Application Portfolio Assessment

What is an application portfolio assessment?

Application portfolio assessment is a process used by organizations to evaluate the software applications they currently use. The main goal of this assessment is to identify which applications are most beneficial to the organization and align with its business goals and objectives.

By conducting this assessment, organizations can make informed decisions about which applications to invest in, retire, or replace in order to optimize their overall application portfolio and improve their operations.

Application inventory assessments are an essential component of the application portfolio management discipline. Efficient and complete assessments are performed using APM (Application Portfolio Management) tools such as the LeanIX EAM.

APM tools provide businesses with a standardized process and visual maps, increasing the quality of assessments over time and more straightforward rationalization.

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Why should you assess your application portfolio?

There are several reasons why organizations may conduct an application portfolio assessment. These reasons include:

• To identify which applications are most beneficial to the organization and align with its business goals and objectives.
• To determine which applications are redundant, underutilized, or no longer necessary, in order to optimize the overall portfolio.
• To identify opportunities for consolidation or integration of applications, in order to improve efficiency and reduce complexity.
• To assess the current state of the organization's application portfolio and identify gaps or weaknesses that need to be addressed.
• To make informed decisions about which applications to invest in, retire, or replace in order to improve the organization's operations and achieve its business goals.

Overall, the main goal of application portfolio assessment is to ensure that the organization's application portfolio is well-aligned with its business goals and is optimized to support its operations and growth.

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Main use cases of assessments

There are several use cases when any organization – large or small – will assess its application portfolio.

Each of the following processes require IT architects to set a target architecture. This is done using the methodologies described further down this page.

Cloud migration

Cloud computing is a huge part of modern enterprises. Third-party services like Google, Microsoft Azure, Salesforce, and IBM enable IT processes and services to be accessed online. 
The process of migrating to cloud services will require an assessment of the current application portfolio. This is to establish which SaaS, IaaS or PaaS services will best achieve the goals of the business and their impact.

Post-merger integration

When two businesses merge, redundant software or duplicate applications can become part of the newly formed IT landscape. As a result, analysis and rationalization of the new application portfolio must be carried out as part of a successful integration process.

IT cost optimization

IT optimization is the process of continuously analyzing an organization’s business technology processes and applications to discover cost-saving opportunities. These areas include cloud services, infrastructure, and applications amongst others.

Complexity reduction

Large enterprises tend to have complex IT infrastructure which can become burdensome and expensive to the business over time. Software complexity reduction allows enterprises to streamline and rationalize their application portfolio.

Application modernization

Technology moves at lightning speed; especially in the IT world. There are always new updates, versions, and applications organizations need to adapt to stay competitive. By assessing application inventory, old software can be retired.

Risk management

Application portfolio assessments help businesses discover possible risks in their IT landscape. Risks can include security gaps, running redundant software, and shadow IT.

Prerequisites for assessments

To perform a successful application portfolio assessment, a few basic requirements need to be established before the process can begin.

The more detailed information IT teams have about the following, the better the decisions that can be made. Main Application portfolio analysis strategy must-haves are:

• Main use case: While there are a lot of benefits to analyzing an application portfolio, business goals need to be outlined to justify the time and resources.
• Complete application inventory: Businesses will need to compile a list of all their applications. This can be done manually (using a spreadsheet) or by using software such as Application Portfolio Management (APM) tools (recommended).
• Description: This is important for IT to quickly understand what an application does, whom it affects, and how it works.
• Business capability map: Maps help establish which business capability is the application part of and whether the application supports adequate business capabilities. This is another benefit of using APM tools.
• Ownership: Who owns the application and what are they using it for?
• Functional and technical fit: What value and function does the app bring to the business? Does the app satisfy your technical needs and can it be part of future IT roadmaps?
• Cost and pricing: How much do the application and its subsequent upgrades and add-ons cost? How is it being paid for?
• Usage: This outlines how often the app is used and the number of active users vs. licenses purchased.
• Application portfolio management solution: all of the above can be found and implemented with the LeanIX EAM.

📚 Related: What are Mission-critical Applications? and What are Business-critical Applications?

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Methodologies

Once the use case has been created, the next step is to establish which application portfolio assessment methodology will be used. There are three main frameworks enterprise architects can use to approach the task; these are Gartner’s APA, TIME model, and 6Rs.

These methodologies go hand-in-hand with each other but create different outcomes. Which one you should use will depend on the use case and desired target architecture.

TIME model

The Gartner TIME model is a way to identify, manage and prioritize opportunities for portfolio improvement using business and technology fitness, risk, and cost. It is a way to modernize large and/or outdated application portfolios, as well as implement cloud migration and application modernization software.

TIME is an acronym for Tolerate, Invest, Migrate and Eliminate. Attributes of the model include:

• Tolerate: applications that don't provide the best business value but have an important function and high IT quality.
• Invest: applications valuable to the business and warrant future investment. 
• Migrate: applications serving a purpose in the IT landscape but create problems and therefore need to be migrated to improve function.
• Eliminate: applications that can be removed.

6Rs

The 6Rs methodology for application portfolio assessments is a framework for determining which applications can move to the cloud, and how.

Cloud migration provides many technical and financial benefits for businesses. 6Rs (Rehost, Replatform, Repurchase, Refactor, Retire, Retain) assess applications for cloud readiness.

• Rehosting: also known as “lift and shift.” Rehosting can be automated using tools and is an easy way to optimize/re-architect applications already running in the cloud.
• Replatforming: a way of identifying and modernizing parts of an application to achieve some tangible benefit.
• Repurchasing: moving an application or system to an entirely different product. 
• Refactoring: this involves reimagining or restructuring an application, usually using cloud-native features. This is done when an organization wishes to add features, scale, or increase application performance.
• Retiring: deciding which applications can be removed because they are no longer useful to the business.
• Retaining: this is the ‘do nothing’ option. Applications that need no changes or should be revisited at another time.

Gartner’s APA

Garter’s Application Portfolio Analysis (APA) is a tool that divides a business's current and proposed applications into three categories — utility, enhancement, and frontier. Each of these categories is based on the degree to which they contribute to the enterprise’s performance.

This framework organizes applications based on performance, so is best used by businesses that want to gain optimal performance and value.

Gartner's APA categories are:

• Utility: essential to the business but does not enhance performance (e.g., payroll).
• Enhancement: contains applications that improve the enterprise’s performance based on established technology.
• Frontier: aims to improve enterprise performance but usually entails substantial risk.

Conclusion

Application portfolio assessments provide the groundwork for many use cases and are necessary for any application portfolio management project. Which methodology you'll use depends on the use case and experience.

To succeed, use APM software which provides IT experts with a visual overview of the application landscape; their business capabilities, components, costs, and potential risks.

Assessments are an essential component of managing the IT landscape toward the organization’s target architecture.