Experts say that a shift to business-focused application portfolio management is currently under way. As part of that shift, business architecture is taking the forefront in application portfolio analysis. Such business architecture techniques as activity and business process models are used to align the strategic objectives and tactical demands of the enterprise.
For enterprise architects looking to transform complex legacy software, application portfolio analysis can be the key to aligning business investments with core capabilities. After all, companies need to know which applications they have before they can decide which ones to keep, add or abandon. Portfolio managers today are using business capability models to prioritize applications and map portfolios to business value.
Still, analyzing an application portfolio can be a challenging task, and in the past, the approach lacked a standardized set of tools. Because most organizations have a large and diverse mixture of applications, it can be difficult to separate applications that are business differentiators from the ones that are unessential.
Portfolio analysis of the application kind
Application portfolio analysis is a way of categorizing applications from an investment and differentiation standpoint. The basic idea is to determine which applications give the company a competitive advantage -- and therefore, which applications the company should invest in.
Big changes in today's corporate market -- such as IT consumerization and bring your own device (BYOD) -- now drive the business' interest in technology decision making. The importance of technology investment decisions to the business is on the rise because of the heightened interest of shareholders in IT choices.
"There is demand from shareholders for more value from IT," said Andrew Guitarte, assistant vice president and business architect of digital channels at Wells Fargo Bank. "Portfolio managers need to ask every day, 'What is this project or portfolio giving back to my shareholders?'" In the past, portfolio managers had the final say about which applications to bring into the enterprise or which projects to pursue, but nowadays shareholders hold much more sway.
All of these factors have led to a general shift toward business-focused application portfolio management. Although the space still lacks a standardized set of tools and approaches, vendors of portfolio analysis products are starting to rebuild their tools to address the needs of business executives, product managers and business architects, Guitarte noted. It should come as no surprise that the use of business architecture techniques for portfolio analysis has grown.
"The biggest trend in this space is using a capability-based framework to try to rationalize portfolios," said Neal McWhorter, president of Strategic Value Partners LLC, which specializes in technology investment strategy.
Business capability models enable companies to create application taxonomies without digging too deep into the technical aspects of the software portfolio. "It highlights the competitive advantage that the enterprise has built over the years," Guitarte said. That approach enables organizations to view applications from a broader, more strategic and business-oriented perspective.
Even so, portfolio managers and business executives are often surprised by what they find when their company's software inventory is analyzed. For example, it's common to discover that an organization's investment strategies, while sound at a technical level, don't map well to overall business strategies. For that reason, application portfolio analysis should be a continuous effort on the part of both business and IT.
Business capability portfolio strategy
"Application portfolio analysis should be part of both the strategic planning and the project lifecycle of an organization," Strategic Value Partners' McWhorter said. "The IT organization should be evaluating the technological reasons that are driving application portfolio change, and the business should be identifying ideas about where they would like to invest. Ideally, every time a major initiative is coming through, it is being informed by that ongoing work."
Technologies and business objectives change rapidly now. It's hard for the "portfolio" to keep up. "As technology evolution happens, it disrupts people's strategies, and causes them to re-analyze their portfolios. So it's never done," McWhorter said.
According to Guitarte, Wells Fargo continuously uses business capability-based portfolio analysis to keep its software portfolio and business strategy aligned. The bank's projects -- whether infrastructure- or process-oriented -- are mapped to business capabilities, and those are ranked based on their contribution to strategy and business value. "Once you do that mapping, then decision makers can use that as a starting point for return-on-investment discussions," he noted.
This was first published in August 2012