Application Portfolio Management: A Detailed Guide‍

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Are you feeling overwhelmed by your organization's tech stack? This is a common challenge when your organization lacks a streamlined application portfolio management system.

Organizations risk wasting resources and incurring higher costs without effective application portfolio management (APM). Poor application management can lead to issues such as insider threats, shadow IT, SaaS sprawl, and reduced operational flexibility.

Recent estimates indicate that more than 70% of the business applications companies use are now delivered via the SaaS model. This figure is expected to rise in the next decade as more organizations adopt SaaS tools.

However, as the SaaS stack grows, the risk of proliferation also increases. To keep it under control, you must enable an effective application portfolio management strategy enabled.

So, what is application portfolio management, and how can it enhance your organization's tech stack efficiency?

This article clarifies the concept and provides actionable best practices for quick implementation.

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What is application portfolio management?

Application portfolio management process is a strategic approach that helps organizations systematically evaluate, manage, and optimize their IT assets and SaaS applications. It also helps them make informed decisions about investments, maintenance, and retirement of SaaS apps.

APM helps companies maximize ROI. It prioritizes investments, streamlines operations, and enhances cybersecurity while improving overall IT efficiency and effectiveness. It includes proactive SaaS management to minimize potential risks, reduce redundancy, and achieve business goals.

‍Why is managing your SaaS portfolio necessary?

Effectively managing your SaaS portfolio ensures that your organization operates efficiently and productively. It enables you to leverage these applications efficiently, securely, and in alignment with your business objectives.

With the ongoing adoption of SaaS across every industry, managing your application portfolio is crucial. Without proper application management, serious consequences can affect critical aspects of your company. It includes cloud infrastructure, financial health, operational efficiency, bottom line, and business longevity.

Thus, you must prioritize efficiently managing your SaaS application portfolio. These factors collectively determine the stability and longevity of your business.

• Through effective APM, you can identify SaaS cost optimization opportunities. It involves eliminating underutilized or redundant applications and optimizing pricing plans.
• You can identify performance bottlenecks, address issues promptly, and optimize resource allocation to enhance productivity.
• You can scale your applications, adapt to changing business needs, and accommodate increased user demands.
• It ensures no compatibility issues and enables seamless data flow between the applications in your SaaS stack.
• Regular audits will reveal areas of vulnerability. They will help you rectify them effectively and keep your data secure and applications compliant.

Also, this APM approach facilitates application rationalization. This process streamlines your application portfolio by eliminating unused features and consolidating similar applications. It optimizes resource usage effectively to enhance overall efficiency and cost-effectiveness.

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‍‍Benefits of application portfolio management

APM helps organizations efficiently manage their software applications. It aligns IT investments with business goals, improves efficiency, and leads to cost-savings.

1. Cost optimization: Managing your application portfolio is very useful in optimizing organizational costs. With this approach, you can identify duplicate, redundant, and unused apps and their licenses. You can also eliminate apps that overlap, adjust licenses to the right size, combine vendors, and cut down on SaaS spending.

2. Application rationalization: This process enables organizations to rationalize their SaaS stack. It eliminates IT-unsanctioned apps and apps that no longer provide value. Rationalizing reduces complexity, simplifies maintenance, and improves portfolio efficiency.

3. Eliminating security and compliance vulnerabilities: It helps identify and address potential security gaps and reduces the likelihood of data breaches. APM also helps forecast and ensure compliance through centralized control, audit trails, and transparent reporting capabilities.

4. Strategic alignment: APM ensures that IT investments align with business priorities set by leadership. It directs resources to initiatives that maximize value. This alignment boosts operational efficiency and supports innovation and growth.

5. Resource optimization: It improves resource allocation by identifying opportunities to consolidate apps, standardize platforms, and utilize cloud solutions effectively. This optimization reduces IT complexity and enhances scalability and flexibility to meet changing business needs.

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Getting started with application portfolio management

When you master application portfolio management, you streamline your organization's use of SaaS resources, enhancing efficiency and fostering growth.

To make it easier for you, we have summarized these in a few easy-to-follow steps:

1. Surface your applications

Any attempt to manage your SaaS stack is incomplete without the initial discovery. Complete end-to-end visibility and a strong understanding of each application’s licensing agreement are key here.

This entails identifying and cataloging all applications used within the organization, including both authorized and unauthorized ones. You can utilize application discovery tools to identify and classify installed applications.

The most efficient SaaS discovery tools are integrated into the best SaaS management platforms. Using such tools ensures seamless SaaS application management in your organization.

With them, you gain complete visibility into your SaaS stack, including purchased licenses. This visibility helps you assess ROI by comparing purchased licenses to actual usage.

2. Analyze application usage

Once you’ve surfaced your entire SaaS stack, the next step is analyzing application usage. This analysis provides valuable insights into the SaaS utilization and impact of each application within your IT ecosystem.

Analyzing app usage involves extracting key information about each application to understand how it is employed across the organization.

This includes examining usage patterns such as frequency, provisioned users, number of active users, and peak usage periods. Understanding these patterns helps identify critical applications that are heavily relied on and those that may be underutilized or redundant.

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Moreover, analyzing application usage provides insights into who uses each application. This helps identify which departments, teams, or individuals rely on specific applications. It allows you to pinpoint dependencies and collaboration requirements more effectively.

3. Identify the spending on each application

Analyzing the costs associated with each application in your IT stack can provide valuable insights. This includes conducting a thorough analysis of costs incurred throughout the software’s lifecycle, including licensing fees, maintenance and support costs, infrastructure needs, and other operational costs.

Understanding these costs enables you to make informed decisions about resource allocation and optimize your IT budget effectively. Analyzing spending helps organizations identify cost drivers, evaluate each application's value, assess ROI, and prioritize cost optimization efforts.

Learn more: Building A Cost-Conscious Culture To Avoid Overspending on SaaS

You can use SaaS spend management software to identify your software spending. It’ll reveal how much each department spends on each application and help you identify shadow purchases.

4. Determine cost optimization opportunities

After gathering accurate information on app usage and spending patterns, your SaaS stack will appear more transparent, bringing underutilized and redundant functionalities into focus.

Organizations must evaluate each application's performance and alignment with strategic objectives to uncover cost optimization opportunities. This includes analyzing user adoption, functionality overlap, usage patterns, and business impact.

A key avenue here is license optimization. This involves assessing the licensing agreements for each application to ensure that the company is getting the maximum value from those licenses.

If you have underutilized SaaS licenses, right-sizing them based on usage is essential. You can review old contracts, negotiate better pricing with vendors, explore different licensing models, or use volume discounts based on actual usage.

5. Implement changes and track progress

The final phase of your strategic portfolio management process is to create a well-defined application rationalization framework and a detailed implementation roadmap.

This crucial step ensures that the insights gained from data gathering and assessment are effectively translated into action, yielding the desired outcomes.

During this stage, key stakeholders from various departments within the organization formulate a comprehensive plan for optimizing all aspects of the application portfolio.

Furthermore, to ensure the successful execution of these proposed changes, it is essential to establish effective tracking mechanisms.

Regular progress monitoring and reporting allow for real-time visibility into the implementation process and enable stakeholders to gauge the effectiveness of their initiatives and take prompt action when necessary.

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The role of an application portfolio manager

An application portfolio manager ensures that the organization's resources are used efficiently and contribute to its success. They possess essential qualities and perform specific roles to oversee the organization's applications effectively.

Their goal of application portfolio management is to align SaaS tools with business requirements, maximize their value, and ensure high utilization rates across all applications.

They do this by:

1. Driving collaboration across departments: Managing SaaS apps requires close collaboration. They work closely with IT, finance, procurement, and enterprise architecture stakeholders to ensure clear visibility into SaaS usage and data, enabling effective performance.

2. Continuous management of SaaS operations: SaaS management is ongoing. Application portfolio managers consistently evaluate and monitor the SaaS environment. They proactively identify inefficiencies and adjust the portfolio to meet evolving organizational needs. They establish regular operational routines to optimize the portfolio and prepare for future renewals.

3. Executing strategic optimization initiatives: APMs do more than find ways to improve things. They take action by reclaiming underused licenses, combining redundant software, and negotiating enterprise license agreements. This boosts ROI and makes application use more efficient. They also ensure future license renewals match the company's needs.

4. Strategic thinking: They align the application portfolio with the business strategy, ensuring each application supports business goals. Better alignment improves visibility into business and customer needs. This leads to delivering results on time, faster, and within budget, creating value quickly.

5. Additional Key Responsibilities: An application portfolio manager manages the following aspects besides the mentioned key responsibilities.

• Analytical skills: They analyze performance, usage, and value data to inform decisions on app lifecycle management, prioritization, and optimization.
• Financial management: These application portfolio managers manage maintenance, upgrades, and licensing budgets to optimize spending.
• Project management: They coordinate application-related projects to ensure successful execution within timelines and resource constraints.
• Vendor and relationship management: These managers have relationships with third-party vendors, negotiate contracts, and meet SLAs.

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The challenges of application portfolio management

Managing an application portfolio presents challenges. However, strategic planning and clear communication across departments can effectively address these challenges.

Such challenges are:

1. App Complexity: Organizations use many different apps, each with its own functions and requirements. Keeping track of them as the portfolio grows can be difficult.

2. Complete Visibility: Understanding where and how apps are used across the organization is crucial but challenging. This includes knowing which departments use which apps and how often they're updated.

3. Cost Management: It's crucial to optimize spending on software licenses, maintenance, and support. This involves identifying unused or underutilized apps to cut costs without losing functionality.

4. Integration Issues: Ensuring apps seamlessly work with existing IT systems is critical. Integration problems can lead to data inconsistencies, inefficiencies, and increased maintenance efforts.

5. Legacy Systems: Older applications (legacy systems) may be outdated or unsupported, making them difficult to maintain and integrate with newer technologies.

6. Alignment with Strategy: Apps should support the organization's goals and evolve as those goals change. Continuous evaluation and adjustment are necessary.

7. Security Risks: Apps can pose security risks if they are not properly maintained or have vulnerabilities. Regular updates, patches, and adherence to industry standards are essential for managing these risks.

8. Resource Allocation: Efficiently managing IT resources like staff time, budget, and infrastructure is essential for effective application portfolio management.

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‍Application portfolio management best practices

We’ve listed application portfolio management best practices to help organizations quickly implement them and achieve rapid success.

1. Inventory and categorization

Start by creating a comprehensive inventory of all applications within your app portfolios. This involves identifying every software application used across different departments and functions.

Categorize applications based on their importance to your business (e.g., essential, supportive), how often they're used (e.g., daily, periodically), and how well they align with your business goals. This helps you identify core applications and decide which ones might benefit from optimization or retirement.

2. Assessment and Prioritization

Evaluate each app systematically to understand its value and impact on the organization. Consider factors like ROI, total cost of ownership (TCO), maintenance costs, scalability, and user satisfaction. This assessment helps prioritize apps based on their contribution to business goals.

For example, prioritize applications that align with strategic initiatives or show high ROI for further investment. Consider optimizing or retiring applications that don't align with current business priorities or show diminishing returns to streamline operations and cut costs effectively.

3. Conduct regular portfolio audits

Conducting regular portfolio audits is a fundamental aspect of successful application portfolio management. By implementing these audits, you can identify vulnerabilities or outdated technologies within their portfolio. It will allow you to prioritize remediation efforts, enforce necessary upgrades, and ensure a vigorous and secure IT infrastructure.

4. Rationalization and Simplification

Identify redundancies, feature overlaps, and outdated applications within your portfolio. Rationalization involves consolidating or retiring applications that serve similar functions or are no longer relevant to current business needs.

This process simplifies the IT landscape, reduces maintenance costs, and enhances operational efficiency. Moreover, it frees up resources that can be redirected toward more strategic initiatives or modernization efforts.

5. Use an application portfolio management Software

APM is a complex process that cannot be managed manually; organizations must use this software to efficiently handle their expanding software stack.

It offers comprehensive visibility into the application portfolio. It enables informed decision-making on app rationalization, consolidation, and optimization. These platforms enforce standardized security, compliance, and risk mitigation processes, improving governance and control.

6. Improve cross-team communication and collaboration

APM heavily relies on a network of interdepartmental communication and collaboration. It is essential to keep key stakeholders, such as decision-makers and data managers, informed and engaged throughout the process.

This ensures a deeper understanding of the broader organizational goals and the interdependencies involved, enabling tailored solutions to be developed that align with these objectives.

By maintaining open lines of communication, organizations can leverage diverse perspectives to quickly and accurately identify potential issues or opportunities. This collaborative approach facilitates informed decision-making and improves overall portfolio management.

Because of this, application engineers' responsibilities include technical prowess in their chosen field and soft skills focusing on communication and collaboration. This dispels the myth that professionals in this role work in isolation from other teams.

With effective application portfolio management and the right tools, everyone will pull in the same direction as projects progress.

7. Streamline your procurement process

A comprehensive application portfolio management strategy needs to be based on a solid foundation that must be laid during the SaaS procurement process.

An application portfolio must facilitate a seamless flow of information, be compatible with each other, and be easy to integrate. How you purchase the application determines all of this.

Sanctioned purchases will have compatible applications, as proper vetting will be done before the purchase. However, unsanctioned applications, on the other hand, will cause compatibility issues with existing applications.

To possess a healthy SaaS portfolio, there should be no room for errors, so organizations must centralize their purchasing process to avoid shadow purchases resulting in unsanctioned applications.

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Thus, you need software to manage all your SaaS apps, enhance collaboration and communication between stakeholders, and streamline your SaaS procurement process.

However, the best part is that you don't need multiple tools for each task with an advanced SaaS management and procurement tool like CloudEagle—it integrates everything you need.

Keep reading to discover more about the tool and how it can maximize your benefits.

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CloudEagle: The go-to application portfolio management software

CloudEagle is a SaaS spend management and procurement platform. The tool helps SMBs and enterprises manage and rationalize their SaaS portfolios.

CloudEagle offers application discovery and cost optimization features for full SaaS and spending visibility. You can track departmental spending on applications and reduce SaaS costs.

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With CloudEagle, you can identify duplicate, unused, and redundant applications and eliminate them to minimize SaaS spend. The tool provides accurate usage insights on licenses to help you determine the ROI of those licenses and eliminate them if they’re unused.

An ideal application portfolio management solution should handle the entire SaaS lifecycle, from procurement to risk mitigation and negotiations. CloudEagle excels in managing SaaS applications, mitigating risks, and optimizing procurement processes for organizations.

With CloudEagle, you get the following:

Complete app discovery: CloudEagle helps you discover all apps used within your organization. This includes identifying IT-authorized and unauthorized applications (often called shadow IT). Having complete visibility helps you manage your application landscape more effectively.

Shadow IT elimination: The tool helps identify and manage shadow IT applications that it has not officially approved. By bringing these applications into the official management fold, you can improve security, compliance, and overall IT governance.

License management: With CloudEagle, you can efficiently manage your SaaS licenses. This includes tracking license usage, ensuring compliance with license agreements, and optimizing license utilization to avoid unnecessary costs.

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You can reclaim unused licenses using workflows and harvest them for the next user, ensuring your investment is accounted for and that they significantly contribute to your bottom line.

Check out Remediant's detailed success story to learn how they used CloudEagle to streamline their SaaS license management process.

Renewal management: CloudEagle helps you manage SaaS renewals. It provides reminders and alerts for upcoming renewals, ensuring you can plan and budget effectively without risking interruptions to critical services.

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Falkonry used CloudEagle to automate SaaS contract renewals, improving financial management and operational flexibility.

Read the detailed success story here.

Automated procurement solutions: The tool offers automated procurement workflows for acquiring new software and SaaS subscriptions. These workflows streamline procurement, reduce manual effort, and ensure purchases align with organizational needs and budget constraints.

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CloudEagle integrates seamlessly with Slack. You can use a Slackbot to streamline intake requests from Slack channels. It automatically creates dedicated channels and notifies stakeholders and IT managers about the details.

Moreover, CloudEagle offers assisted business services to handle vendor negotiations efficiently, especially when you have limited time and bandwidth to engage directly.

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Final thoughts

Application portfolio management (APM) should not be seen as overwhelming your budget and resources. It should be the cornerstone of your entire cloud management strategy.

It aims to align IT with strategic goals, maintain standards, and effectively meet stakeholder needs. Neglecting APM exposes your infrastructure to data theft, license redundancies, and resource shortages, impacting business outcomes.

Moreover, it is essential to understand that APM is an ongoing and iterative process beyond initial application inventory and optimization. Maintaining an established landscape through regular analysis, monitoring, and informed adjustments is crucial to fully capitalizing on its potential.

To effectively manage your application portfolio and offload the burden of SaaS handling and governance, consider CloudEagle.

Schedule a demo with CloudEagle to learn how to optimize your application management process and reduce costs efficiently.

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Frequently asked questions

1. What does application portfolio management provide?

Application Portfolio Management provides a wide range of benefits to SaaS-dependent organizations. In addition to maintaining control over their software stack, APM enables businesses to gain greater visibility into their IT assets, optimize resource allocation, minimize compliance risks, and maximize the value of their software investments.

2. Why does your business need application management tools?

To successfully transition from an on-premises environment to a cloud-friendly ecosystem, businesses must prioritize mastering their software management standards. By implementing APM practices, businesses can adopt a robust approach to optimizing their application landscape, improving operational efficiency, and staying ahead in today's rapidly evolving digital landscape.

3. What are the three phases of application portfolio management?

A comprehensive APM strategy consists of three crucial phases: assessment, decision-making, and implementation.

The existing application portfolio is evaluated during the assessment phase to understand its functionalities, costs, and risks.

In the decision-making phase, applications are prioritized based on business value and technical feasibility, resulting in a roadmap for retiring, enhancing, or maintaining them.

Implementation involves executing pre-established decisions, including application consolidation, modernization, or integration. Each APM phase involves regular application monitoring, often aided by automated platforms.