Application Portfolio Management - Evolution of The Practice

Evolution of The Practice

Likely the earliest mention of the Applications Portfolio was in Cyrus Gibson and Richard Nolan's HBR article "Managing the Four Stages of EDP Growth" in 1974.

Gibson and Nolan posited that businesses' understanding and successful use of IT "grows" in predictable stages and a given business' progress through the stages can be measured by observing the Applications Portfolio, User Awareness, IT Management Practices, and IT Resources within the context of an analysis of overall IT spending.

Nolan, Norton & Co. pioneered the use of these concepts in practice with studies at DuPont, Deere, Union Carbide, IBM and Merrill Lynch among others. In these "Stage Assessments" they measured the degree to which each application supported or "covered" each business function or process, spending on the application, functional qualities, and technical qualities. These measures provided a comprehensive view of the application of IT to the business, the strengths and weaknesses, and a road map to improvement.

APM was widely adopted in the late 1980s and through the 1990s as organizations began to address the threat of application failure when the date changed to the year 2000 (a threat that became known as Year 2000 or Y2K). During this time, tens of thousands of IT organizations around the world developed a comprehensive list of their applications, with information about each application.

In many organizations, the value of developing this list was challenged by business leaders concerned about the cost of addressing the Y2K risk. In some organizations, the notion of managing the portfolio was presented to the business people in charge of the Information Technology budget as a benefit of performing the work, above and beyond managing the risk of application failure.

There are two main categories of Application Portfolio Management 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'). Application mining tools, now marketed as APM tools, support this approach.

Hundreds of tools are available to support the 'Top Down' approach. This is not surprising, because the majority of the task is to collect the right information; the actual maintenance and storage of the information can be implemented relatively easily. For that reason, many organizations bypass using commercial tools and use Microsoft Excel to store inventory data. However, if the inventory becomes complex, Excel can become cumbersome to maintain. Automatically updating the data is not well supported by an Excel-based solution. Finally, such an Inventory solution is completely separate from the 'Bottom Up' understanding needs.