The Financial Burden of Application Development

Every application that is built is a capital expenditure and most organizations budget 10% to 15% of the project budget for at least three years after the application launches to fund continuous maintenance, support, and operations of the new application. Most firms will then continue to have new initiatives and new projects that are approved and allocated the same level of funding on a multi-year basis.

From a financial perspective, you can see in graph below, there is a base amount that we spend on general administration, then, if we build Project A and B in Year 1, we have to support Project A and B in Year 2 and beyond. When we continue to add project after project, year after year, and don't end-of-life our applications, our support costs become increasingly large and may exceed the entire base plus investment of Year 1. This becomes the financial burden of applications.

In today's world of decreasing budgets, it is impossible to sustain the constantly increasing costs that a lack of an application portfolio management (APM) strategy creates. When budgeting for new applications, from the outset of a project you should always include ongoing operations and maintenance expenses as well as the cost of retiring the application. Even more important is periodically evaluating and overhauling your application portfolio. We use Gartner's TIME model to evaluate applications and Gartner's Pace-Layered Application Strategy to categorize applications as essential steps in APM. You can get started today with our free worksheet to evaluate your applications with TIME.

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