5 Application Portfolio Management Best Practices in 2024

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Organizations today are struggling with many challenges in managing their SaaS stack. They use many applications, and inefficient management can lead to wasted resources, duplicate functionalities, and increased security risks.

When you do not have a clear view of your SaaS applications, you end up paying for unused or redundant tools, which inflates costs. Security is also a concern because an outdated or non-compliant application will leave the business vulnerable to cyber threats.

Application portfolio management (APM) is what helps address these issues. When you streamline your software inventory, APM enables you to cut costs, enhances security and boosts operational efficiency.

Read on for the five application portfolio management best practices in 2024 that will help you to fully harness your software investments, drive innovation, and maintain a competitive edge in an increasingly digital sector.

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TL;DR

• Application Portfolio Management (APM) provides visibility into your software stack, helping reduce costs, eliminate redundancies, and improve operational efficiency.
• Quarterly or biannual evaluations ensure alignment with business goals, identify opportunities for consolidation, and optimize license utilization.
• A well-structured governance process with assigned owners ensures control over software performance and cost management.
• SaaS management tools like CloudEagle.ai streamline application discovery, license management, and renewal processes, enhancing security and reducing spending.
• APM reduces SaaS spend, improves productivity, and mitigates security risks associated with shadow IT and outdated applications.

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What Is Application Portfolio Management?

Application portfolio management is a strategic approach to overseeing and optimizing all software applications within your organization. It is a comprehensive inventory system for your digital tools.

APM helps you track, evaluate, and make data-backed decisions about each application's value, cost, and whether it aligns with your business goals.

When you implement APM, you gain clear visibility into your software stack, enabling you to identify redundancies, cut unnecessary expenses, and boost operational efficiency.

With a good APM, you will be able to prioritize investments in high-value applications while phasing out outdated or underperforming ones.

APM ensures your software portfolio remains agile, cost-effective, and perfectly tailored to support your organization's evolving needs.

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Why Is It Important To Manage Your Application Portfolio

It is crucial to effectively manage your application portfolio in today's digital landscape. It helps you maximize the utility of your applications.

According to CloudEagle’s SaaS spend report, companies use an average of 371 SaaS apps. This abundance often leads to redundancy and waste.

By managing your portfolio, you can eliminate duplicate tools, rationalize your SaaS stack, and ensure each application serves a distinct purpose.

Proper management enhances operational efficiency. With a pre-approved app catalog, you empower your employees to select the tools they need while maintaining control.

This standardization improves collaboration and streamlines processes across your organization. Furthermore, it establishes a consistent framework for ongoing management and governance.

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Managing your application portfolio significantly reduces SaaS spend. Gartner predicts SaaS spending will triple by 2026, reaching a staggering $591 million.

Through regular rationalization and rightsizing at renewal, you can achieve substantial savings. You'll identify opportunities to consolidate licenses, negotiate better deals, and eliminate underutilized applications.

A well-managed portfolio boosts employee productivity while enhancing security. A streamlined stack improves collaboration by providing centralized tools. Moreover, it mitigates the risks associated with shadow IT.

In 2024, the average cost of a data breach reached $4.88 million, a 10% increase from 2023. By ensuring proper vetting of applications, you protect your organization from potential data breaches and compliance issues, safeguarding your reputation and bottom line.

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Application Portfolio Management Best Practices

To implement an effective APM, you need to approach it strategically. With the following best practices, you will be able to optimize your SaaS stack, reduce costs, and enhance operational efficiency.

1. Get a Comprehensive Application Inventory

A comprehensive application inventory is the foundation of effective APM. This inventory is a detailed catalog of all software used within your organization.

To build this inventory, leverage SaaS management tools that automatically scan your network and identify installed applications.

After that, you conduct surveys across departments to capture any shadow IT or employee-purchased software. Review financial records to uncover SaaS subscriptions that may have been overlooked.

Once compiled, your inventory should include critical information for each application, such as:

• Application name and vendor.
• Purpose and functionality.
• Number of licenses and users.
• Associated costs (subscription fees, maintenance, support).
• Integration points with other systems.
• Renewal dates and contract terms.

A thorough inventory benefits your organization in many ways. It provides visibility into your entire software stack to help you identify redundancies and underutilized applications.

It also enables better budget planning by giving you a clear picture of your total SaaS spend. Lastly, it is a crucial tool for compliance and security audits, ensuring you can account for all data-storing applications.

2. Evaluate and Assess Your Applications Regularly

It is essential to regularly evaluate your application portfolio to maintain its efficiency and alignment with business goals.

The purpose of application assessment is to determine each application's value, performance, and relevance in your inventory. To conduct effective assessments, establish criteria like:

• Cost: Total cost of ownership, including licensing, maintenance, and support.
• Usage: Adoption rates, frequency of use, and user satisfaction.
• Risk: Security vulnerabilities, compliance issues, and vendor stability.
• Business value: Alignment with strategic objectives and contribution to productivity.

Employ various assessment methodologies to gain comprehensive insights. For instance, use SWOT analysis to evaluate an application's strengths, weaknesses, opportunities, and threats.

Conduct cost-benefit analyses to determine if the value derived justifies the investment. Additionally, gather user feedback through surveys or focus groups to gauge satisfaction and identify pain points.

Create a standardized assessment framework that allows for consistent evaluation across your portfolio.

This framework should include scoring criteria, assessment frequency (e.g., quarterly or bi-annually), and defined stakeholders responsible for each application's evaluation.

Regular assessments enable you to make data-driven decisions about which applications to retain, upgrade, or retire. They also help you identify areas for improvement in user training or support to ensure you maximize the value of your software investments.

3. Rationalize and Optimize Your Application Stack

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Application rationalization is the process of streamlining your software portfolio to eliminate redundancies, reduce costs, and improve overall efficiency.

Start by analyzing your comprehensive inventory and assessment results to identify opportunities for optimization. Look for redundant applications that serve similar functions across different departments.

For example, you might discover multiple project management tools in use. When you consolidate to a single, enterprise-wide solution, you will reduce licensing costs and improve collaboration.

The next thing is to analyze usage data to pinpoint underutilized applications. If only a handful of employees use an expensive software package, consider whether a more cost-effective alternative could meet those needs. Develop a rationalization roadmap that outlines the following:

• Applications to be retired or replaced.
• Consolidation opportunities.
• Upgrade plans for essential applications.
• Timeline for implementation.
• Projected cost savings and efficiency gains.

When rationalizing your stack, consider the total cost of ownership for each application, including licensing fees, maintenance costs, and the resources required for support and integration. Additionally, factor in any changes' potential disruption and training needs.

By optimizing your application stack, you can significantly reduce SaaS spend. For instance, consolidating multiple single-user licenses into an enterprise agreement often results in better pricing.

Moreover, a streamlined application portfolio reduces the burden on your IT team, allowing them to focus on more strategic initiatives.

4. Follow a Streamlined Governance Framework

A robust governance framework is essential for maintaining control over your application portfolio and ensuring it continues to serve your organization's needs effectively.

Start by establishing clear ownership and responsibilities for each application in your portfolio. Assign an application owner who is accountable for its performance, cost management, and alignment with business objectives.

Create a governance committee comprising representatives from IT, finance, procurement, and key business units. This committee should meet regularly to:

• Review the application portfolio's performance.
• Approve new application acquisitions.
• Make decisions on application retirements or upgrades.
• Ensure alignment with overall IT strategy and business goals.

Define clear decision-making processes for various scenarios, such as:

• Criteria for approving new application requests.
• Thresholds for automatic renewal vs. review of existing applications
• Escalation procedures for resolving conflicts or addressing urgent needs.

Implement change management procedures to ensure smooth transitions when introducing new applications or retiring old ones. This should include:

• Communication plans to inform affected users.
• Training programs to support the adoption of new tools.
• Feedback mechanisms to address issues and concerns.

A well-structured governance framework helps maintain discipline in your APM efforts, ensuring your application portfolio remains optimized and aligned with your organization's evolving needs.

5. Use an Automated Tool for Effective APM

Leveraging a SaaS management platform (SMP) will significantly enhance your APM efforts. These platforms offer automated discovery, monitoring, and optimization features that streamline the management of your application portfolio.

Key functions of an SMP include:

• Continuous discovery of SaaS applications across your network.
• Real-time usage tracking and license utilization monitoring.
• Cost management and optimization recommendations.
• Security and compliance monitoring.
• Integration with existing IT systems and workflows.

When you use an SMP, you can automate many time-consuming tasks associated with APM. For instance, these tools can automatically flag underutilized licenses, allowing you to reallocate or downgrade them promptly.

They can also alert you to upcoming renewals, giving you ample time to evaluate the application's performance before making a decision.

Additionally, SMPs enhance security by providing visibility into shadow IT and ensuring all applications meet your organization's security standards.

They can automatically detect when new applications are added to your network, allowing you to assess and mitigate any potential risks quickly.

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CloudEagle.ai - Effectively Management Your Application Portfolio

CloudEagle.ai gives you a comprehensive solution for managing your application portfolio effectively. It is an intelligent platform combining SaaS management and procurement services, providing unparalleled visibility into your software stack.

Its capabilities span four areas: Discover, Optimize, Govern, and Renew. The platform automatically discovers all applications within your organization through industry-leading 500+ integrations to help you proactively prevent shadow IT and gain complete visibility into your SaaS stack.

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It also offers granular insights into license usage and contract details, empowering you to make informed cost-optimization decisions.

The platform's optimization features enable you to eliminate redundant applications, recycle unused licenses, and right-size your SaaS investments for maximum ROI. CloudEagle.ai's governance capabilities streamline employee onboarding and offboarding, maintain an approved app catalog, and ensure compliance with security and access controls.

CloudEagle.ai's renewal management and procurement services help you stay ahead of contract renewals, leverage price benchmarking data, and outsource negotiations to experts, ultimately driving significant cost savings.

Recognized in the GigaOm Radar and the Gartner Magic Quadrant for SaaS Management Platforms, CloudEagle.ai is trusted by high-growth companies to transform their application portfolio management and unlock the full potential of their SaaS investments.

Application discovery: This is one of the main features of CloudEagle.ai. Through easy integration with over 500 SaaS apps, the platform automatically discovers and catalogs every application in use across your organization, even uncovering shadow IT.

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With this comprehensive visibility, you will be able to make data-driven decisions, eliminate redundancies, and optimize your software investments for maximum impact.

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License management: CloudEagle.ai excels in license management. The platform provides granular insights into feature-level usage through its integrations to help you identify underutilized or unassigned licenses.

Its automated workflows seamlessly reclaim unused licenses, ensuring you never pay for licenses that aren't being used. These capabilities enable you to right-size your software stack and maximize the ROI on your SaaS spending.

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Renewal management: CloudEagle.ai also streamlines renewal management by initiating workflows 90 days before contract expirations. This approach ensures you have ample time to analyze usage data and prepare negotiation strategies.

Contract management: The platform's contract management features also eliminate the need for cumbersome spreadsheets, providing a centralized hub for all vendor contracts.

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Its AI metadata extraction capability will automatically extract contract metadata, populate them in the platform, and create a renewal calendar to stay ahead of renewals.

Cost optimization: CloudEagle.ai's cost optimization tools help you identify and eliminate duplicate apps, recycle licenses from departing employees, and analyze feature-level usage data. These insights enable you to right-size your SaaS stack and significantly reduce unnecessary spending.

Automated workflows: CloudEagle.ai's no-code procurement workflows streamline the entire application acquisition process.

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Whenever a new software request is made, the relevant stakeholders receive instant notifications via Slack and email, allowing you to track progress in real time and accelerate approvals.

These automated workflows extend to user provisioning, deprovisioning, and license reclamation, ensuring your application access remains secure and optimized.

Self-service app catalog: The platform's self-service app catalog empowers your employees to request access to approved applications directly from Slack.

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This enhances the user experience and helps prevent shadow IT by directing users to the sanctioned software options available to them.

Integration library: CloudEagle.ai integrates with over 500 applications, including finance, SSO, and HRIS systems.

This extensive integration library ensures accurate data and insights across your entire SaaS stack, allowing you to make well-informed decisions about your application portfolio.

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For instance, a growing company, Edge, leveraged CloudEagle.ai to gain razor-sharp insights into their software expenditure.

As a result, they eliminated spreadsheet-based tracking and optimized their SaaS spending significantly.

Iffi Wahla, co-founder and CEO of Edge, enthusiastically recommends CloudEagle.ai for its ability to provide complete spending visibility and detailed cost-per-license information.

Vendor research: Powered by AI and machine learning algorithms, CloudEagle.ai's vendor research module simplifies the process of evaluating and selecting new SaaS applications.

You can access information on pricing, features, and customer reviews and connect with industry peers to gather valuable insights. This feature helps you make informed decisions when adding new applications to your portfolio.

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Conclusion

Implementing these application portfolio management best practices will transform your SaaS portfolio.

You'll significantly reduce costs and boost operational efficiency by maintaining a comprehensive inventory, regularly evaluating applications, rationalizing your stack, following a streamlined governance framework, and using automated tools like CloudEagle.ai.

Over time, these practices will lead to improved security, enhanced productivity, and better alignment of your software investments with business goals.

To experience the full potential of effective APM and start optimizing your SaaS portfolio today, book a demo with CloudEagle.ai. Our platform will provide you with unparalleled visibility, streamlined processes, and expert guidance to maximize your software ROI.

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Frequently Asked Questions

1. What is the difference between application portfolio management and CMDB?

APM strategically optimizes your software applications, considering business value, cost, and usage.

In contrast, CMDB is a comprehensive inventory of all IT assets. APM helps you decide about software investments, while CMDB provides detailed infrastructure information.

2. How often should you conduct application portfolio assessments?

You should conduct application portfolio assessments quarterly or biannually. This frequency allows you to stay agile in the fast-paced SaaS landscape, identify trends, and make timely decisions.

However, you may need to assess more frequently for critical applications or during major organizational changes.

3. What are the key metrics to track in application portfolio management?

Key APM metrics include total cost of ownership, user adoption rates, application performance, security and compliance scores, business value alignment, license utilization, ROI, and time to value.

Application portfolio management involves developing and governing SaaS app strategies to optimize a company's SaaS stack. See the five best practices in 2024 for optimizing SaaS usage, cost, and security.

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