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Featuring research from

A Best Practices Approach to Portfolio Management

Introduction

You’ve Transformed Your Applications: Now What?

Best Practices: Portfolio Management Techniques

New Levels of Visibility

Real-World Examples

Getting Started

Gartner Research Findings

About HP ES

Issue 1

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3

5

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15

Re-Thinking Applications Management

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Introduction

Across sectors and industries, the success and even survival of many organizations depend on their ability to sustain a healthy set of enterprise-class applications. Unfortunately, most CIOs struggle with severe applications-related limitations at a time when their organizations expect improved performance and measurable results.

Applications are more complex than ever, a trend made worse by aging and obsolete systems, the emergence of new technologies, and disparate and often incompatible software. M&A strategies – and years of adding applications and overlapping functionality – have created portfolios that are crowded with redundant applications.

It has been said that “all applications are not equal.” CIOs seek real transparency into true cost of ownership, on a per-application basis, to enable intelligent alignment conversations with business owners on strategy, roadmaps, and rationalization.

Unfortunately, poor visibility often prevents most CIOs from seeing and understanding the total cost of ownership (TCO) and value of their applications. As a result, while businesses demand that IT “do more with less” and allocate resources toward growth and innovation, many IT units spend from 65-80% of their budgets to simply keep the lights on.

The good news is this: by rethinking how they manage their portfolios, and by replacing the traditional “one and done” methods with a systematic approach that balances the maintenance-to-innovation ratio mix, organizations can create and sustain a healthier set of applications.

Balancing that crucial mix can benefit both organizations that have completed a transformation journey and those that have not.

In fact, unless they change how they manage, view, and control their applications portfolio, that mix invariably slips away from the much-needed investment in growth and innovation. And that tendency can rob even the best organization of the full benefits of a portfolio modernization effort.

In this series of articles, HP addresses the strategies and techniques used to optimally manage an applications portfolio on an ongoing basis. HP features Gartner research on the topic of “Applications Overhaul: How to Get Out of the Hole and Not Fall Back In.” In the article, Gartner agrees that IT organizations have to take a long-term approach to staying out of the hole.

Ed Quinn, vice president of Applications Management for HP Enterprise Services, shares his thoughts on why organizations need to keep their applications optimized, and how to best manage an enterprise-class portfolio.

We discuss best practices as they relate to applications portfolio management – including two vital techniques, and how they are applied at both the strategic portfolio level and at the more tactical application level. We examine the importance of having deeper visibility into these two levels, and discuss the tools and processes organizations can use to better manage specific applications or entire portfolios.

Our systematic approach described here allows organizations to reliably profile and categorize applications based on their true TCO. It enables CIOs to clearly understand the risk and value these systems bring to their business. This proven approach then allows those leaders to select the strategies, techniques, and tools needed to build and sustain a healthy set of applications.

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You’ve Transformed Your Applications: Now What?

Maryanne Faschan, Director of Delivery, Applications Management at HP Enterprise Services interviews Ed Quinn, Vice President of Applications Management at HP Enterprise Services, on how organizations can keep their newly-transformed applications optimized.

MF: Thanks for joining us Ed. Let’s start with a basic question. Why is the ongoing management of the application portfolio after transformation so important?

EQ: First, let’s take a step back and think about an applications transformation experience in its entirety. Let’s face it, it’s not an easy thing to do. It requires a clear roadmap to understand how to get there. But HP has made it easier for organizations to make the journey – transforming their application environments to gain the control they need over aging applications and inflexible processes that govern their responsiveness and pace of change.

With a newly transformed portfolio of applications, CIOs begin to see better alignment between the business and IT with all the results – increased agility, improved security, improved business continuity, and your IT maintenance spend is now 50% or less of your IT budget. The last thing they want is for their organizations to lose these transformational results. By rethinking their approach, and by better managing those transformed applications, organizations can continue to realize the full benefits of their modernization efforts, and can purposefully adjust their portfolio as the business changes over time, minimizing or eliminating the need for future big-bang transformations.

MF: How can organizations better manage applications to retain those transformational benefits?

EQ: With a good understanding of the transformation under their belts, clients need to look at how to best manage the application portfolio. They should work to maintain the metrics of each application by continually measuring cost and performance. They should leverage the best

sourcing strategy for each type of application, whether that source is internal, outsourced, cloud-based, or elsewhere.

They need to turn their focus to systematically balancing the newly optimized maintenance-to-innovation ratio they’ve achieved through the transformation in order to sustain it, and continually improve on it. We find that effective management of the transformed applications environment will yield ongoing efficiency improvements and opportunities to eliminate unnecessary costs and increase effectiveness well into the future.

MF: This seems logical. But how do organizations actually do it?

EQ: Well, it is often easier said than done. We have seen many organizations struggle with the management phase following an applications transformation because they seem to be stuck in a rut, doing things the same way.

They tend to go back to managing and maintaining their applications the way they did before the transformation because they simply do not have the right level of visibility, flexibility, or control to effectively manage over time. IT still has a tendency to treat all applications as being equal – servicing and supporting them at the same level across the portfolio.

The ongoing manage phase following the applications transformation calls for clients to rethink the way they are managing their applications. Organizations must address the people aspect of these changes, because with new applications and the growth of mobility, they will need new ways to develop and support those systems.

Ed Quinn, Vice President of Applications Management at HP Enterprise Services

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“Whether you choose

to manage then

transform or transform

then manage, optimal

portfolio management

is where the rubber

meets the road. You

want to realize the

full benefits of your

applications and

maintain those benefits

well into the future. HP

Portfolio Management

can help clients gain

that insight, flexibility,

and agility needed for

ongoing optimization

and continuous

improvement of their

portfolios.”

Ed Quinn, Vice President Worldwide Applications

Management Services

We have seen it too many times. Without a change in the way the portfolio of applications is managed, the maintenance-to-innovation ratio will almost invariably creep back up on the maintenance side if left unchecked, ultimately diminishing the transformation’s return on investment.

MF: Exactly how should organizations “rethink” the way they manage their applications?

EQ: We recommend two fundamental techniques, which are based on our experience helping organizations successfully manage their applications – both before and after a transformation effort.

The first technique is what we call “dynamic service delivery,” and it includes underlying methods and tools to optimize costs and enable business change. This technique incorporates a scalable delivery model. It allows services to be assigned by applications, based on business need, and provides the flexibility to change that level of service as the business need changes.

Dynamic service delivery also provides application-specific cost transparency, so IT and the business units can better understand and control expenses and investments.

The second technique is “data-driven portfolio management,” which implements an ongoing process for collecting data, analyzing metrics, and identifying improvement opportunities. Leveraging this technique, organizations can maintain an inventory of applications and their individual support metrics. They can score and classify each application, which provides the necessary structure for analysis. This approach also supports the close monitoring of application data to spot developing trends and to perform root cause analysis.

As you will see, HP applies these two techniques at both the application-level and portfolio-level. The application-level or tactical-level activities will identify, diagnose, and develop improvement recommendations that arise from the course of ongoing operations. The portfolio-level or strategic-level activities then review those recommendations, using a strategic planning filter to ensure the best course of action is taken after considering alternative solutions.

So this systematic approach – leveraging proven techniques and applying them at both the strategic and tactical levels – is what we mean by “rethinking” applications management. It really is the key to creating and maintaining a healthier applications portfolio.

MF: What does this all mean for business organizations?

EQ: This is where the rubber meets the road for your newly transformed applications. CIOs naturally want to realize the full benefits of a modernization program, and the success of that effort depends upon keeping the maintenance-to-innovation ratio in optimal balance.

The techniques we’ve discussed keep the application portfolio optimized, and the underlying application-level and portfolio-level methods help to systematically sustain the benefits derived from an application transformation. Plus, with the consolidated view of the portfolio and individual applications that HP provides, organizations gain the insight and agility needed to optimize their investments for the greatest business impact.

Source: HP Enterprise Services

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Best Practices: Portfolio Management Techniques

Michael Marzullo, offering manager, WW Applications Management at HP Enterprise Services

Jim Johnson, product manager, WW Applications Portfolio Management at HP Software & Services

In an increasingly instant-on world, organizations really need to rethink how they manage their applications. Gartner research confirms this observation in an October 2011 report on Applications Overhaul, which found that “Lack of a deliberate process for managing the application portfolio makes the application hole deeper.”1

To support that new approach, HP has developed two proven portfolio management techniques: the implementation of a dynamic service delivery structure and the use of data-driven portfolio management methods. Figure 1 illustrates these two key techniques and how they can be applied at both the tactical application level and the more strategic portfolio level.

When used correctly, these techniques and methods allow organizations to effectively and continually balance the maintenance-to-innovation ratio. By doing that, CIOs better control their portfolios, optimize costs, and accelerate positive change.

Source: HP Enterprise Services

FIGURE 1 Portfolio Management levels and techniques

1Gartner RAS C ore Research Note G00218816 Applications Overhaul: How to Get Out of the Hole and Not Fall Back In, Bill Swanton, 6 October 2011.

Technique Service Delivery Portfolio Management

Method Dynamic Service Delivery Inventory Classify Assess Business Case

Application- level

• Scalable delivery model

• Services assigned by app

• Cost transparency by app

• List of applications

• Application metrics

• Maintainability score

• Dashboard • Trending

analysis • Metric detail • Root cause

analysis

• What-if analysis • Preliminary

business case

Portfolio-level • Application portfolio governance

• Project portfolio governance

• List of applications

• Portfolio metrics • Business process

alignment

• Application health

• Strategic disposition

• Business and portfolio alignment

• Architectural fit • Opportunity

development

• What-if analysis • Complete

business case • Investment

prioritization

A solid portfolio optimization foundation built on two techniques, applied at both the application- and portfolio-level to successfully transform the way you manage your applications.

• Dynamic Service Delivery

• Data-Driven Portfolio Management

As noted, this approach can be used successfully by organizations that have undergone transformation and by those that have not. Enterprises that have undertaken the transformational journey can leverage these techniques to keep their applications in optimized balance. Others can use these methods to gain visibility and control, to reduce costs and stabilize

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a challenging applications environment, and to ready their organizations for a more efficient and successful applications transformation.

It may help to examine each of these techniques, and how they are applied at the application and portfolio levels.

Dynamic Service Delivery

Dynamic Service Delivery incorporates a scalable delivery model – enabling services to be assigned by applications, based on business need – and offers the flexibility to change the level of service as business conditions evolve. This approach also provides application-specific cost transparency, so IT and the business can have clarity into, as well as control over, expenses and investments.

At the tactical application level, dynamic service delivery uses three key methods to optimize costs and to support innovation.

First. A scalable delivery model creates a tiered work structure that allows the higher-volume, straightforward support activities to be aligned to lower-cost resources, and the more complex and strategic value work to be aligned to higher-cost resources. This tiered delivery model supports more rapid addition and removal of applications – a key capability in a changing business environment.

Second. Services are assigned at the application level based on measurable business value, and the level of service can be adjusted as the business needs change. This approach provides additional service flexibility.

Third. Costs are transparent by application, allowing IT and business units to better understand application-level costs and investments.

When applied at the more strategic portfolio level, the dynamic service delivery model supports a governance process needed to ensure true enterprise-class alignment.

This requires a governance model that actively manages applications and projects based on both the opportunities identified by IT and by the broader demands of the business. Requests should be filtered and conceptualized from two perspectives:

One. The Application Portfolio Management view assesses demands and opportunities based on a strategic priority assigned to each application. Gartner recommends the use of its TIME methodology to characterize the strategic intent of an application. Each application is classified as a target for transformation – tolerate (T), investment (I), migration (M), or elimination (E). As new demand for work on an application is received, it is evaluated against this strategic intent designation.

Source: HP Enterprise Services

FIGURE 2 A scalable service delivery model, aligned services, and cost transparency

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Applications in the investment (I) category get high priority attention. Applications in the elimination (E) category will have to demonstrate a very strong reason why any new investment should be directed their way.

Two. The Project Portfolio Management view assesses demands and opportunities based on project charters, schedules, skills, risks, and cost. This ensures that even proposals to work on an investment (I) category application are assessed to ensure they meet standard business case requirements before funding is approved.

This governance approach provides comprehensive visibility, data-driven knowledge, and a strategic perspective of the applications portfolio. HP believes that forward-looking organizations can harness the resulting insights to better manage risk, to reduce costs associated with applications that are not adding value to the business, and to tilt the spending ratio toward innovation and growth.

Data-Driven Portfolio Management

This second crucial technique provides a clearer view and a greater understanding of business applications. This activity provides the original strategic intent classification for each application, and is reviewed periodically to ensure that the designation keeps pace with changing application and business conditions.

HP employs four methods to gain insight into and to develop the strategic intent for these enterprise applications.

One: Maintain an inventory of applications and their attributes.

Two: Classify applications to provide structure for further analysis.

Three: Assess all applications for optimization opportunities.

Four: Create a business case for investment consideration.

Inventory. Portfolio-level dashboards provide summary views of applications, the business processes they support, the organizations that use them, their owners, and the servers they reside upon. Measures are defined for business value, cost, risk, and quality.

Classify. The classification of applications can be based on distributed, mainframe, or other architectural types, or on transactional, informational, or other operational profiles. This method can be used to identify enterprise software for sunset or decommissioning, to be sustained, or as a candidate for strategic investment.

As part of the APM

process, use a

methodology, such

as Gartner’s TIME

(tolerate, invest,

migrate, eliminate),

to determine

your investment

posture with

regard to particular

applications.

Gartner RAS Core Research Note G00218816

Applications Overhaul: How to Get Out of the Hole

and Not Fall Back In, Bill Swanton,

6 October 2011

FIGURE 3 Assess portfolio alignment to understand cost and value of applications

Source: HP Enterprise Services

Redundant support of business processes

Cost relative to quality and business value delivered

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You need to have

visibility to where

money is spent at the

application level so

that IT organizations

and the business units

can better understand

and control expenses

and investments. This

application level

visibility provides

actionable data for their

decision-making.

Doug Longer, WW Applications Management consultant, HP

Enterprise Services

New Levels of Visibility

Doug Longer, WW Applications Management consultant, HP Enterprise Services

The best practice techniques for portfolio management apply equally to a tactical, application level view of the portfolio as well as the strategic, or overall portfolio view previously discussed. For the application level view, visibility into the drivers of cost allow organizations to first understand what those costs are and second, use the information to build a business case to determine if there is an overall cost benefit to making a change.

Classifications should be reviewed and modified as architectural standards or business conditions evolve.

Assess. To manage a complex application portfolio environment, HP recommends the use of an assessment method that views the applications within the context of the systems or activities they support. Visualizations may include heat maps to identify process areas that require excessive

support, are overloaded with applications, are high cost, or by some other measure suggest opportunities for improvement of the portfolio.

Business Case. A business case can then be developed to capitalize on the improvement opportunities. That business case then becomes a source of demand to be vetted through the project review process described earlier.

Source: HP Enterprise Services

Source: HP Enterprise Services

FIGURE 4 Application-level methods enhance visibility, providing actionable data for decision-making

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Inventory Classify Assess Business Case

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Several preparation and management steps are needed to gain the necessary insight as shown in Figure 4. At the application level, we take an inventory of the applications and periodically gather attributes for the applications. For example, we inventory all the applications that make up a payroll system, as well as gather the number of lines of code and how many changes have been implemented.

One problem with those attributes is how to manage them. In a comprehensive method such as HP’s, the applications are grouped with a scientific algorithm that arranges the applications

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into classifications. This aids deeper understanding by consolidating the information so that you can better assess it.

Using a dashboard as an overview to the classified applications provides the insight necessary to begin understanding why an application costs what it does and how trends over time affect the cost of supporting the applications. For example, if an application in the dashboard is showing some significant change in its classification, the attributes can then be investigated to determine which aspects of the support are changing.

Once you’ve assessed the impacted cost drivers, then you have the focus necessary to do real root cause analysis. And by finding the real root causes for support costs, you now have the unique ability to change them. For example, if you find an application that has 30 changes in a month, which is costing you significant release time as well as higher levels of operational incidents, one cost reduction method would be to provide only monthly releases, which both stabilize the application and significantly reduce the change and release support costs.

With that root cause in hand and potential solutions in mind, and in conjunction with the known application costs, you can now objectively estimate the application level return on investment, or business case, for implementing changes.

The tactical application-level inventory and assessment activities described here are related to ongoing operations, and serve to identify, diagnose, and develop specific recommendations for improvements. HP builds these tactical methods into applications management best practices and delivery activities.

But visibility is also crucial at the strategic portfolio-level perspective. To gain those higher-order insights, HP applies specific portfolio-oriented methods designed to leverage the information and recommendations gathered at the tactical, application level. For example, strategic planning filters are used to identify the best

course of action from various alternative solutions. An application portfolio repository, combining application-specific attributes with a portfolio-wide perspective, provides a comprehensive view of both tactical and strategic options.

Converging the tactical application-level details with the strategic portfolio-level considerations – and supporting those views with proven techniques – provides a truly deliberate approach to applications management.

HP supports this proactive solution with a unique set of tools and capabilities, including an Apps Online applications inventory tool, the Applications Management Metrics Portal, and HP Software’s Application Portfolio Management solution. The new HP Software-as-a-Service (SaaS)-based Application Portfolio Management (APM) software suite provides a rich set of process, data capture, and analytic capabilities.

Results-oriented organizations can leverage these tools to answer critical application-related questions, including:

• How are applications performing over time?

• Does the cost of an application align with the true business value of that asset?

• Are some application assets degrading, while others improve?

• Is the applications portfolio evolving to meet changing conditions?

• Which application investments will yield maximum returns?

By considering both the portfolio- and application-level perspectives, and by applying these proven techniques across both levels, organizations can at last fully realize the potential of their applications investment. Best practice-based Portfolio Management is a key aspect of any successful applications transformation journey.

Source: HP Enterprise Services

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Real-World Examples

Chris Alexander, WW Applications Management consultant, HP Enterprise Services

By “rethinking” how they manage their applications, organizations can realize real and measurable benefits. Companies are already leveraging the techniques and tools cited here to generate the greatest business impact at the best possible value.

Those impacts often begin with insights. By controlling and exploiting information, CIOs gain powerful visibility into their portfolios. They bring new transparency into costs and sources of spend. And they can more accurately assess levels of service and support.

That knowledge allows them to create and manage change. Well-managed applications allow organizations to scale up or down quickly, and to adapt smoothly to dynamic market conditions. Predictive pricing and adjustable contracting lets them continually realign to meet changing business needs.

Astute CIOs can then translate those qualities into competitive agility, a more balanced maintenance/innovation ratio, and optimized business value.

In fact, HP has seen precisely those results in organizations across the globe.

One company was experiencing significant growth and leadership changes with three CIOs in five years and stringent limits on its IT budget. This dynamic environment coupled with associated IT philosophy changes presented the challenge of rapidly adjusting IT spend without impacting service. Our applications management model allowed the organization to quickly and easily reprioritize dollars to preserve current spending levels, while realizing improved quality performance and business service levels.

To prepare for the implementation of dynamic application service delivery, another company worked with HP to analyze, inventory, and classify all enterprise applications. This HP evaluation process revealed previously unrecognized business applications, which were driving hidden IT costs. This discovery led to business value discussions and new rationalization strategies, a process that ultimately reduced the company’s overall maintenance spend.

Another organization modernized two core business systems by upgrading and updating outdated technologies. Those changes resulted in simplified processing methods, a reduction in associated incidents, and lowered classification metrics. As a result, the HP data-driven portfolio management approach supported an applications cost model where the application prices for each system were significantly reduced.

After implementing the dynamic service delivery model, a rapidly growing company gained transparency into the true cost drivers for each of its business-critical systems. That knowledge, coupled with the ability to execute “what-if scenarios” using the HP tool set, provided accurate estimates for the cost of future system maintenance. Those projections allowed the company to develop end-to-end ROI studies of the critical changes needed to drive continued growth.

Yet another organization sought to lower overall applications costs as part of its transformation. A tiered services approach, assigned by application, allowed this organization to reach its savings target. Based on the concept that “all applications are not created equal,” the HP applications cost model enabled the matching of appropriate support services to the business value of the applications and reduced spend in the appropriate areas.

Source: HP Enterprise Services

All applications have

a cost and a value,

however, all applications

are not created equal.

By matching the

appropriate support

services to the

business value of each

application, one client

immediately reduced

spend in the appropriate

areas and increased

the effectiveness of

their ongoing portfolio

management decisions

Chris Alexander, WW Applications

Management consultant, HP EnterpriseServices

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Getting Started

HP agrees with Gartner – “when you are in a hole, stop digging.” Get out of the rut of doing things the same way and rethink the way you are managing your applications. Expand your applications management strategy to stay out of the hole.

The techniques and capabilities described here can work for organizations that choose to “manage, then transform,” and for those that elect to “transform, then manage.”

For portfolios that have not undergone transformation activity, these techniques provide the insight, control, and flexibility needed to identify areas that are ripe for change, while also providing a mechanism to adapt to evolving business demands.

For portfolios that have already undergone transformation, this approach allows IT to proactively monitor the health of the portfolio, and to easily align and adjust support levels to meet changing business requirements.

By IT organizations rethinking the way they manage their applications, they can balance the maintenance-to-innovation ratio to fund and support current and future business priorities.

To learn more, visit the HP Applications Management Services site at www.hp.com/enterprise/applications/managementservices.

For access to a range of HP enterprise applications-oriented blogs and discussion boards, visit www.hp.com/go/apps-blog.

To engage in a conversation, contact your HP consultant.

Source: HP Enterprise Services

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Applications Overhaul: How to Get Out of the Hole and Not Fall Back In

Years of underinvestment and ineffective governance have left many companies in an application hole. As you formulate a plan to overhaul your applications, it is instructive to remember the first rule of holes: When you are in a hole, stop digging.

Overview

Aging legacy and custom departmental applications, independent instances of packages by each business unit, and countless small database and workflow tools often add up to thousands of entries in the application inventory. As IT organizations try to support new business initiatives, including globalization and process harmonization, they find the application hole they have dug makes it difficult to fund current support, or take on a major transformation. As you formulate a plan to overhaul your applications, it is instructive to remember the first rule of holes: When you are in a hole, stop digging. Understanding how you got in the application hole is critical to getting out and staying out.

Key Findings

• Tactical application acquisition, compounded by mergers and acquisitions (M&As), digs the hole by increasing the size of a company’s application portfolio.

• Lack of a deliberate process for managing the application portfolio makes the application hole deeper.

• The budget is never enough for all requests for application work, so maintenance projects are often deferred.

• Maintenance projects are funded only when the risk becomes extremely high, or when maintenance can be combined with a project that is a strategic business priority.

Recommendations

• Start developing an application overhaul strategy to improve your applications.

• Evaluate application rationalization, standardization, modernization and

simplification as tools for overhauling your application portfolio and getting out of the hole.

• Use large business transformation projects as an opportunity to think in terms of business projects to fund significant application overhaul efforts.

• Expand the application portfolio management (APM) to consider life cycle costs, and link maintenance requirements to business projects to stay out of the hole.

• Raise the maturity of your application governance processes by using Gartner’s ITScore to assess your application organization’s maturity.

Analysis

Tactical Application Acquisition, Compounded by M&A, Digs the HoleAn application hole is dug with a small shovel over many years. Independent tactical business requirements lead IT to develop applications or implement packages to solve the problem at hand. Each of these independent applications is tweaked as required. A complex Web of integration develops and grows as the business tries to automate end-to-end processes.

In addition, during the last two decades, we have seen an enormous amount of M&A activity as companies grow from national to multinational to global powerhouses, and broaden their portfolios with complementary products or services. Each acquisition brings a long list of applications to make the hole deeper. Companies find they can’t realize the M&A synergy without having common systems in place.

Lack of an Application Strategy Makes the Hole DeeperMany application development projects or acquisitions are treated as one-time projects, with little planning for what it will cost to maintain the software. A support team must keep the application running, fix bugs, and change the application as business requirements or

From the Gartner Files:

Lack of a deliberate

process for managing

the application portfolio

makes the application

hole deeper.

Expand the application

portfolio management

(APM) to consider

life cycle costs, and

link maintenance

requirements to

business projects to stay

out of the hole.

Gartner RAS Core Research Note G00218816 Applications

Overhaul: How to Get Out of the Hole and Not Fall Back In, Bill Swanton, 6 October 2011.

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governmental regulations dictate. Packaged applications need periodic patching and upgrades, or vendor support will eventually be withdrawn. If the business isn’t asking for changes, it often isn’t willing to fund these routine activities, and a maintenance backlog develops. The older the applications get, the more it costs to fix them, pushing maintenance further down the priority list for funding and deepening the application hole.

Essentially, companies at the bottom of the hole got there because they lacked an application strategy. The strategy is developed as part of a deliberate process – i.e., consult with stakeholders to determine how to develop the portfolio to provide the business capabilities for the business to win.

The Budget Is Never Enough for All Requests, so Maintenance Projects Are Often DeferredWhile many IT people would like to see money dedicated to application maintenance, this is not how businesses allocate limited funds. The argument that you have to maintain IT applications, like the roof of a building, falls on deaf ears. The business effectively tells IT, “Call me when it starts to leak.”

Businesses typically are based on an operating model that allocates operating and capital funds based on a percentage of revenue. The amounts may change slightly year to year based on priorities and profits, but there is a fixed budget and more than enough proposed projects to consume it.

Depending on the application portfolio governance maturity of the company, different things may happen. The worst-case scenario is a political free for all, when the strongest or loudest stakeholders get their projects funded – often digging the application hole deeper. More-mature organizations rank projects based on business priorities, risk and ROI, among other things, to gain consensus on what to fund. Regardless, maintenance projects with no immediate business value will fall to the bottom of the funding list.

Tie Maintenance Activities to Current Business PrioritiesThe reality is that maintenance will be deferred until the business has no choice but to acknowledge the problem. Typically, the business waits until an application, database or OS version

is going off support. A rise in transaction volume may require new hardware that won’t support the old versions of software. A change in regulations or other outside event may force the issue – remember the urgency to address Y2K and the Sarbanes-Oxley Act?

But business isn’t senseless. While it may hold off replacing that “roof,” it will expect to get the best long-term ROI once the project is approved. The business will usually opt to do the project right, and, staying with the roof analogy, perhaps will use a long-lasting material and include added insulation to save energy.

For applications, this means linking known maintenance needs with specific business projects. For example, ERP upgrades are often scheduled when the business needs functionality that’s in the latest version of a specific application. Because 40% or more of the cost of an upgrade is regression testing, testing would also be required for a functional expansion. Combining the upgrade and testing projects reduces the incremental cost of the upgrade.

Evaluate the Application Overhaul ToolsUsually, the business case can be made that it is more cost-effective to replace five or more aging applications with fewer new applications or a packaged application suite.

The tools of application overhaul are:

• Application rationalization – Consolidation, migration and retirement of applications improve the business value delivered by the application portfolio and reduce the cost.

• Application modernization – Transition an application portfolio to more-modern languages, architectures and runtime environments.

• Application simplification – Meet users’ expectations by understanding the context of their requirements and eliminating superfluous features that make applications difficult to use.

• Application standardization – Standardize business processes and performance measures across the organization, incorporating the best ideas from across the enterprise, and drive a step change in performance.

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Use Business Transformation Projects to Fund MaintenanceMajor filling of the hole often requires a major business transformation project. Massive overhauls and standardization of business processes will require significant change to the software that supports those processes. For example, major ERP implementations or consolidations are often part of an effort to become “one company” and leverage a company’s size and global reach better than it can with autonomous business units and country organizations.

A best practice is to tie applications to a transformation that the business leaders desperately want to accomplish. The application change is a catalyst to the more-critical business and process change. Employees are forced to relearn how to do their jobs with the new application. As more of the process is embedded in the application, the change is more likely to stick. This creates a powerful incentive for the business to fund the project and fully engage to ensure its success.

Expand APMIT organizations have to take a long-term approach to staying out of the hole. Rather than continuing to propose maintenance projects or allocations only to be shot down, they must:

• Create a complete application inventory, identifying ownership, user base, annual costs, technical risk, business risk, and how well the application can meet current and anticipated business needs.

• Make sure the inventory information and deferred maintenance are linked to proposed business application projects where there is a synergy to combining the projects.

• Guarantee that the full life cycle cost of the old and proposed applications is understood so that the long-term benefits of doing the right thing are apparent.

As part of the APM process, use a methodology, such as Gartner’s TIME (tolerate, invest, migrate, eliminate), to determine your investment posture with regard to particular applications. Based on the technical state and business fit of the existing application, you may decide whether to tolerate, invest in, migrate or eliminate applications.

Conclusion

Getting out of the hole requires learning how to work the corporate funding mechanisms. IT organizations have to show the business that filling the application hole is necessary in the long term, but can also deliver immediate benefits as part of current business priorities. Done right, you will not only get out of the hole, but also strengthen your engagement with the business and your APM process.

Source: Gartner RAS Core Research, G00218816, B. Swanton, 6 October 2011

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