Abstract
Enterprises across the globe have multiple applications deployed on their networks. Sadly, a large chunk of these applications are occupying space, and increasing costs and pressure on infrastructure without adding much business value. Mimgany applications are either unused or underutilized and could be costing millions of dollars. To combat this redundancy and bloat, IT managers must develop an application strategy, which rationalizes their legacy portfolio and prepares it for emerging business requirements.
Need of the Hour
IT teams of global businesses drive investments towards delivering new reliable applications and new technologies. However, with evolving business needs, compounded by economic uncertainty, deficient IT alignment, mergers and acquisitions, and compliance pressures, many organizations have become a hub of legacy applications and redundant processes. These applications are often sub-optimal, create information silos, have incompatible technologies, and an unmanageable application portfolio.
Industry statistics suggest that almost 80% of the IT budget is spent on ongoing operations and maintenance, while only 20% is used for future business needs and innovations. In order to have a balanced application portfolio, many organizations cut IT spend by systematically identifying and decommissioning ageing applications to drive operational efficiency and reduce overall complexity. It is critical for businesses to continuously analyze their application portfolio for its business value, potential to deliver more value, and reduce cost of ownership.
Such ongoing comprehensive assessments help CIOs and IT executives make strategic decisions on how to rationalize the application landscape, reduce cost of ownership and improve speed-to-market. This paper provides a robust approach to the Application Portfolio Rationalization (APR) framework for understanding functional and technical gaps, and recommends opportunities to replace/transform, retain, migrate, and technically or functionally extend an application to increase its usefulness. It also describes why we need APR, and the critical success factors to execute an effective strategy. It articulates a comprehensive approach to APR by tailoring processes as relevant and using a simple toolkit.
Wide Scope of Application Portfolio Rationalization
With the global economy slowly stabilizing, IT organizations face an unprecedented demand to maintain an effective application portfolio—a collection of software applications—to sustain growth and profitability. However, organizations need to ensure that the application portfolio health is continuously evaluated. Rationalization is essential in order to decrease business failures and help determine the extendibility potential of specific applications by identifying obsolete, redundant and business-critical applications.
When executed right, Application Portfolio Rationalization (APR) ensures reduced Total Cost of Ownership (TCO) and maximization of business ROI, realized through application elimination, replacement, consolidation or modernization. Application rationalization is not merely a cost-cutting exercise. It is an initiative by the organization to transform a highly complex and moderately effective application portfolio into a more agile and productive, one aligned with the organization’s business and IT needs.
The Nuts and Bolts of APR
Tools and Mechanisms
Organizations need a wide range of tools and mechanisms to keep the application portfolio rationalization process on track. As a result of successful APR engagements, there is a wide range of home-grown and industry standard tools and mechanisms available that can help assess applications, analyze, and communicate outcomes and the imperative for change, and make business decisions effective as a result. These tools are adapted for each requirement and are being evolved continuously.
Framework
A robust framework for APR provides solution strategies and necessary information on how to improve application health. It helps organizations in analyzing and transforming the application portfolio, and generates a final effective, rationalized application portfolio.
Figure 1: APR Framework
Following an application portfolio analysis, the APR framework helps in making recommendations to retain, migrate, replace/transform, conduct functional or technical upgrades, and consolidate applications technically.
Application Weightage
An effective APR framework takes into account key parameters that assess the functional and technical health of an application. Each of the technical and functional dimensions (see Figure 2) of an application is assigned a weight based on its relative importance.
Individual applications are assessed on each parameter to identify and understand critical functional and technical gaps. The functional and technical dimensions, when evaluated, identify each application’s positioning in its lifecycle, assess the opportunity for improvement, calculate potential impact, and guide optimization efforts.
Figure 2: Applications Functional and Technical Aspects
Rationalization Map and APR Analytical Model
The rationalization map is the outcome of the bespoke analysis process. Nine quadrants identify opportunities for application migration, retention, replacement or functional and technical consolidation as illustrated below:
Figure 4: Opportunity Domain Grid
Analysis and Typical Outcomes
- Aligns application portfolio well with strategic business, and IT objectives
- Helps identify and understand critical, functional, and technical gaps
- Provides better informational support to business
- Lowers cost of maintaining the application infrastructure
- Simplifies and optimizes application portfolio making it easier to manage
Less is More: Benefits of APR
Strategic IT Roadmap Development
This is the first step to aligning IT with business priorities. These strategies are built with the help of a cross-functional team including architects and business and IT leaders. They employ specific evaluation criteria such as alignment with business goals, IT or/and business strategy and objectives, budget availability, total cost (license, implementation, training, and support), technology maturity and longevity, people skills and motivation, and complexity and stability of business processes supported to create a comprehensive roadmap.
The IT roadmap reflects a segmented, logical, affordable, and achievable plan for application disposition—to decommission, remediate, re-platform, consolidate or enhance applications. It must define an effective framework to identify gaps, changes, and benefits specific to each phase in a transformation from current state to future state. A good roadmap contains the following details:
- Updated application portfolio inventory
- Application portfolio effectiveness assessment
- IT infrastructure effectiveness and adequacy, gaps, and remedies
- Outsource/ insource service scope and boundaries
- Management and governance structure for the transition and steady-state
- High level timeline and cost estimates for APR
- High level critical success factors, risks, and recommended mitigation strategies
Application Modernization and Consolidation
Organizations run numerous legacy applications built on outdated technologies, and hardware and software platforms. Such legacy applications are often difficult to maintain and operate, and limit an organization’s ability to support evolving business requirements. An effective APR approach must help organizations identify and prioritize difficult-to-maintain-and-operate legacy applications for modernization and consolidation.
Before modernizing and migrating legacy applications to newer, less expensive, and more efficient technology platforms, IT teams must identify applications that can be eliminated, consolidated or replaced. Opportunities to optimize every existing application must also be explored. Investment in complex business logic and data is protected by modernizing existing applications as appropriate. APR also defines consolidation opportunities while modernizing the legacy applications, thus simplifying the applications estate.
IT Platform Consolidation
Platform consolidation helps organizations develop a robust transformation strategy to meet business goals. A wholesome approach to APR helps organizations consolidate multiple applications on more flexible technology platforms. This accelerates time-to-market, reduces operational costs, and facilitates multi-channel capabilities.
Success Story 1: Aligned Application Portfolio for a Leader in Chauffeured services and Ground Transportation Services
Business scenario:leader in chauffeured services and ground transportation services, providing full-service solutions for discerning global travelers was using multiple application assets. They had no clear mapping between the business functions and supported technology.
The technology spends for each business function were also not known leading to a complete lack of clarity on TCO for these applications. The organization wanted to take strategic inventory decisions on applications worth enhancing and those that needed to be decommissioned or revived. This need was being hampered by a lack of clear and quantifiable financial information.
Solution and Benefits:The organization partnered with us to align its application portfolio with its strategic IT objectives.
A comprehensive gap-analysis was conducted to identify and evaluate major discrepancies within the system and to map core systems and applications. Transformation was needed in three major areas:
- Organization
- Governance
- Process
The proposed solution aligned with cutting-edge industry trends and streamlined the IT processes, while delivering superior customer experience. The critical emerging benefits included:
- Improved alignment between IT and business teams
- Enhanced utilization of core team by freeing up 33% of resources
- Introduction of agile methodologies for developing future IT projects
- More effective solution development in the given time frame
- Reduced development and maintenance cost by more than 20%
- Established vendor selection and governance model processes
- Provided future IT roadmap leading to cost benefits of nearly 30%
- Defined a digital strategy for improving customer satisfaction
Success Story 2: Rationalized Application Portfolio for a Europe-based Manufacturer
Business scenario:A leading, Europe-based multinational company faced the challenge of disparate information systems with varying usage and maturity. This made it challenging for the business to respond quickly to regional disparity, local requirements, and central governance needs. The company was looking to rationalize IT investments and identify opportunities to improve application efficiency. They wanted to asses the impact of tighter IT architectural alignment with information quality improvement to support regional growth. The IT division was required to optimize IT and IS resources, and reduce duplicate, redundant and complex applications.
Solution and Benefits:The service provider worked closely with the IT/ leadership team to perform assessment/analysis of the existing applications and identify gaps in functionality and responsiveness based on key stakeholder requirements. The emerging benefits of the efforts included:
- Well-defined IS strategies to bridge identified gaps
- Standardized technology platforms
- APR for each operating unit with regional best practices
- Reduced cost of maintenance by 50% across the region
- Ensured sustainable gains from regional standardization
- Reduced direct IT staff by 22% and contract staff by 30%
Pruning for Optimized Performances
Companies across industries have disparate IT applications and face overwhelming challenges to improve operational efficiency and reduce complexity and cost. As more and more applications continue to be developed, and mergers and acquisitions happen, the application portfolio’s landscape changes. This increases the need to regularly rationalize the portfolio to best meet business requirements.
A framework that can retain the existing portfolio’s residual business value and reduce functional overlap can dramatically change the dynamics of the APR program. A robust framework acts as a guiding tool to assess the portfolio and quickly determine whether the applications are functionally and technically healthy to support the organization’s business strategy. It maps the analysis made with the cumulative application portfolio, and identifies potential applications that can be retired.
In addition, once the organization clearly visualizes the state of its application portfolio, it must build a strategic IT roadmap, modernize and consolidate legacy applications or move applications to flexible technology platforms to avoid application portfolio deterioration over time.
Lastly, the application portfolio developed should be maintained and assessed regularly using effective teams of skilled technology and domain experts, and top management support to better serve a company’s business objectives.