What is Application Portfolio Rationalization?

Enterprise software takes up a large part of IT budgets. With organizations aggressively investing in digital initiatives, there is a wide range of dissimilar and disconnected applications that have become a part of their portfolio. In response, CIOs are putting in continuous efforts to rebalance their technology portfolio, prioritizing their investments in the most efficient and much-needed software applications. 

But, how to make it possible? How to understand an array of software applications, analyze them, and transform the current portfolio into a lean, productive portfolio that’s aligned with the business requirements as well? The answer is – through Application Portfolio Rationalization. 

Application Portfolio Rationalization is the process of streamlining the existing portfolio with an explicit goal of improving efficiency, reducing complexity, and lowering the total cost of ownership. This is done by gathering metrics like application’s age, how often it’s used, what’s the cost of maintenance, how it is related to other applications and then decide which application within the portfolio should be kept, updated, retired, or replaced. 

Now, the point is – how to do it? How to assess the opportunities attached to the software portfolio, how to analyze the hidden cost associated with them, and how to figure out the cost-cutting possibilities?

Evaluating the application portfolio is an ongoing process, which involves data collection, application profiling, application value analysis, identification of opportunities & defining implementation roadmap. Here is how it works. 

Step 1: Determine Scope 

Rationalizing all applications at once might seem to be a profitable option in the first place but such an approach has a likelihood of failure. A practical approach involves developing a strategy that has multiple, iterative projects rationalizing application portfolio for focused scope. 

To define the scope, start with application portfolio profiling. For this, create a questionnaire that collects necessary metrics to understand business and technology value that an application brings if the application is a strategic fit for the organization, and what are the cost dimensions. The questionnaire can be customized accordingly to get the most accurate and useful set of metrics to calculate the value that an application offers the business. This questionnaire can be circulated in the form of Q/A form to the service managers, business owners or can be asked in the form of an interview. 

Step 2: Build an Inventory 

The questionnaire captures information that evaluates the business value of an application, it’s technical fit and the total cost of ownership. Based on the parameters collected, every application is assessed for its technical health, business value, discover the opportunity for improvement, cost savings, etc. 

Step 3: Assess Portfolio 

Depending upon how large or small an organization is, how complex its processes are, or how many people use the application, the assessment process can be simple or exhaustive. You can start by reviewing if the application fulfills the objectives of the business or a department, or if the application and its use cases are able to justify the cost and check if the application in use is the right fit for the people. 

Step 4: Define Next Steps 

Now when you have surveyed or interviewed the application users, assessed their value, it’s the time to define what needs to be done. In response to the feedback received, their alternatives, replacement, retirement, or modernization can be planned. You can perform any of the following actions, depending upon the assessment done in previous steps. 

Keep an Application 

You can keep an application in the portfolio in the following cases: 

• If the application is delivering high value to the organization and is technically strong, then keeping the application in the portfolio is a great idea. 
• Another scenario where an application can be kept in the portfolio is when there is no alternative available for the application or the organization can invest an amount with a cap for a specific function. 

Upgrade the Application 

Legacy applications come under this category. If an application is offering value to a business from ages but, is supported by ageing technology, then its high time to upgrade it. An application, in this case, can be modernized by using different modernization approaches including reengineering, recoding, encapsulation, etc. 

Migrate the Application 

• If an alternative to an application is available, then retire it and migrate its data into a new application. 
• Merge multiple applications and make them work together for improved efficiency 
• Standardize applications on a  common technology for the platform for better functionality 
• Move a custom application to an off-the-shelf solution and vice versa 

Eliminate the Application 

If the existing application isn’t delivering any value to the business (in terms of cost, efficiency, functionality), then the only option to deal with such low-value applications is to eliminate them and replace them with a completely new solution. 

Have a Plan to Manage Application Portfolio? 

The aim of the application rationalization is to assess what your organization has, what it needs, and what’s needed to build a cost-effective application portfolio. To start with, you need to set up a technical team who can audit the portfolio of your organization, assess applications, and suggest the action items. Once done, the right approaches (to modernize), alternatives (to solution), and the solutions (to be added) need to be figured out.

If your organization is planning to manage its application portfolio, then set up a free consultation with our experts who will audit the application portfolio of your organization and help in rationalizing it. Our team will help you out in discovering the right solutions for the organization and will also help in upgrading, recreating new solutions, offering better value to the business.