Application Portfolio Management: An Introduction

Application Portfolio Management: Synergies with Enterprise Architecture and Project Portfolio Management


Application Portfolio Management (APM) is a practice that has emerged in mid to large size (IT) organizations since the mid 1990s. APM attempts to use the lessons of project and/or financial portfolio management to justify and measure the (financial) benefits of each application in comparison to the costs of the application’s maintenance and operations.

APM was widely adopted in the late 1980s and through the 1990s as organizations began to address the threat of application failure. The Y2K hype made many organizations around the world develop a comprehensive list of their applications, with information about each application.

It is common to find organizations that have multiple systems that perform the same function. Many reasons may exist for this duplication, including the former prominence of departmental computing, the application silos of the 1970s and 1980s, the proliferation of corporate mergers and acquisitions, and abortive attempts to adopt new tools. Regardless of the duplication, each application is separately maintained and periodically upgraded, and the redundancy increases complexity and cost.

There are two main categories of APM solutions, generally referred to as ‘Top Down’ and ‘Bottom Up’ approaches. The first need in any organization is to understand what applications exist and their main characteristics (such as flexibility, maintainability, owner, etc.), typically referred to as the ‘Inventory’. Another aspect of APM is to gain detailed understanding of the applications in the portfolio by parsing in the application source code and its related components into a repository database (i.e. ‘Bottom Up’).  APM tools support this approach.

Definition of an application

In application portfolio management, the definition of an application is a critical component. Many service providers help organizations create their own definition, due to the often contentious results that come from these definitions.

Software application and software component are technical terms used to describe a specific instance of the class of application software for the purposes of IT portfolio management. Application software  is commonly defined as: An executable software component or tightly coupled set of executable software components (one or more), deployed together, that deliver some or all of a series of steps needed to create, update, manage, calculate or display information for a specific business purpose. In order to be counted, each component must not be a member of another application.


Taking ideas from project and/or investment portfolio management, APM practitioners gather information about each application in use in a business or organization, including the cost to build and maintain the application, the business value produced, the quality of the application, and the expected lifespan. Using this information, the portfolio manager is able to provide detailed reports on the performance of the IT infrastructure in relation to the cost to own and the business value delivered.

Synergies Between Enterprise Architecture and APM

Enterprise Architecture (EA) is regarded as a strong concept to cope with the complexity caused by large application portfolios. EA models are a strong basis to aggregate the AP-relevant characteristics per application, which are then integrated into an AP dashboard to support senior IT managers’ holistic APM. Consequently, a decision-oriented view is created of the overall EA, which the managers of the case studies companies deemed to be very helpful for steering their application portfolios.

The scheme below  illustrates relationships between EA, APM, and the CIO office. APM allows transparency in the architecture process. This is important to the CIO and is also critical to building an EA community. Additionally, it reinforces governance for EA initiatives. It does this by providing transparency in the process. This is coupled by having a central store of record for application classification and management processes in which to base decisions.

Relationships between EA, APM, and the CIO office

APM and Project Portfolio Management (PPM)

Application portfolio management (APM) and project portfolio management (PPM) are very closely related activities. PPM is very similar to APM; sometimes there is confusion between the two. Although PPM and APM are very similar, they are also very different.

PPM provides project managers the visibility into many projects or program portfolios. They also provide built-in governance processes. The goal of PPM is to catalog, quantify, and manage project efforts.

The following table lists the comparisons of APM and PPM.

Focuses on the application architectures: 

  • Application-centric
  • Takes non- tangible aspects into account such as: Personnel skills and education
  • Dependencies of applications
  • Links costs between applications
  • Takes into account architecture, infrastructure, platforms, frameworks
  • Supports IT governance holistically
Focuses on project characteristics: 

  • Primarily project-driven
  • Links to project resources
  • Focuses on investments in the portfolio
  • Return on investment (ROI) of programs and projects


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