Application Portfolio Rationalization Play Book : A Guide for Enterprise Portfolio Management

Part II

(Editor’s Note: What follows is part two of a two-part series)

Steps to Perform Application Portfolio Rationalization

The following are the steps to follow to perform Application Portfolio Rationalization assessment across the enterprise.

Fig: Application Portfolio Rationalization Approach
  • APR Readiness Assessment: Before starting the Application Portfolio Rationalization exercise, perform the readiness assessment for APR. Establish the business case for APR exercise and engage CXO and executive leaders across the enterprise to ensure buy in for the APR assessment. Decide whether to do it as a big bang approach or select critical business units where maximum number of applications belongs. Some of the questions that decide on the APR readiness are,
    • Do business processes be standardized
    • What is the percentage of custom developed and COTS applications?
    • How many applications are using non-approved technologies?
    • Do multiple versions of the same technology exist? Can licenses be rationalized
    • What is the level of automation required?
    • Howe effectively the monitoring tools are used
    • How effectively shared service are used across enterprise?
    • Is the organization ready for Digital technology adoption?
  • Enterprise Strategy: Glance through the enterprise IT strategy.  Understanding of the Reference architectures related Business, Application, Data, Technology, Security etc. are done during this stage which help us to get the clarity on high level processes, nature of applications, technologies and deployment overview. Also, capture the summary of Business and IT roadmaps, blueprints of an enterprise.
  • Collect the applications: Prepare the list of applications currently deployed and running across the enterprise. This includes all the applications across the business units, locations, regions, geographies.
  • Owners Identification: Identify the appropriate stakeholders (users) of the applications across BU’s and locations. There is a possibility that many users or sometime no users against the applications usage.
  • Heat Mapping: In a typical enterprise, many business units collaborate to create a capability area and often features, and functions duplicated across business units, simply because of the way IT systems evolved because of business demand or mergers and acquisitions over the years. Perform linkage of applications to the business functions/capabilities.  Review existing business capability model and refine this to suit the business functions. This helps categorize ‘like’ applications together quicker. This is called Heat Mapping.
  • Hotspot Identification:  As part of this step, analyze cost/FTE information per application, application count and other key parameters to identify areas where there are disproportionate number of systems supporting a business capability. These areas are opportunities or “Hotspots”.  These are the areas that enterprises will gain the most from rationalization. Industry statistics suggests that almost 80% of the IT budget is spent on ongoing operations and maintenance, while only 20% is used for future business needs.
  • Develop the Survey Questionnaire: Develop the questionnaire for each application owner to respond as part of the assessment. The questionnaire at minimum shall capture business value, technical value, risk value and cost value for each application.
  • Build Application Inventory: In this stage, perform 360-degree surveys with the stakeholders covering key dimensions such as Business Value, Technology Value, Cost Value and Risk value for the applications. Analyze and validate the survey responses and develop the inventory of the applications portfolio.  Some of the indicative attributes related to these key dimensions are,
Fig: BV, TV, CV & RV
      • Review the Application Inventory: Review the developed inventory for completion and accuracy. Compare them with existing inventory sources, if available (sometimes CMDB). Follow up with the application owner if there are any discrepancies between the responses provided on the survey questionnaire and information from developed inventory.  Review the application inventory to determine application dependencies and identify the duplicate applications.
      • Capture the Life Cycle of Applications: Identify the applications (mostly vendor provided) which are end of life of technology. Capture the issues related to lack of support from Vendor, Integration issues, low service levels and unavailability of resource skills.  This helps to estimate the future state of the application. Also, assess the applications, which are misused and not used to the full potential that help to take the decision of either consolidate or retire them.
      • Score the Applications: Develop a consistent scoring methodology that is applicable to all the applications. This methodology should weigh factors relevant to enterprise business and mission needs. Review the application scores with the application owners for each application in the inventory to ensure consistency. Refine the scoring methodology based on application owner feedback and input.

Based on the business value, technical value and cost value score of applications determine whether each application should be retired, consolidated, migrated and retained. This process is called disposition analysis. Below are the criteria to decide on the disposition of the applications and its benefits.

Disposition Criteria Benefits
Retire •      Identify low-use, no-use apps

•      Identify redundant & duplicate apps and consolidate

•      Change management

•      Archive application data

•      Decommission Infra

 

Quick savings

 

Consolidate •      Identify redundant applications and consolidate

•      Identify multiple software versions and standardize

•      Identify multiple vendors and standardize

•      Identify COTS alternatives to duplicate apps

 

Functional Consolidation, Vendor Consolidation, License Consolidation, SaaS alternative, Infrastructure Consolidation
Migrate •      Modernize applications to release legacy technology

•      Identify SaaS alternatives to non-core apps

•      Leverage Open Source or alternative technologies

•      Consolidate redundant apps and upgrade to platform utilities

 

Improve Business, Time to Market
Retain •      Improve user experience and enable self-service operations

•      Automate monitoring and operations to reduce costs

•      Rationalize support and maintenance costs

 

Quick Turnaround, Automation, Less Maintenance Cost

 

      • Generate APR Reports: Creates various types of reports that provide insight on the specific applications that help in coming up with dispositions.  Various reports that generated are, Business capability reports, redundancy analysis reports, cost break down reports, aging-cost breakdown reports, risk reports, resource distribution reports etc.  Assess the TCO of each application and compare the TCO of the current state of the application against the estimated TCO of the future state.
      • Create Roadmap: Finalize recommendations and develop transformation roadmap including quick wins, near, medium and long-term initiatives. High-level definition of the future state environment, high-level application, data and technology architecture framework are defined during this step.

Application Portfolio Rationalization Enabling Strategies

APR can be used as an enabling step for various initiatives across the enterprise.  The following diagram depicts the usage of APR for various initiatives across the enterprise.

Fig: Application Portfolio Rationalization Strategies

Critical Success Factors

In most of the cases, the IT department of enterprises initiate the Application Portfolio Rationalization in response to business pressure to reduce the cost. They start the initiative with lot of enthusiasm and over a period, it dies down on its own. This could be because of lack of commitment from top management, shifting the focus to some other new initiative, poor planning and unrealistic expectations.

The following are the critical success factors to be address by Application Portfolio Rationalization initiative across the enterprise.

The CXO need to focus on,

  • Strategize and lead in governance
    • Develop a multiyear application strategy that will enhance business agility
    • Establish an EA governance council to help guide portfolio decisions
    • Ensure that EA strategy to align with business strategy
    • Clear communication of objectives of application portfolio rationalization to respective stakeholders
  • Obtain peer buy-in
    • Articulate the benefits of executing the application rationalization, as well as the costs and risks to the business
  • Define metrics
    • Access to and active participation of all the stakeholders
    • Establish a team that includes other business units to obtain unbiased data and define metrics on application cost and value
  • Maintain momentum
    • Monitor the portfolio through regularly scheduled reviews
    • Demand regular updates on modernization projects
    • Application rationalization as an ongoing process requiring regular evaluation
    • Higher degree of confidence on financial data Availability of budget and resources to implement recommendations

IT leaders to focus on,

  • Conduct regular portfolio rationalization reviews
    • Deploy experienced team of consultants with right mix of skills
    • Identify the applications with the worst performance in terms of meeting business needs in a cost-effective and reliable manner
  • Determine a recommended course of action
    • Create an objective framework for assessing applications, and deciding whether to retire, consolidate, replace or modernize them
  • Build a business case
    • Articulate the costs and risks of each potential rationalization project, including the opportunity cost of doing nothing
  • Segment the applications into pace layers
    • Reduce the cost of maintaining foundational systems of record, while allowing faster and cheaper delivery of differentiating capabilities
    • Robust model for application health analysis on key dimensions
    • This may require refactoring and service-enabling applications

APR Team to focus on

  • Collect relevant and meaningful data
    • Availability and time commitment from IT stakeholders and key SMEs/resources for information sharing, workshops, interviews, surveys, validation of findings, and related activities as per schedule
    • Ask right set of questions very specific to customer pain areas leading APR exercise
    • Check for existing data
    • Avoid using fast moving data like Ticket data, log data
  • Categorization of applications
    • Identification of business applications, shared applications/services
    • Identification of external focus and internal focus applications
    • End user applications, system software applications, integrations and BI applications
  • Build Target Architecture
    • Create APO analysis and cost rationalization
    • Create target reference architectures
    • Create Common language Roadmap

Conclusion

Application Portfolio Rationalization helps in streamline the processes, reduction in maintenance cost, enhance efficiency, lower total cost of ownership (TCO), adhere to compliance, and increase agility of an enterprise. It frees up the time, cost and resources.

In addition, Application Portfolio Rationalization looks at portfolio suitability for different solution areas like Modernization, Agility, Cloud, Mergers & Acquisitions, Application Development Services, and Application Maintenances Services to arrive at the future roadmap for the enterprise.

Acknowledgements

The author would like to thank Vijayasimha Alilughatta & Raju Alluri of Wipro Digital Architecture Practice of Wipro Ltd for giving the required time and support in many ways in bringing up this article.

Dr. Gopala Krishna Behara is a Lead Enterprise Architect in Wipro Digital Architecture Practice division of Wipro. He has a total of 25 years of IT experience. He can be reached at gopalakrishna.behara@gmail.com

Disclaimer

The views expressed in this article/presentation are that of authors and Wipro does not subscribe to the substance, veracity or truthfulness of the said opinion