(Editor’s Note: What follows is part one of a two-part series)
If you have worked in the Application Portfolio Management (APM) space, you know that over a period of time enterprises accumulate thousands of applications to their portfolios because of enterprise business drivers, change in their IT strategy and adoption of next generation technologies. This results into rigid, complex and expensive IT landscapes that are difficult to maintain. These environments also produce silos of redundant information, which negatively affects the bottom line.
In a more elaborate way, the problems faced by various enterprises, which leads to an Application Portfolio Rationalization (APR) exercise, are:
- Business unable to respond quickly and effectively to business demand
- Challenges of aging, siloed and unmaintainable systems leading to questionable business value of IT
- Large number of software applications with numerous redundancies
- Higher Variations – across products, geographies, and contracts
- Non standardized, incongruent and inefficient Business Processes and lack of alignment with apps
- Misalignment of application portfolio with future business needs
- Lack of consistency in the infrastructure used to run applications
- Stringent regulatory compliance
- Growing need for Security
- More spend on maintenance as compared to the new development
- Skyrocketing maintenance budget, escalating cost of data centers
- No Idea on how to leverage cloud computing models to optimize costs
- Poor strategy to execute mergers and acquisitions
Application Portfolio Rationalization is the right solution to address all these challenges.
This playbook focuses on a business case for APR, need for APR, methodology to be adopt in performing the Application Portfolio Rationalization, benefits of APR and explains how APR helps enterprises adopt digital transformation.
Application Portfolio Rationalization
Application Portfolio Rationalization (APR) is the methodology to efficiently monitor and review the application portfolio. It helps in setting up of methodologies and tools systematically analyze evaluate and monitor the existing IT portfolio based upon the key business and technology drivers of an enterprise.
Capturing and detail analysis of application inventory helps to determine the application disposition. This leads to categorize the applications into retired, retained, migrated and consolidated. This disposition helps the enterprise in making investment or divestment decisions. It also helps in maintaining the overall hygiene of the app portfolio of the enterprise.
APR looks at portfolio suitability for different solution areas like Modernization, Agility, Cloud Migration, Cloud Native Adoption, Mergers & Acquisitions, Application Development Services, and Application Maintenances Services to arrive at the future roadmap for the enterprise.
Other initiatives that can be derived from APR analysis are:
- Application portfolio management (APM), framework for managing applications and services across the enterprise. It helps in measuring and optimizing the use of applications over the entire lifecycle. It measures the financial benefit of each application in comparison to the costs of the application’s maintenance and operations.
- Application Portfolio Optimization (APO) helps enterprises to implement systems and processes that allow them to evaluate and monitor the portfolio of IT projects, applications, and infrastructure to ensure cost-effective benefits to the organization.
- Application Process Harmonization (APH), the activity of designing and implementing business process standards across different regions or business units of an enterprise.
Business Case for Application Portfolio Rationalization
Many CXO’s see the IT budget as an area of overspend and are continually looking for ways to reduce expenses. APR is one of the initiatives that get kicked off as the first remedy to reduce the cost.
The following strategy level questions help to understand about the enterprise readiness for the APR assessment.
- Is there a CXO mandate for APR?
- Is there a top management-level charter for application rationalization tied to one or more of the drivers?
- Do enterprise has a published Business Strategy and IT strategy
- What is the business pain-point/business driver for undertaking an application portfolio rationalization effort?
- What does the total current spend on the in-scope application portfolio?
- Who will make the final decision on the application rationalization initiative (business only, business and IT, IT only)?
- Is there an internal business case built? If so, at what level?
- When would the application rationalization initiative start (next 3 months, next 6 months, 1 year+)?
- Have there been previous application portfolio rationalization efforts, who participated, how far did the effort go and what level of reduction did they deliver?
Need for Application Portfolio Rationalization
For a typical enterprise, the business complexity leads to application complexity and this in turn results into technology complexity. Without active application portfolio management, organizations run the risk of application bloating. This application bloat leads to unmanageable growth of an IT portfolio.
The following are the drivers for the Application Portfolio Rationalization for an enterprise in the Digital Era:
- Legacy Platform: Many enterprises are still leveraging legacy systems to run the businesses. Most business do not understand their entire inventory of applications, many of them being legacy systems with no clarity on the business value.
- Application Bloat: Business operations and IT budgets of most large enterprises still managed in silos. Addition of any new business functionalities, incremental enhancements the enterprises develop new systems. As a result, enterprises are developing/procuring and maintaining multiple systems with similar functionalities on diverse technology platforms. This leads to tightly coupled, non-standardized, complex and inflexible IT landscape. This IT Portfolio cannot fulfill the complete business capabilities of an enterprise.
- Improved Agility: Change of business demands at a very fast rate to sustain in the industry. Re-align the applications to new business processes in support of business transformation.
- Portfolio Modernization: Re-align the applications to new business processes in support of business transformation through adopting modern applications delivering better business outcomes
- Technology Advancement: Enterprises face challenges as newer IT solution areas like cloud, big data, analytics, mobility and social media are driving businesses to transform themselves in order to increase revenue and retain customers
- Cost Rationalization: Rationalization of IT maintenance costs e.g., s/w licenses, support contracts, skill sets, etc.
- Reduce Risk: Challenges of aging, siloed and un-maintainable systems with questionable business value poses huge risks to organizations. Reducing the risks in terms of applications, security will drive the overall exercise
- Digital Transformation: Create next generation smart applications and Transform legacy estate to more modern ones, to increase maintainability, sustainability and future proofing the applications in the portfolio.
- Infra Optimization: Rationalization of infrastructure like server consolidation enabled by application simplification
Value Pillars of Application Portfolio Rationalization
In order to have a balanced application portfolio, many organizations reduce IT spend by systematically identifying and decommissioning ageing applications to drive operational efficiency, reduce the overall complexity and risks and contain costs. The main goal of the Application Portfolio Rationalization of an enterprise are,
- Simplified IT Landscape – Reduce Number of Applications from a large number to a number close to the Best-in-class benchmark and support business agility
- Reduce Cost- The number of applications within application portfolio are reduced/optimized. This leads to a reduction in cost.
- Reduce Complexity- Reduce Number of Technologies/Platforms. Decrease functional and technical complexity. Adopt a standard integration platform and remove potential points of failure to improve overall process/service stability and reduce operational risk.
- Standardize & Simplify Business Processes – Reduce Process Variations across products, geographies and contracts
- System diversity: Reduce diversity of systems, and enhance interoperability
- Modernize – Redesign aging and high-value applications. Automate the applications, processes and data. Leverage the adoption of new technologies like IoT, Blockchain, AI & ML based applications.
- Cloud Migration – Identify opportunities to migrate to the Cloud (SaaS, PaaS, etc.)
- User Experience – Improved user experience of applications which are customer facing
Part II follow on Monday, February 7
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 email@example.com
The views expressed in this article/presentation are that of authors and Wipro does not subscribe to the substance, veracity or truth