"Application Portfolio Management: Delivering Improved Functionality"

If you receive errors when attempting to view this white paper, please install the latest version of Adobe Reader.

"Without a clear view of application performance, controlling costs and improving ROI is difficult. APM is one of the best tools for evaluating, balancing, and enhancing the value of application portfolios and supporting fact-based decision-making."
Source: Lionbridge Technologies

Resources Related to Application Portfolio Management: Delivering Improved Functionality:

• Application Portfolio Management (Wikipedia)

Application Portfolio Management: Delivering Improved Functionality

Executive Summary

Globalization and the accelerating pace of change have created a mass of complex business, technology, and management requirements - resulting in an overwhelming mix of technologies and applications that must somehow be aligned with business and IT strategies and requirements. Profitability and growth pressures have also never been greater. Today's technology and application leaders are under pressure to deliver functionality that will drive efficiency, innovation, and growth, while keeping costs under control. In this dynamic environment, the management of technology and application portfolios has become a top business priority.

Companies rely on a growing portfolio of applications to keep their business running. Financing, managing, and maintaining a portfolio of several hundred applications is not uncommon. Everything from email to critical business applications must be maintained, integrated, and updated on a regular basis. Accordingly, maintenance and operation costs consume about 80% of IT budgets - leaving only 20% for new project spending.

To deliver improved functionality and align spending and effort with business criticality, business and IT leaders need a clear picture of the cost versus return for each application in their portfolio. Unfortunately, most companies are operating without maintenance and management tools, such as Application Portfolio Management (APM), that are designed to maximize performance and efficiency. A 2006 Forrester Research survey indicates that only 5% of 221 IT decision-makers surveyed had "full APM implementation[s]."

Not having a clear view of application performance makes controlling costs and improving ROI difficult. APM is one of the best tools for evaluating, balancing, and enhancing the value of application portfolios and supporting fact-based decision making. Being able to recognize and reduce the amount of time and money spent maintaining non-essential applications can significantly free up budgets for IT innovation.

This white paper provides a framework for implementing an APM program that will enable your organization to:

• Monitor and analyze the impact of technology and application changes
• Align changing business and technology objectives
• Reduce portfolio complexity and cost of ownership
• Increase return on portfolio investment and performance

Definition of Portfolio Management

Portfolio management is the process of managing investments and assets, and balancing risk and reward to achieve certain goals and outcomes. To support the delivery of expected returns, portfolios must be continuously managed and maintained. In the IT context, portfolio management is the process of managing the economic lifecycle of software, hardware and infrastructure, and divesting and investing in a mix of assets to optimize gains. In the application context, it is the process of managing application portfolio performance to achieve specified business goals and returns.

Lionbridge defines application portfolio management (APM) as a:

• Program - that enables the assessment of all applications in a portfolio, the evaluation of potential changes, and an understanding of the impact of these changes
• Discipline - that enables managers to continuously manage and maintain an application portfolio
• Framework and tool - that evaluates total cost of ownership, identifies performance redundancies and gaps, pinpoints trouble spots, and highlights opportunities for improvement

Benefits of APM

APM offers an "all-in-one" approach to evaluating, categorizing, prioritizing, purchasing, and managing your organization's assets and resources. Gartner Research indicates that as portfolio management efforts such as APM mature within an organization, they become "an intrinsic part of the execution process around architecture and allocation of resources." In short, APM enables business and application managers to monitor on an ongoing basis all changes that may impact the performance of technologies and applications, align changing business and technology objectives, and reduce portfolio complexity and cost of ownership.

Challenges of APM

A recent Gartner Research survey indicates that portfolio management efforts are largely underutilized by most organizations. According to Gartner, only "forty-two percent of [survey] respondents indicated they were using portfolio management." Inevitably, both business and technology obstacles make the management and maintenance of portfolios complex - highlighting the need for the "all-in-one" approach that APM offers.

Creating and implementing an APM program brings about additional challenges as well. Common stumbling blocks include:

Portfolio management is the process of managing investments and assets, and balancing risk and return to achieve certain goals and outcomes.

• Project size: Gartner research indicates that Global 2000 companies typically support between 250 and 500 different applications - a combination of homegrown and packaged applications running on a wide range of platforms and operating systems.6 Invariably, the larger your application portfolio, the more complex your APM program.
• Failure to secure high-level support: APM must be championed by the highest level business and IT leaders or implementation efforts will falter. Moreover, the benefits of APM to the overall organization must be communicated by the highest level managers to all stakeholders to ensure program buy-in and implementation success.
• Poor communication: As soon as the APM process begins, communication challenges arise. For example, users are often unaware of the maintenance and integration issues associated with an application - resulting in a higher or more positive ranking for an application than what IT and application managers may provide. Collaboration and communication across groups, especially user and IT groups, are critical to ensuring that a balanced and wide-view assessment of an application and application performance is obtained.
• Resistance to change: Keep in mind that APM is a program and a process that requires continuous management. It almost always requires an organization to tweak existing processes to ensure APM efforts are supported. APM stakeholders must champion change. Creating incentives for change is a practice that many organizations implement to support APM efforts.

The Recommended Approach

It is recommended that the introduction and implementation of an APM program be phased to balance costs, benefits, risks, and combined business and technology objectives. Moreover, because APM is a continuous process, it requires a lifecycle approach to be effective. Figure 1 provides an example of the lifecycle approach that Lionbridge has developed to support the implementation and ongoing management of APM programs.

A closer look at each phase of the APM lifecycle shows how it supports the APM process across an organization.

Phase 1: Define goals & strategies

Technology management and maintenance initiatives such as APM are designed to facilitate business goal achievement. This means that the first step in any IT management program is the identification and prioritization of business goals. This list may be long, so prioritization is critical to ensuring an organization's top business goals are clearly called out. The next step involves repeating the process to identify and prioritize IT goals.

Once an organization's business and IT goals are identified, the alignment process begins. The mapping of business and IT goals enables the clustering of applications. Applications are clustered into categories such as utility (applications that support business operations), enhancement (applications that improve business processes), and frontier (applications that increase business innovation and competitiveness). After every application in a portfolio is categorized, a strategy for each cluster is crafted. This final step helps organizations to build their "ideal application portfolio scenario" and begin the process of establishing goals for their APM program. Just as business and IT goals are unique to an organization, application portfolios are also unique. To optimize business and IT performance, application portfolios must be customized to support the unique goals of an organization.

Phase 2: Secure sponsorship

Management sponsorship is a critical success factor for all APM programs. Forrester Research cites an example where "the rollout of an application scoring program was stopped dead in its tracks ...because the program was championed at too low a level in the organization." To mitigate the risk of failure, some organizations identify an APM program owner to manage and secure funding on an ongoing basis. At a minimum, organizations must identify and establish a team of business and IT leaders that will set goals, create an implementation plan, and support the APM program on an ongoing basis. Sponsors are also instrumental to communicating the value of APM to the organization.

Phase 3: Conduct assessment

Several activities are involved in an APM assessment. The first is to develop a framework for assessing each application and asset in your portfolio. For example, if the organization's business goal is increased efficiency and cost reduction, the framework for assessment might be to cluster applications in "maintain," "improve," and "retire" categories for the first line of analysis. Once the framework is in place, the process of data collection begins. The data collection phase is the most time-intensive part of the APM lifecycle. At the same time, it provides the input for delivering value. Most often, the data collection process involves a series of interviews with various application stakeholders, including users as well as business and application managers. The goal is to obtain a complete and accurate assessment of each application.

It is important to realize that users tend to score applications based on their comfort level with them, whereas IT and application managers focus on the amount of effort it takes to keep them functioning, i.e., the number of help desk tickets they generate. In both cases, because neither group assesses the application's value or criticality to the business, the APM framework includes application indices for evaluating and scoring applications across several areas, including:

• Criticality
• Complexity
• Value
• Performance
• Volatility
• Cost

Forrester Research highlights the importance of application scoring to organizations and explains why it is a critical component of any APM program: "An application scoring mechanism is a first step toward creating better application transparency, providing actionable, objective information about each application that will, in turn, enable better decisions about the proper fate of each application. Application scoring mechanisms give CIOs a rating mechanism that can help them reallocate maintenance dollars to the highest-priority applications while starving commodity applications."

For example, Figure 2 illustrates a cost versus volatility index analysis. This Ansoff Matrix is one that Lionbridge often employs to analyze application stability across four possible situations:

Quadrant I: Low criticality and low volatility. Applications in this segment require further analysis before recommendations are made.

Quadrant II: High criticality and low volatility. Applications in this segment can be evaluated for retention.

Quadrant III: Low criticality and high volatility. Applications in this segment are potential candidates for retirement or replacement.

Quadrant IV: High criticality and high volatility. Applications in this segment should be examined for improvement to reduce volatility and improve portfolio stability.

In summary, application scoring and indices power APM programs to evaluate both qualitatively and quantitatively every application in a portfolio across functional groups and from multiple angles. It provides a wide-view assessment of performance (both application and overall portfolio performance) that enables decision making based on qualitative and statistical data.

Phase 4: Review & recommendations

The post-assessment review and recommendation phase communicates and validates APM assessment findings and improvement recommendations to business and IT managers. A complete recommendation plan for improving portfolio performance typically includes detailed application-level recommendations. In addition, the recommendation plan often provides "investment and return" scenarios that provide improvement options or approaches with varying levels of risk and return. Figure 3 provides an investment and return scenario used by Lionbridge in a recent APM program implementation.

Phase 5: Monitor and evaluate

Because APM is a program that is designed to run continuously, ongoing monitoring, evaluation, and portfolio fine-tuning processes must be built into the program. In the monitor and evaluate phase, appropriate metrics for evaluating performance based on business and IT goals should be defined and selected, and a scorecard for managing the process should be rolled out. The only way an organization can ensure its application portfolio continues to deliver the return it expects is to monitor and evaluate performance on an ongoing basis.

Driving Efficiency, Innovation, and Growth with APM

To understand the value of APM, organizations need to ask: "Where does the value of our business lie... with our applications or with the systems our applications run on?" Most likely, the response will be "with the application." Applications and application portfolios enable organizations across industries and around the globe to deliver value. Systems are important, if not critical, because they provide the infrastructure for businesses to run on. But applications deliver value because they are the interface for interaction and communication - internal, external and global communication.

Gartner Research points out that "Businesses that are successful in their use of software are successful because they use technology and effectively allocate capital to worthwhile investments, not because they spend a lot of money."9 The increasing adoption of APM indicates that businesses are beginning to embrace this notion.

Delivering the highest level of value possible to all company stakeholders - customers, shareholders, and employees - is the goal of every organization. Tools, programs, and frameworks like APM that are designed to optimize performance deliver value because they drive operational efficiency, business innovation, and growth. Ultimately, APM enables organizations to make decisions that move them forward and enable them to explore the possibilities.

For more information about APM and Lionbridge's application services, go to: www.lionbridge.com/app-management