APPLICATION

THE DEFINITIVE RATIONALIZATION

GUIDE
 Introduction:
How many applications does the average enterprise use? Take a
guess before continuing. 50? 100? Maybe even as many as 500?

The actual figure is 1516.

And this is not just an enterprise level problem either, with

research from Okta finding that the average across all large firms
has grown by 68% over the last 4 years, up to 129.

Given the continued developments in technology and growth of

new business models, it is perhaps unsurprising that the number
of applications a firm uses has ballooned. Nonetheless, this
rapid growth will impose heavy costs upon firms, not just from a
financial point of view, but from an efficiency standpoint as well.
Every application in a firm’s portfolio needs to deliver business
value. It’s no surprise that Application Rationalization has become
one of the most important initiatives for CIOs and Enterprise
Architects today.

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 What is
Application Rationalization?

Application Rationalization (sometimes referred to as Application Portfolio

Rationalization) is the act of reducing the size of an organization’s application
portfolio. In other words, using fewer applications than previously, typically done
with the aim of cutting costs and improving efficiency.

When discussing costs, the typical term used is Total Cost of Ownership (TCO),
which is a calculation of all costs involved over time with IT equipment. Gartner
highlights the following as areas that might contribute to TCO:

For IT, TCO includes hardware and software acquisition, management and
support, communications, end-user expenses and the opportunity cost of
downtime, training and other productivity losses.

Typically led by the CIO of an enterprise, Application Rationalization is of vital

importance to enterprise architects, with Orbus’s own research indicating it is the
main use case for enterprise architecture departments.

The scale of Application Rationalization can vary, with industry leaders likely to
take a continuous, careful approach to application portfolio management that
minimizes the need for major change, while less active companies may need
huge, enterprise wide projects that need large investments of time and money.

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 Why Rationalize?
For those who guessed incorrectly in like every other function of a business,
the Introduction, this is probably self- but face unique pressures for continual
explanatory – companies are using far, far investment. Any firm which wants to
more applications than seems necessary, exist on the cutting edge of technology
and there is ample space to save money will by necessity need to keep acquiring
by removing redundant software. Gartner new applications, and indeed this likely
estimates that firms which follow best explains why application portfolios have
practices for application rationalization become so bloated. Nonetheless, there will
can reduce total cost of ownership by come a time when an IT department has
30%. Given that application costs are no choice but to delay implementation of
estimated to make up 80% of the entire technologies or applications for budgetary
IT budget, that can be a significant reasons. Consider the example of a retailer
saving. in the year 2005 that chose not to invest in
e-commerce solutions; the opportunity cost
It is not merely financial cost that there could be massive.
rationalization can impact upon either.
Opportunity cost is another possibility. Opportunity Cost ties into another benefit,
Given the nature of technological which is increased efficiency. It almost goes
development, applications can cause without saying, but an IT department has to
opportunity costs in two ways. First, manage hundreds of different applications
clinging to older versions of certain and this complexity can slow everything
software will prevent an organization down. Removing applications from the
f rom making use of new features and portfolio reduces the burden of maintenance,
efficiencies as they advance. This is as well as not having to train staff to use
true even if a firm actively updates dozens of unnecessary applications. More
and invests in their applications. For generally, application rationalization can
example, a firm which uses Office be the first step towards better application
365 may still have certain locations or portfolio management. Maintaining a
teams making use of Office 2007 due to centrally managed application portfolio
simple inertia. The second opportunity requires effort at the best of times, but when
cost arises due to simple budgeting. a business can’t even keep track of all the
IT departments have limited budgets applications that they use it is practically
impossible.

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 Barriers to
Application Rationalization

The Application Portfolio Visualization

It’s a tautology, but if you’re looking to Assuming that you can access your
undergo application rationalization, then application data, the next challenge to
your application portfolio is likely to be overcome relates to making sense of the
complex and unmanageable. If your data. When a firm has upwards of 900
portfolio is sufficiently cumbersome, then applications, it is no small feat to pick out
the very act of identifying applications in targets for rationalization. A spreadsheet
need of rationalization can be difficult. might be able to do the job for smaller
If you can’t even keep track of every organizations, but chances are you will
application that is in use or paid for within a need particular tools and techniques to be
firm, it will be impossible to make decisions effective.
on redundancy or cost.
Poor visualization won’t just impact on the
Even if a firm is confident that it has rationalization process either. A key part
records of every application within the of application rationalization is presenting
portfolio, the information itself may prove to and gaining the buy in of stakeholders,
troublesome to extract. Application data which becomes challenging without user
can be buried in ancient Excel spreadsheets f riendly presentation options. Rationalization
or Word documents, which can also decisions can have impacts on a wide range
contribute to collaboration difficulties if of business functions, and so even with the
information is not easily passed between support of the CIO, push back could derail
teams and team members. attempts to discontinue legacy applications.

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Barriers to Effective
Enterprise Architecture

Judgment Collaboration

You have managed to gather all your Stakeholder engagement is vital for
necessary application data and have successful application rationalization.
organized it in order to begin culling This barrier arguably impacts on several
applications. What now? How does of the others: for example, you would
an enterprise architecture team go not be able to compile an application
about deciding which applications are portfolio without application owners and
unnecessary? users supplying relevant data.

While there will undoubtedly be some Gartner suggests that application

obvious choices in every rationalization rationalization initiatives that do not have
project, only targeting low hanging the support of business leaders rarely
f ruit will not realize large gains. Utilizing get off the ground, as rationalization
industry best practices and methods initiatives often require change in
can achieve 30+% cost savings, but business processes, which cannot be
these methods will often be opaque and driven by the IT department.
unknown to inexperienced firms.

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 The Steps to Successful
Application Rationalization
Common focuses for a rationalization It may seem strange, but the best path towards succeeding with application rationalization
initiative include:
is to use the right application. An enterprise architecture tool with a central repository, such
as iServer, will drastically improve the ability to execute on rationalization. The following
Functional Duplication – identify

7
applications which provide similar steps have been written with this in mind.
functionality to others in the portfolio.

Vender Consolidation – lower the

6
5
number of application ‘suppliers’ that an

4
organization deals with.

3
Strategic Importance – identify and

2
visualize applications that are poorly
aligned to strategy and are of low
criticality.

Fit Analysis – scoring applications for

technical and business fit; see below for
more detail on these terms.
1
Application Lifecycle or Usage – review
basic characteristics of applications to
find quick wins, such as applications
that can be retired early, or applications
with minimal usage.

Establish Centralize Build on Assess Analyze Visualize Review and

Goals Data Data Data Portfolio Results Present the
Application
Roadmap

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 1. Establish Goals 3. Build on Data
This is an oft overlooked step, but one Once your application catalog is loaded
which is vital to any business initiative. into the central repository, you will then
What do you aim to achieve with most likely need to augment the data with
application rationalization? While it manually gathered information. Application
is all very well hoping to get all the ownership and lifecycles are particularly
benefits outlined earlier in this paper, an important, and of course the usage of each
unfocused approach is likely to lead to a application is necessary. You can also link
slow, troubled process. The steps required applications in the iServer repository to other
to gather and analyze data are the most key enterprise concepts, such as business
time consuming and having to account capabilities or processes, to start to build a
for a wide variety of different aims can comprehensive picture of impacts.
all contribute to additional complexity.
There are a broad set of angles from which
to approach a rationalization initiative,
though organizations can attempt some
4. Assess Data
combination of the above if a larger scope
Depending on the key criteria established
is needed.
in step 1, you will need to score applications
to see which are in need of rationalization.
There are three measures that are commonly
used to score applications: TCO, Technical
2. Centralize Data
Fit and Business Fit (or Value). Business
With iServer’s central repository,
and Technical Fit are typically qualitative
gathering all your necessary data in one
measures that determine how useful an
place is not too challenging. Much of the
application is to the business, and the
work for this step will be manual, relying
technological ‘health’ of an application.
on accurate lists of application ownership
iServer has predefined scoring methods for
or an up to date application catalog.
all of these measures, so you won’t need to
build your own, though interested readers
can head to our posts on Business Fit and
Technical Fit to find out more.

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 5. Analyze Portfolio Applications in Tolerate have high technical fit but low business fit. These
With scoring complete, you will now need to applications don’t need much attention, but should be monitored in case
they degrade any further.
analyze and group your application portfolio
according to your desired criteria, as established
Invest, predictably, is for applications with both high technical fit and
in step 1. A common sorting is TIME, which stands high business fit. As the name implies, companies should aim to invest
for Tolerate, Invest, Migrate or Eliminate, and was and evolve these applications. For applications in migrate, they will have
designed by Gartner. high business fit but low technical fit. These applications are valuable
business assets, but will likely be in need of modernization to preserve
their business value.

Finally, Eliminate refers to applications with both low technical fit and
business fit. These applications should be decommissioned.

TIME analysis is a good starting point, there are additional

factors that can be considered. Not every application assigned
for elimination should necessarily be removed. Further factors to
consider include:

Complexity Data Implications

How heavily integrated is the Is the application associated with any
application? Investigate the number of sensitive data? The nature of the data
interfaces/integrations the application processed by the application may pose
has, and discuss these with the additional implications for retiring it
application owner. early.

Replacement / Business Impact Cost Savings

What would the impact of retiring this How much would we actually save
application be to users in the business? by retiring this application? Perhaps
Interviews should assess real business the most important consideration; an
impact f rom removing the application. application should not be retired early if
doing so will not result in a meaningful
cost saving.

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 6. Visualize Results
After your analysis, predefined visualizations and reports can
illustrate the results with ease. If using the TIME methodology,
visualizing applications in a matrix will demonstrate this clearly.

7. Review and Present the Application Roadmap

To complete the project, enterprise architects will need to present

their results to stakeholders, showing potential savings identified and
other positive impacts, such as elimination of redundancy, as well as
the selection of applications that will be rationalized. iServer offers
predefined reports for this stage.

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 Maintaining an Efficient
Application Portfolio
By following this guide, enterprises can drastically cut the size of their application
portfolio and reduce their software costs. However, if an organization was able to
accrue hundreds of applications, what is preventing this buildup f rom occurring
again? For a truly successful approach to application rationalization, firms need not
only succeed in the initial rationalization, but to complement this with effective,
continuous application portfolio management.

iServer comes with a number of application portfolio management features built in,
so for users the transition f rom an application rationalization project to continual
portfolio management is smooth and simple. Prebuilt dashboards enable users to
instantly view application scoring at any time and keep track of application lifecycles
through a dynamic Gantt chart.

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The Definitive
Definitive Application
Application Rationalization
Rationalization Guide
Guide
 Conclusion
The need for businesses to maintain
a technological edge has never been
greater, but many are crippling their
abilities by failing to keep control
of application growth. Application
Rationalization is not an exciting or
easy initiative, but it is arguably one
of the most important methods in
the enterprise architecture toolbox,
delivering outsized gains in a variety
of areas. Ironically, the biggest
reason to undertake application
rationalization today is applications,
with modern tools such as iServer
rendering many tedious tasks far
easier. Those driving rationalization
will still need to be aware of the
need to bring stakeholders on board
and communicate the end result
effectively, but the opportunity to cut
software costs, reduce the burden
on the IT department and start
application portfolio management
should convince even the most
recalcitrant stakeholder.

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13 The Definitive Application Rationalization Guide