Application Portfolio Rationalization (APR) is a proven way to prune the application landscape and focus on what matters to the enterprise. You want your organization to become streamlined, ready to meet whatever opportunities and challenges that may come your way. At the same time, you are aiming to cut expenses and make processes work more efficiently.

Consider that approximately 70% of companies do not have proper documentation about their application portfolio. LeanIX noted that “Infosys, a global leader in technology services and consulting reports that Application Rationalization can lead to the cost-saving of more than US $2 million in an enterprise. Currently, 75-80% of IT budgets are spent on operating and managing applications.”

CFOs and CIOs in your position will be examining application portfolio rationalization to align the software being used with the company’s current objectives. APR is important particularly because of the proliferation of SaaS solutions in the last decade.

As Apptio put it, “Application rationalization is the process of cataloging and eliminating duplicate software applications used across an organization. This allows IT departments to improve efficiency, simplify portfolio complexity, and lower the total cost of ownership (TCO) for their application portfolio.”

There’s plenty to motivate an enterprise to begin rationalizing their application portfolio, from reducing software complexity to cutting down on time spent on maintenance. It makes for a better return on investment.

What’s at Risk for Organizations That Avoid Application Portfolio Rationalization?

Many pitfalls await CIOs who are reluctant to initiate application portfolio rationalization. Chief among these potential problems, according to LeanIX, is not being able to react quickly enough to business conditions as they evolve.

You run the risk of missing key updates and any bug fixes from the software developer. Of course, this implies you will be more vulnerable to malware when you fail to allow for timely patches. It’s also more difficult to manage and optimize your software environment until you start application portfolio rationalization.

Finally, there is a distinct risk of your enterprise missing out on new business opportunities because your software stack was not set up to take advantage of them.

Major Benefits of Application Portfolio Rationalization

Reducing IT costs, minimizing complexity, getting rid of redundancy, and saving on training (time and money) are chief benefits of pulling the trigger on Application Portfolio Rationalization in your enterprise.

“After performing Application Rationalization, it is not uncommon to uncover substantial savings,” noted LeanIX. “This money can be used to reinvest in innovative endeavors such as IoT, artificial intelligence, and machine learning.”

By eliminating redundant applications, your software landscape is simpler and easier to work with. License costs naturally plummet, as does the cost of maintenance.

Starting the Process

The steps to build a framework for a successful application rationalization begin with you analyzing the system to create a catalog of all applications. You determine where costs should be allocated, and score the value of the applications to help calculate what you will keep and what you’ll eliminate from the catalog.

It pays to be on the lookout for software that currently has no retirement plan. Killing zombie apps means your IT landscape will be less cluttered. Your spending will go down on licensing fees that are no longer needed.

You can envision the project as a 6-step process. According to CIO Council, you would structure the project as follows:

* Identify the software needs in your organization and determine their governance.

* Create an inventory of the applications

* Assess the technical fit and the business value of the applications now in your catalog

* Determine the total cost of ownership for the various applications

* Score the software for utility and importance

* Assess the placement of those applications you intend to retain

An Example From the Pharmaceutical Industry

It’s useful to examine how another enterprise succeeded in application portfolio rationalization, to get an idea of applying the same principles to your organization.

As Cognizant put it, “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.”

It went on to note that “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.”

Cognizant reported on a case study of a large pharmaceutical company that was having challenges with its ever-increasing software landscape, whose complexity was making it hard for them to respond to changing business conditions.

The company wanted to reduce the TCO of its applications and find ways to save money. They managed to simplify their portfolio by 40%, with a proposed saving of about $1 million in immediate actions and about $600,000 in longer-term actions, such as winding down contracts for less-used applications and not renewing them.

Defining the Business Value of Applications Before Rationalization

Don’t focus on the names of particular applications. Instead, concentrate on what value the software brings to your organization.

Here’s an example of a scenario from Apptio that could play out in your enterprise, about using a SaaS-based project management application. “With Trello, we project manage contractors that deliver 30% savings on labor vs. a full-time employee. This value assessment makes it easier to evaluate redundant capabilities in similar applications: For example, the company says, ‘We have Trello, but we also have surpluses licenses for Wrike and Nutcache. Let’s agree on one standard and retire the others.’”

During the Purge, Hang on to Useful Software

While it’s admirable to be as thorough as possible when eliminating redundant and otherwise unneeded applications, you don’t want to get rid of software that’s still useful.

For example, if your company operates in multiple time zones, your uptime requirements are more complex as compared to enterprises in a single zone. Apptio explains, “Redundant capabilities with a sound business case are not candidates for rationalization.” So, it’s morning in Australia when it’s nighttime in North America, while French people are settling in for the evening at the same time it’s afternoon in Japan.

“If all app servers for an organization are rationalized to one location, I&O has a maintenance window falling into at least one region’s core business hours. In this case, there may be a business need for redundant capabilities.”

Getting a Better Return on Investment With Application Portfolio Rationalization

Identifying applications that are outdated, redundant, or otherwise no longer needed to support the enterprise’s current mission should be a routine task that you take care of periodically to streamline operations. Retiring unused applications and consolidating the versions of the applications that you’ll continue to use helps you pare down the portfolio. You’ll spend less since there will be fewer licensing fees and less maintenance, accordingly.