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A Comprehensive Approach to
Application Portfolio Rationalization
Executive Summary
Ongoing economic uncertainty is imposing
stringent cost pressures on organizations across
industries. In response, many businesses are prioritizing their investments to drive operational efficiencies and minimize IT spend on their application
portfolios. However, several factors including
the expanding size and complexity of the application portfolio, poor license management, rising
total cost of ownership and increasing inflexibility
are challenging many organizations to adapt to
the rapid changes in the business environment.
Many IT organizations are working to lower the
percent of the budget spent on operations and
maintenance, which tends to hover at 70% or
above, according to industry estimates.
This paper provides a methodical approach, with
embedded critical success factors, for application
portfolio rationalization. It also describes a robust
model for assessing the business value, technical
health and strategic fit of the application estate,
as well as prescribed solutions, such as decentralization of the software/application procurement
function and other overlooked components of
cost avoidance in the portfolio. A comprehensive approach allows organizations to utilize the
residual business value of the existing portfolio,
which frees key resources and funds to support a
focus on high-value opportunities.
Top-level support is mandatory, since initiatives like this have organization-wide impact.
The leadership team must align application
portfolio rationalization strategically with key
organization objectives to first overcome and
then resolve conflicting business needs. Most
experts would agree that strategic planning
should be at the heart of the IT leaders
agenda.
Clear
Drivers of Success
Strong commitment from top management team
Clear communication of objectives of portfolio rationalization
Access to and active participation of all the stakeholders
Critical
Success
Factors
Figure 1
An
Availability
Application
rationalization as an ongoing
process with regular evaluations: Application rationalization is a continuous improvement program that requires regular re-evaluation to determine the effectiveness of the
portfolio and its alignment with organizational
objectives.
Application Profiling
& Value Analysis
Data Collection
Finalize project scope
Prepare interview/
survey questionnaire
Collect data from
application support team
for data inventory
Prepare business
value and technical
health model
Create
rationalization map
Identify opportunity
domains
Profile the
application portfolio
Score applications on
business value and
technical health
Interview/survey of
application service
managers
Discuss with
business team
Map applications
on opportunity
domains grid
Analyze application
clusters
Figure 2
Benefits Realization
& Implementation
Roadmap
Develop
recommendations
Develop business
cases
Conduct cost/benefit
analysis
Create
implementation
roadmap
Scalability
and
Flexibility
Usage
Documentation
& Training
Stability &
Usage
Scalability
and
Flexibility
Functionality
Coverage
Documentation
& Training
Financials
Stability
Criticality
Data
Analysis and
Dependencies
Complexity
Criticality
Business Value
Technology Health
Figure 3
4
Enhance
Functionality/
Consolidate
Maintain/
Evolve
Retire/
Consolidate
Rewrite/
Replace
0.700
0.600
Applications
Consolidation
Support
Team
Consolidation
Enrichment
Opportunity
Instance/
Versions
Consolidation
Service
Category
Savings
Technical Health
0.500
0.400
0.300
Technology
Upgrade
0.200
0.100
0.100
Decommissioning/
Retirement
License
Consolidation
0.200
0.300
0.400
0.500
0.600
Business value
0.700
0.800
0.900
Functional
Overlap
Figure 4
Wave 1: Immediate
1
Rationale
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Rationale
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Figure 5
8
Cost/Benefit Attributes
1
Optimizing
IT Cost
Payback from
Application
Portfolio
Rationalization
Improving
Operational
Efficiency
Business
Innovation
s !DDITION OF NEW CUSTOMERSUSERS
s !BILITY TO MEET CURRENT AND FUTURE FUNCTIONAL NEEDS
s 2EDUCTION IN TIME TO MARKET OF NEW OFFERINGS
IT Efficiency
Process
Improvement
s 2EDUCTION IN DUPLICATE FUNCTIONALITY
s 2EDUCTION IN PROJECT TIME BY REUSING EXISTING FUNCTIONALITY
s 2EDUCTION IN MANAGEMENT AND DOCUMENTATION EFFORTS
s #LEAR DEFINITION OF )4 RULES AND POLICIES
Ease of
Governance
s 2EDUCTION IN PROCESSING TIME
s 4RAINING PREVENTION COSTS REVIEWINSPECTION DAYS COST REWORKRETEST