Over the years the idea of application portfolio management has become a familiar one, because it addresses a problem faced by any large and complex organization – how can the organization keep control of the large amount of applications that they need? Yet, just as no two organizations are precisely the same, neither are the problems that two organizations, even in the same industry, the same. This in turn means that the opportunities arising from an application portfolio management initiative will vary from organization to organization.
Despite this, it is possible to observe some common themes that emerge based on the specific characteristics of the different organizations that engage.
In an organization with a Coordination operating model, where business units have the same customers but perform different operations, there may be little opportunity for consolidation but the organization should focus on enabling the flow of data by using the application portfolio to identify the data integration capabilities and needs of the core applications used.
In an organization with a Diversification operating model, where business units have different customers and perform different operations, there are likely to be comparatively few opportunities to consolidate and rationalize applications – the main opportunity is going to be to establish standardized, rationalized platforms on which the applications rest.
In an organization with a Unification operating model, where business units have the same customers and perform the same operations, there are the strongest opportunities to rationalize applications out of all the four operating models. Thus should hardly be a surprising result – the unification operating model can be seen as the reference business case for application portfolio management. However, faced with so much opportunity for potential rationalization, the organization will need to prioritize, and so the application portfolio becomes an invaluable tool for this prioritization.
In an organization with a Replication operating model, where business units have different customers but perform the same operations, there are also strong opportunities to standardize, although operational considerations may require systems to be replicated, depending on their operating characteristics. Here the application portfolio becomes the basis for identifying where systems can be consolidated and where they need to be standardized with replicated distribution.
It probably shouldn't surprise us that the greatest opportunities for an application portfolio management effort arise in the two operating models where processes are duplicated between business units – applications, after all, are about automating business processes. However, this does not make such an exercise worthless in the other two cases – instead, the application portfolio should be regarded as an enabler for the data integration suggested by the coordination model and the standardized platform suggested by the diversification model.
There is one important caveat in all of this, however – what is an organization? What is a business unit? For example, UPS has already been referenced as a unification model organization... but at the same time, an individual business unit within UPS might have more of a coordination operating model at the internal level. As usual with any complex environment, whichever classification scheme that we use to understand it will always be arbitrary to a certain extent. Nevertheless, there is definite value in considering how the operating model of a given organization can affect how it can benefit from an application portfolio management initiative.