fit anymore
  • Eliminate/retire the apps that are no longer fit for the purpose
  • Use the refreshed overview to decide what you need before purchasing any more apps

Now imagine that this process has to cover hundreds or even thousands of apps at a time, especially with the SaaS growth. For many organizations, that sounds like such a big job, they simply never get around to doing it!

That’s a problem.

Failing to keep your application portfolio up to date means organizations are spending money unnecessarily on apps that don’t add value, leaving less money and fewer resources to spend on the software and services that could add value and boost organizational competitiveness. It also leaves them open to potential and compliance and security breaches.

This is where Application Portfolio Management and SaaS Management solutions come in.

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What you can achieve with Application Portfolio Management

So what concrete benefits do we obtain with application portfolio management?

  • Application portfolio management is an effective way to identify capital for reinvestment.
  • Application rationalization can lead to cost-savings of more than US $2 million in a single enterprise. (Infosys)
  • License optimization results in 30% savings on licensing costs (Gartner)
  • Over 20% of applications are unused and can be retired
  • Infrastructure costs can be reduced by 45%
  • At least 10% of IT project costs can be avoided through application rationalization (Oracle)
  • Vendor consolidation can reduce Total Cost of Ownership (TCO) by 22-28%
  • Currently, 75-80% of IT budgets are spent on operating and managing applications. (Science Direct)


Typical stakeholder questions

APM supports the informational needs of diverse stakeholders (CIOs, CTOs, IT managers, enterprise architects, cloud architects, and more). If practiced with a dedicated tool, the following can be addressed:

Which apps deserve investment, and which need to be shown the door?

After mapping applications, an IT manager must decide which applications to support and which to abandon altogether. To do so, they must determine both the technical and functional fit of the application. This information can be collected by sending out surveys to the actual users of the applications.

Once feedback is returned, it will be clear which applications are fit for an organization. The next step is then to divest.

Which applications are not adequately supporting business capabilities?

Enterprise architects manage both sides of the business and IT coin. A business program manager might naturally be interested in finding out how current applications are supporting the business capabilities of the office. In the below example, we can see that many applications do not functionally support finance. This is a perfect occasion to remove these applications and balance the application portfolio. 


Image 1: Application Landscape showing the functional fit of applications regarding business capabilities.

Which applications are necessary? Are there gaps or overlaps?

A difficulty encountered in big corporations is streamlining applications across an entire organization.


Image 2: Application Matrix showing which applications are supporting business capabilities, depending on their geographical user group.

Is our application portfolio developing in the right direction to support future strategic goals?

In large and complex organizations, one can quickly lose sight of application lifecycles. When an application reaches its end-of-life stage, a successor for the application must be in place, especially if it is depended upon by projects or others. This information is pertinent to numerous stakeholders in a company (e.g., the security officer needs to know that all underlying applications are up-to-date to avoid attacks on obsolete apps; the CTO needs to know what the application roadmap looks like).

There are many additional types of reports that an enterprise architect should have access to that are essential to a company.

Top 12

Reasons to use Application Portfolio Management

1. Enable cloud native strategies 

A dynamic catalog of applications is a pre-requisite for securely upgrading core IT processes according to business criticality and implementing tailored yet efficient cloud native development standards. A practical resource for EAs and cloud architects, APM exposes organizational roadblocks when iteratively expanding cloud environments and integrating agile principles.

2. Mitigate security and compliance vulnerabilities 

Compliance issues stemming from end-of-life application service lifecycles can be forecasted using IT portfolios either integrated into vendor information databases or distributively maintained. Further, all applications handling customer data yet running on time-sensitive software licenses can be tracked to support audit management.

3. Optimize cloud and hybrid costs and resources 

IT leaders must support business in analyzing cloud costs and investments. Doing so while strategically splitting workloads between on-site data centers and public cloud spaces requires contextualized, automated updates on cloud cost trends across multiple accounts and business units—the likes of possible with application inventories directly integrated to cloud vendors. 

4. Upgrading processes with lean principles and the Technology Business Management (TBM) framework

Data from APM programs is leveraged to measure enterprise-wide adoptions of the TBM framework. By documenting cloud vendor-specific services according to their ability to help IT optimize run-the-business and change-the-business spending, APM is a natural companion to IT and business leaders wishing to scale services in cost-effective manners. 

5. Secure the adoption of strategic platforms with holistic insights using powerful reporting

APM offers enterprise architects and executive-level stakeholders alike the oversight to monitor large-scale IT transformation projects. In particular, many companies use automated and configurable reporting mechanisms to measure, in real-time, the impact of their evolving application landscapes.

6. Reduce IT complexity and improve efficiency

IT landscapes in billion-dollar enterprises usually contain thousands of interdependent entities—the majority of which are disconnected from their anchoring business capability. APM systematically untangles this IT complexity by categorizing applications and pinpointing redundancy. This organization helps when coordinating the implementation of technologies and processes.

7. Promote collaboration between business and IT to react faster to business needs

APM is rooted in close collaboration between IT and business. The sooner development can diagnose business needs, the sooner solutions can be tailored to relevant security, software, and market standards. Quite often this involves identifying where and with what data sources to most effectively apply autonomous development cycles.

8. Rationalize application costs and lower total cost of ownership

Server license optimization, application retirement, standardizing common technology platforms—APM is an engine for maximizing IT budgets through highly scoped value assessments. For every application, a total cost of ownership (TCO) is recorded alongside other sets of criteria such as strategic value, available skills, user satisfaction, and availability of alternatives.

9. Improve IT visibility and control across scaling hybrid cloud environments

Enterprises rely on APM methodology to guarantee the exact visibility they have on traditional, on-premises IT with granular assets deployed on cloud platforms. By detecting violations that affect cloud landscapes while validating architecture, infrastructure, and deployments against established best practices, APM ensures that hybrid IT environments are documented and controlled.

10. Prioritize IT projects 

APM prioritizes projects and their associated applications according to business value and available resources (personnel and technological). This high-level clarity is directly used to support the decisions of CIOs and CFOs when charting organizational targets.

11. Strengthen business processes by uncovering technological gaps and data redundancies

A fully-delineated application portfolio offers a clear path to the technological gaps and redundancies likely to be slowing business processes. APM outlines feasible improvements while incorporating the knowledge of stakeholders with close ties to the technology.

12. Map data flows and application dependencies

By integrating networks of applications and their shared interfaces, APM provides the groundwork for seeing the implications of service lifecycle phase-outs across the wider application landscape. The reliability of any particular interface and dependency can accordingly be scrutinized by operations teams.

Getting started with Application Portfolio Management

Now that we have covered why Application Portfolio Management is necessary, it is time to show how to actually get started with Application Portfolio Management and assess your portfolio.

1. Compile a list of applications

Compile a list of past, present, and future applications deployed on your system. This should include all users and offices worldwide. Use the SaaS management process to identify SaaS applications.

2. Identify who owns the application

Identify the affected stakeholders (users) of the applications. During this discovery period, it is common to find out that very few people are using certain applications. You may also find that some applications are, or are becoming, totally unused.

3. Identify the lifecycle of the application

Once a technology is activated, its value increases and its potential risks go down. As it reaches its end-of-life, however, IT management has to confront challenges such as integration issues, limited functionality, varying service levels, lack of available skills, and missing support from vendors. Many experienced executives are quite good at managing risk at an early stage but may nonetheless still ignore the risks of technology at the end-of-life stage.

4. Assess the usage of applications

Misused applications can be identified by conducting a thorough application rationalization. Applications are not often used to their full potential or can be easily exploited when used incorrectly.

5. Establish the application business value, its quality, and its costs

Determine the total cost and business value of every single application– even the ones barely used. Compare this cost to the TCO of similar applications being used in the industry. At this stage, it is best to use business capabilities.

Business capabilities define what a business is doing right now and what it needs to be doing in order to meet current and future challenges. They outline “what” a business does rather than “how” it is done. Additionally, business capabilities help to identify redundancies in IT, spot risks, and develop innovative technology solutions.

6. Create an application architecture framework

One best practice is to develop a rationalization framework for your application architecture by defining a set of business, information, and application concepts that your organization would like to see reflected in the long term.

LeanIX, by providing an easily referenceable, tangible, visual display of the application landscape, can establish an overview of which parts of the organization are being fulfilled by the current application stack in order for you to determine what is truly needed.

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7. Map the total concept onto the landscape

Business leaders, IT heads and EAs should gather to review the recommended actions of each application and design an implementation roadmap for moving forward. Involving various business leaders while creating a supporting architecture will help to establish transparency and properly align the business to IT.

Though some consolidation efforts will be easier to implement than others, it is best to unite applications within one business domain (e.g. Human Resources, Financials, etc.) to achieve a shared business model.

8. Make application rationalization a continuous process 

Once an application portfolio is officially inventoried and optimized, it is imperative to continually maintain the landscape. One-time application rationalization endeavors might save the organization money in the beginning, but they lack the long-term value that continuous application rationalization promises.

Application rationalization improves the overall effectiveness of IT by regularly ensuring that the IT landscape is actively aligning to business goals and objectives.

Check out the video below and join Ross Francis from UnitingCare — one of Australia’s largest charitable providers of healthcare and support services in Australia — to present his group’s journey to LeanIX. Francis shared details about the IT complexity inherent to UnitingCare’s IT environment and shared an APM Business Case Example within his company.

Duplicate technology, spreadsheets, inconsistent data — in order for UnitingCare to reach its 2030 transformation roadmap, it had to thoroughly organize its application landscapes and take care of what Francis termed “dirty data”.


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In Conclusion:

Operating an agile landscape is key in today’s business climate. With digital transformation driving customer demand, IT architecture must dynamically adapt to the rapidly changing needs of the market. Most businesses spend 70-80% of their IT budgets on supporting aging, low-value legacy applications, leaving very little money to invest in optimizing business processes.

The goal of application portfolio management is to articulate a singular architectural vision to enable business goals, respond effectively to strategic drivers, conform with architectural principles and standards, and address the concerns and objectives of key stakeholders.

APM efforts help you optimize your application stack, establish transparency between stakeholders and deliver true value to your business leaders.

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Answers to frequently asked questions on Application Portfolio Management

What does the Application Portfolio mean?

Application Portfolio Management is a framework to identify every IT software applications within the company and to manage these applications in a clear and efficient overview. APM helps the specific managers to illustrate specific business needs or risk within specific departments regarding their IT.

The goal of Application Portfolio Management is to formulate an EA vision that makes the business objectives feasible, responds to strategic drivers, is consistent with architectural principles and standards, and addresses the concerns and goals of key stakeholders.

What does Application Portfolio Management provide?

Application Portfolio Management provides clear insight into the number of applications in use, their value contribution, supporting technologies and life cycle.

What can Application Portfolio Management achieve in the company?

Application Portfolio Management can lead to license cost savings of up to 30% by optimizing or rationalizing existing software licenses.

As a rule, an average of 20% of applications are not used and can therefore be terminated. Application Portfolio Management enables IT projects to be completed much faster and to reduce their project costs by at least 10%.