Application Rationalization
The Beauty in Simplification

This unprecedented global pandemic has changed the way we work now and in the future. Organizations realize that it is not about “do” we transform, it is “how fast can we accelerate” digital transformation. 

This is forcing organizations to rethink and re-evaluate their organization, their business models and their ability to compete, to thrive and to survive.

Application Rationalization is at the forefront of this discussion as organizations must constantly modernize and consolidate their portfolio to align with the business and reduce unnecessary costs.

This process can also be prompted by mergers, acquisitions or shifting business strategies where the IT organization accumulates an unmanageable, duplicative and/or inefficient collection of applications.

 

Companies over $1 Billion dollars can save conservatively $2 Million dollars and decrease IT costs by up to 15% annually through Application Rationalization.”

What is Application Rationalization?

Application Rationalization is a strategic initiative that re-organizes enterprise applications to improve and reduce the portfolio, based on an application’s business and technical priorities to achieve tangible business outcomes.

Figure 1: Estimated Cost Saving – IBM Institute for Business Value analysis, 3MC Advisory

What are the Benefits?

This process and approach can provide incredible tangible business value by lowering Total Cost of Ownership (TCO), improving efficiencies, reducing organizational complexities and streamlining the entire enterprise application portfolio.

Figure 2: Summary of High Level Benefits

Our Strategic Approach to Application Rationalization

Application Rationalization should be an ongoing, critical part of IT portfolio management and is a cyclical process.

The speed of technological change means there is constant investment in new applications, decommissioning legacy IT and refactoring applications to reflect changing technology and business environments. 

Organizations must routinely and continuously update and rationalize their portfolios to ensure it continuously aligns with the needs of the business. Click To Tweet

Application Rationalization uncovers issues such as application duplication, siloed business units and unnecessary IT costs.

A full Technology Business Management (TBM) implementation of all IT expenditures and spend will provide a baseline of application portfolios aligned to business value, detailing the TCO and a breakdown of the infrastructure components and IT services. The application details should be updated as changes occur to maintain a current inventory for use in ongoing application portfolio management.

A structured, iterative approach that provides discrete actions that are measurable is critical. Secondly, focus on reducing costs, improving business responsiveness and standardizing business processes versus reducing the amount of applications. It is likely that a mere 20% of your applications account for 80% of the cost.

Figure 3: Application Rationalization 6 Phased Approach

Elements for Success

Once you’ve made the strategic decision to consolidate and modernize your application portfolio, there are key elements to ensure success.

  1. CIO’s need to be committed to this process and consider it a top priority.
  2. Build a business case and clearly define the tangible business value that is anticipated and/or needed. 
  3. Ensure a mature governance process to get alignment between all areas of the business and guide decision making as this should be a holistic approach.
  4. Realize this may be a cultural shift for many organizations as they may be accustomed to a large portfolio of software and applications.
  5. Create an Organizational Change Management strategy as the new streamlined approach may impact how people work.
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