Application portfolio management
Sopra Group’s business leader in Ireland, Tom McCann, offers a pragmatic approach to understanding and optimising your investment in IT applications.
In the current environment of continued cost pressures and increasing service user and citizen demands for innovation in service delivery, many organisations in Northern Ireland are struggling to understand the extent of their investment in applications software and, more importantly, the return on that investment.
In this article, Tom McCann, who leads Sopra Group’s business in Ireland, outlines a pragmatic approach to understanding your investment in software applications, rationalising your application portfolio and optimising your return on investment. This approach is commonly known as application portfolio management.
Application portfolio management is the continual measurement of the business and financial impact of an organisation’s application portfolio against the benefits this provides to the organisation. Just as a fund manager optimises financial holdings, through application portfolio management, an organisation will look to dispose of, or replace applications that are not performing well with applications that will perform well or meet changing business needs.
Reducing operating and maintenance costs are not the only drivers. This approach can deliver so many more benefits to the business: it can help improve efficiency and reduce complexity within your organisation, allowing it to maintain or enhance responsiveness or, for example, collaborate with partner organisations in a more efficient way without necessarily requiring further funding.
Understanding your capabilities
Before an organisation can perform application portfolio management, it needs to understand its existing capabilities. This allows any decision to be taken within the context of the organisation’s business and response needs. By augmenting this view with a consideration of required future capabilities, provided by enterprise architecture, an organisation can take a longer term position on its portfolio and improve performance over time.
• What is enterprise architecture?
An enterprise architecture is, effectively, a realisable blueprint for business and IT change that captures an organisation’s strategic objectives and vision as well as the various entities, assets, relationships and processes within the organisation.
Once defined, an enterprise architecture provides a tangible insight into an organisation’s strategy, and guides projects and programmes to ensure they meet their objectives and deliver the required value.
• Forming your architecture vision
To be able to take advantage of application portfolio management, you must have a clear vision of your current state and your future state within your enterprise. Therefore, you must start to form the enterprise architecture blueprint for change.
Before you can move to the future state; you need to understand your existing capabilities. The enterprise architecture must capture the current operating model. By comparing the current and future operating models, the organisation can then build a view of initiatives required to deliver change.
Analysing your portfolio
By using an organisation’s enterprise architecture blueprint as opposed to a simple rationalisation exercise, the application portfolio management process can now be aligned to the business, enabling a true assessment of the portfolio’s performance against the organisation’s goals. This is performed by exploring the cost of providing the organisation’s required capabilities using the portfolio in place.
• Application to capability mapping
In order to manage your portfolio you must first create an inventory of the applications that comprise the portfolio itself by capturing details on the applications, their underlying infrastructure services, their risk profile in the business and their fiscal profile such as cost to run, cost to maintain etc.
Many organisations have a starting point for this exercise through their help-desk or asset management system, however, given the proliferation of ‘almost enterprise’ applications developed or procured directly by users without IT involvement, it has become increasingly difficult to track applications that silently become part of an organisation’s portfolio. Examples include the popularity of cloud-based tools such as Salesforce being procured directly by an individual department, or an Access database that has, over time, become a critical and embedded tool within a department’s processes.
Once finalised, the inventory can then be mapped on to business capabilities identified within your proposed business architecture. This process is designed to identify both cross-over between applications and their related components, and gaps within your true capability against what is required.
• Capability-based portfolio management
Having completed an application to capability mapping exercise, information is now available to allow an organisation to make business-aligned portfolio-management decisions.
By exploring how an application, and its related technical infrastructure, relates to the business capabilities required by the organisation’s enterprise architecture, any decision within the business, application or infrastructure architectures can be aligned to the business strategy.
The most common approach in an application portfolio management initiative is to look down into the information and infrastructure architectures, looking only at the technology usage within the enterprise.
However, to fully explore the application portfolio it is best to take a middle-out approach from the capabilities within the enterprise architecture into the component architectures: business architecture, information architecture and infrastructure architecture.
Further to the above mapping, it is important to review the components highlighted against criteria including:
• Cost-benefit analysis: what is the cost of running the component versus the benefit provided to the business (both quantitative and qualitative)?
• Risk profile: how important is the application or component to the business? what is the risk of a failure? is it a strategic technology or an ageing one?
• Functional and architectural fit: both for current and future states.
These criteria contribute to the overall cost-benefit assessment and can be used to explore the impact of changing, removing or rationalising components within the architectures.
It is important to understand when analysing the business architecture that any overlaps may not necessarily highlight duplication. However, they do suggest optimisation of the processes may be possible.
Having analysed the portfolio, the next step for an organisation is to create a portfolio roadmap to plot the proposed journey from analysis to implementation within the organisation. Typically, this roadmap is aligned to the organisation’s existing change management processes, such as ITIL’s Implementation Roadmap. However, it can exist as a standalone entity used to drive change over time.
• Continual management
Just as with a financial portfolio, an organisation’s application portfolio should be continually reviewed and optimised to ensure alignment to the business strategy and continued best-use of assets. Therefore, it is recommended that organisations explore setting up a formal application portfolio management process.
This need not be a large investment as many existing tools within organisations are capable of supporting the process.
Conclusion
To compete in the current environment, Sopra Group’s clients right across Europe have found the need to innovate and adapt their business to deliver better service to meet the more “demanding demands” being placed on them both internally and externally, within increasingly tighter budgets.
Many of these clients are turning to enterprise architecture and related approaches such as application portfolio management to help them meet their challenges by focusing on enabling their required capabilities.
What is evident historically is that organisations that are adaptable and responsive and rise to meet the challenges of changing demands, as well as understand the fundamental shifts taking place, will survive; albeit perhaps in a very different form.
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