The Quadrant Approach to Application Portfolio Management

Issue 1, 2012 Download pdf

I just got back from CeBIT, the world's largest trade fair showcasing digital IT and telecommunications solutions for home and work environments. More than 300,000 visitors from all over the world attended the conference. As every year, it was a remarkable event and Software AG was present with an impressive booth where customers and prospects could inform themselves about Software AG’s strategy, product portfolio and newest innovations. Check out the highlights from CeBIT 2012 at

Every day the booth was packed with people passionate about processes and business excellence. As the corresponding Product Manager, I was in charge of the Enterprise Architecture Management work station where many existing and future clients stopped by over the five conference days. I had so many discussions around enterprise architecture (EA) that week I can say I have discussed nearly every flavor of enterprise architecture feasible.  However, there was one topic discussed the most: The strategic viewpoint of an application portfolio realized through a quadrant diagram.

The discussions held during CeBIT combined with the good feedback I received about my articles “Transform your Application Portfolio – But don’t lose focus!” from TECHniques Winter 2011 Edition  and “Cultivated Landscapes” from TECHniques Autumn 2010 Edition ( motivated me to dive a bit deeper here into the process of Application Portfolio Management.  Specifically focusing on how Software AG’s Enterprise Architecture Management solution supports the creation, design and analysis of a strategic application portfolio through quadrants.


The concept of the application portfolio was first described as a Strategic Grid that demonstrated the importance of IT to the business in 1983 by McFarlan, McKenney and Pyburn in the Harvard Business Review's "The Information Archipelago -- Plotting a Course." They divided the grid into four quadrants: Strategic, Turnaround, Support and Factory, as shown in Figure 1. The idea was to classify applications into these four quadrants to document the strategic relevance of the application to the business.

1.       Strategic:Business depends on application for competitive advantage.

2.       Turnaround:Business expects that the application will be strategically relevant in the future.

3.       Support:Business sees no strategic value in the application.

4.       Factory:Business sees strategic value now, but predicts that this will disappear in the future.

FIGURE 1:  The Strategic Grid by McFarlan, McKenney and Pyburn

Over the last few years I have seen many EA projects where this approach is used and basically the concept of the Strategic Grid introduced has not changed much. However, depending on the respective focus and purpose of the IT strategy, the four quadrants were assigned different meanings. For example, in the context of a modernization initiative the following categorization turned out to be very typical:

-        Enhance: Standard, penetrate, recommend, invest

-        Retire: Freeze, minimize cost, keep alive until phase out

-        Replace: Phase out, no enhancements, no investment

-        Maintain: Tolerate but no enhancements, no investment


FIGURE 2:  Quadrant approach applied in meaningful context

The goal is to provide an overview of the application landscape in terms of future applications and investments areas as well as applications which will be frozen or phased out in the future. Very often KPIs such as business contribution, business value or strategic fit, help to find the right categorization. With this approach, applications are not only planned and managed according to their lifetime and future contribution to the business, but also classified regarding IT budget distribution. Created, designed and updated every year, these viewpoints represent the IT strategy in terms of the modernization of the application landscape and are actually used as templates for budget discussions.


Application portfolios are a fundamental concept to support a sustainable modernization process of the application landscape that actually is in line with the Business and IT Strategy.

Recommendations for the definition of the right application portfolio for your modernization initiative:

  • Define the categories/quadrants that matter to your goals
  • Automatic portfolio generation based on appropriate KPIs would be nice but politics makes it hard to do
  • Meaningful analytics of the integrated IT and business landscape are mandatory to make reliable decisions within the portfolio
  • The impact of decisions needs to be analyzed continuously to keep track


Software AG’s Enterprise Architecture Management Solution not only provides the methodology and capabilities to define, design and manage such portfolios in a very flexible manner but also provides powerful analytic capabilities such as dashboards shown in Figure 3. These dashboards can be used to analyze the status and impact of the portfolio over business areas and organizations as well as to track the development over the years.

Thereby the process of Application Portfolio Management is supported by the comprehensive EA capabilities of the solution combined with the delivered transparency of business and IT in one common repository.

FIGURE 3:  Enterprise Application Management Dashboard for tracking and analyzing