Applications portfolio analysis (APA) is a tool to divide current and proposed applications into three categories — utility, enhancement and frontier — based on the degree to which they contribute to the enterprise’s performance. The utility category is essential but does not enhance the enterprise’s performance (e.g., payroll); the enhancement category contains applications that improve the enterprise’s performance based on the use of established technology (e.g., documentation automation); and the frontier category is aimed at greatly improving enterprise performance (e.g., through aggressive use of rule-based decision support) but usually entails substantial risk. The management issues for each category are, respectively, cost, opportunity identification and innovation. The planning process should consider the best balance among the three categories to gain optimal future performance and the appropriate value from the application of IT.