Application Portfolio Management: A Quick Guide

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May 26, 2023
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SaaS applications have become an essential part of every company's tech arsenal. These Cloud-based tools are used in a variety of business areas. These include marketing, customer relationship management, finance, sales, and core operations.

In fact, recent estimates suggest that over 70% of the business applications utilized by companies are now delivered via the SaaS model. This figure is expected to increase over the next 10 years. This is due to an increasing number of organizations understanding the advantages of cloud-based software.

However, as the SaaS stack grows, the risk of proliferation also increases. Unless you have an effective application portfolio management strategy in place to keep it controlled.

So, what is application portfolio management?

Well, you’ll learn more about it in this article, as well as the application portfolio management best practices to help you implement the strategy immediately.

What is application portfolio management?

Application portfolio management is a strategic approach that enables companies to gain complete control over their SaaS application landscape. It optimizes costs and ensures it aligns with core organizational objectives, and maximizes ROI.

APM encompasses a proactive approach to SaaS management to minimize risks, reduce redundancy, and fulfill pre-established goals.

Application portfolio management also enables companies to understand the interdependencies between different applications. This helps in making strategic decisions on optimizing their technology stack to support future growth and innovation.

In short, APM is essential for any organization looking to stay ahead in the current highly competitive business landscape.

Why is managing your SaaS portfolio necessary?

In today’s business landscape, where SaaS products are actively adopted in every industry, managing your application portfolio is more than just a consideration; it has become a vital necessity.

Without proper management, the consequences can be serious. These consequences affect critical aspects of your company, such as cloud infrastructure, financial health, operational efficiency, bottom line, and business longevity. All of these factors play a role in the stability and longevity of your business.

  • You can identify opportunities for cost optimization through effective APM, such as 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.
  • Ensures no compatibility issues and enables a seamless data flow between the applications in your SaaS stack.
  • Regular audits will reveal areas of vulnerabilities so you can effectively rectify them and keep your data secure and applications compliant.

Also, SaaS portfolio management facilitates application rationalization, a pivotal process of evaluating your application portfolio to eliminate unused or superfluous functionalities.

By consolidating applications with similar capabilities, organizations can simplify their portfolio and optimize resource allocation.

Getting Started with Application Portfolio Management

Regardless of whether you're a small startup or a large enterprise, mastering the fundamental phases of APM can lead to remarkable outcomes. To make it easier for you, we have summarized these in a few easy-to-follow steps:

Surface your applications

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

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

You’ll be able to see all the applications in your SaaS stack, along with the licenses purchased. This will make it easier for you to determine the ROI on those licenses by comparing the licenses purchased to actual usage.

Analyze application usage

Once you’ve surfaced your entire stack, the next step is analyzing application usage to gain valuable insights into the 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.

Additionally, analyzing application usage provides insights into the user base of each application. It helps determine which departments, teams, or individuals utilize specific applications, enabling you to identify dependencies and collaboration needs.

Identify the spending on each application

Identifying the costs associated with each application in your IT stack is another crucial aspect of effective application management. This involves conducting a detailed analysis of the costs incurred throughout the software’s lifecycle, including licensing fees, maintenance and support expenses, infrastructure requirements, and any additional costs related to its operation.

Analyzing the spending enables organizations to identify cost drivers, evaluate the value derived from each application, assess the return on investment, 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 spend. It’ll reveal how much each department spends on each application and help you identify shadow purchases.

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 need to 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.

Organizations can significantly reduce SaaS costs by revisiting old contracts, negotiating better pricing agreements with vendors, exploring different licensing models, or leveraging volume discounts based on actual usage.

Implement changes and track progress

The final phase of your application portfolio management 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.

Application portfolio management best practices

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

Conduct regular portfolio audits

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

Use an application portfolio management Software

It is a complex process that cannot be done manually; organizations must use application portfolio management software to efficiently manage their expanding software stack.

Such software provides comprehensive visibility into the application portfolio, enabling informed decision-making regarding application rationalization, consolidation, and optimization. These platforms also facilitate governance and control by establishing standardized security, compliance, and risk mitigation processes.

Improve cross-team communication and collaboration

APM heavily relies on a robust 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, the responsibilities of application engineers include not only technical prowess in their chosen field, but also 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 be pulling in the same direction as projects progress.

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. All of this depends on how you purchase the application.

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

There you go, four essential application portfolio management best practices that you must follow before and after implementing the approach to keep your portfolio healthy.

Benefits of Application Portfolio Management

Cost optimization

Application portfolio management enables organizations to identify duplicate, redundant, and unused applications and their licenses. You can eliminate overlapping applications, right-size licenses, consolidate vendors, and reduce SaaS spend.

Application rationalization

It enables organizations to rationalize their SaaS stack by eliminating applications that no longer serve significant value and unsanctioned applications. Rationalizing reduces complexity, simplifies maintenance, and improves overall portfolio efficiency.

Eliminating security and compliance vulnerabilities

APM expertly identifies and addresses potential security gaps, reducing the likelihood of data breaches and their associated financial and reputational consequences.

Moreover, regulatory compliance is a critical aspect of data security. Application portfolio management software assists in forecasting and ensuring compliance by providing centralized control, audit trails, and transparent reporting capabilities.

Promoting interdepartmental collaboration

APM promotes interdepartmental collaboration by increasing visibility and ease of access for stakeholders, enabling effective teamwork and knowledge sharing.

Additionally, by aligning with the high-level organizational charts set by CFOs and CIOs, APM ensures that IT initiatives are strategically aligned with business objectives, contributing to the organization's overall success.

CloudEagle: The go-to application portfolio management software

CloudEagle is a SaaS spend management platform that can help SMBs and enterprises manage and rationalize their SaaS portfolio.

CloudEagle is equipped with application discovery and cost optimization features to provide complete SaaS and spend visibility. You can identify how much each department is spending on applications and make the necessary optimizations to reduce SaaS costs.

You can identify duplicate, unused, and redundant applications and eliminate them to minimize SaaS spend. CloudEagle 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 be capable of managing the entire SaaS lifecycle, from procurement to risk mitigation to negotiations.

CloudEagle is one of the most comprehensive software for application portfolio management, capable of managing SaaS apps, mitigating risks, and streamlining SaaS procurement for organizations.

Final Thoughts

APM should not be seen as overwhelming your budget and resources. In fact, it should be the cornerstone of your entire cloud management strategy.

The primary objective of application portfolio management is to ensure that your business aligns its IT operations with key strategic drivers, adheres to architectural standards and security protocols, and effectively addresses the diverse needs of all stakeholders.

Neglecting APM exposes your infrastructure to data theft, license redundancies, resource shortages, and increasing process complexities.

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 capitalize on its potential.

Offload the burden of SaaS handling and governance to CloudEagle and book a free demo today!

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.

Written by
Anam Qamar
Product Marketing Manager
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