The 4 Fundamental Rules of Application Portfolio Rationalization

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When businesses are exploring the different ways they can stay on top of their soaring technology costs, application portfolio rationalization should be one of the first things they consider doing. Rationalization lowers complexity and reduces overall IT spend.

For large organizations, this exercise can lead to tens or hundreds of millions of dollars in savings. But such savings can only be realized if you follow certain rules. We look at 4 of the most important rules of application rationalization.

1.  Develop a List of All Applications

You cannot manage what you cannot measure. It’s important you understand the systems you currently use. Ergo, compile a list of all applications currently installed on your servers and workstations.

If you run a multi-location or multinational organization, this must include applications in every location. If some or all of your systems run in the cloud, this includes the software deployed in your virtual servers.

2.  Determine the Owner of Each Application

Each application in an organization has an owner. This is usually the head of the department that uses it the most. For example, the owner of human resource management (HRM) software is the chief human resources officer (CHRO) or equivalent role.

Knowing the owner of the application ensures that conversations on application use are initiated with the right persons. The owner is likely deeply conversant with the strengths and weakness of the application and can provide invaluable input on whether the software is needed or if it can be replaced by a lower cost alternative.

3.  Determine the Application’s Life Cycle Phase

Every application follows a standard life cycle. In the beginning, it’s only used by risk-taking early adopters. Over time and as the application’s functionality is proven, the number of people using it increases rapidly. The more the people using it, the greater the volume of user feedback and thus the higher the number of improvements. It’s in this phase that the application is stable and mature.

However, since the environment the application operates in isn’t static and the vendor will not provide support in perpetuity, the application eventually starts to descend into its end-of-life phase.

There are many challenges an application faces at the early adopter and end-of-life phases which ultimately translates to higher maintenance costs. Determining what phase an application is at allows tech leaders to make changes that will optimize spending.

4.  Assess Application Usage

Application usage is determined in multiple ways. First, how many people in total use the software. Second, if the application is used by one or more specific departments, what proportion of the staff in these departments uses the application.

Third, check if there is already an existing application within the organization that can take over the function (for example, ERP systems have such expansive functionality that they can fulfill the role played by more specialized software). Fourth, find out how frequently the application is used (daily, weekly, biweekly, etc.).

Collecting all this usage data eventually gives you enough information to develop a shortlist of applications that could potentially be phased out.

Application portfolio rationalization isn’t something you do once and forget about. The technology environment is constantly changing. Therefore, you must regularly assess the IT landscape to confirm you are still getting value for money and aren’t spending more than you should.

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