Application landscapes often contain a multitude of information systems. All these systems are connected with different technologies and support various business processes. Because of the quick technological advancements, they are subject to continuous change.
Many organizations do not have any referenced documents for their existing application portfolio, which make them run into unnecessary challenges:
- Inability to make necessary updates and bug fixes on applications
- Sticking to low-value applications
- Inability to quickly respond to changes in the needs of the business
- Failure to modernize the ICT landscape, ending up in falling behind competitors
- Dealing with an increase in costs for maintaining old and/or unnecessary applications
- Inability to effectively plan and optimize the ICT environment and the application landscape, in particular, based on a well-defined strategy and roadmap
These issues pop up because of a lack of documentation and grip on the application landscape. Because of these challenges, as mentioned above, managing an application landscape can become a nightmare for an ICT manager. In a previous post about the application landscape and architecture, I advised that as an ICT department, you should take full ownership of all applications that are out there. By taking full ownership, the ICT department will be behind the steering wheel and fully control the application landscape. However, claiming ownership is an empty shell without completely maintaining the entire application landscape.
Having complete control is also a prerequisite for an approach of Application Rationalization. When introducing a system of Application Rationalization, you can reduce costs and complexities and improve overall efficiency for all the applications available in your organization. You can categorize application costs into Total Cost of Ownership (TCO), ICT equipment, and overall calculated cost.
Application Rationalization is an initiative that a CIO/ICT manager leads, but they do this in service to the business process owners and management. In this post, I will guide you through a set of steps to take to set up a successful system of Application Rationalization.
Define success criteria
To communicate the success of your applications, you require well-defined criteria. Focus areas for application rationalization are:
- Identify which applications in your application landscape have the same functionalities
- Reduce the number of applications
- Visualize all the applications that align with the strategic goals of your organization
- Add scores to applications based on how they fit and contribute to the business (business value) and their technical perspectives
- Review the application lifecycle and identify applications with an early scope of retirement or low usage of an application
Setting up an Application Rationalization Matrix
An Application Rationalization Matrix will help you grasp your application landscape. It will give you an easier time analyzing the added value of your applications in an organization’s business processes. You can set up your Application Rationalization Matrix in two phases: a data-gathering phase and an analyzing phase.
Phase 1: data gathering
This phase of your Application Rationalization Matrix centralizes your data and builds on the data you gather.
Start with collecting all required data on a central location using an application catalog/application matrix and accurately listing all your organization’s applications.
When you have plotted your entire application portfolio in your data application catalog, you can add application ownership and the lifecycle of all your applications in combination with the usage of each application by counting the number of users that work with an application. After completing this assessment, you have the first part of your application rationalization matrix.
Phase 2: analyzing gathered data
The second phase of your Application Rationalization Matrix is to analyze all the gathered and cataloged data.
To create a complete picture of all your applications’ impact, you have to link your applications to business capabilities and processes. After you have gathered all your applications in a catalog, you need to add scores to all your applications to figure out what applications need rationalization. To do this, you can use three categories:
- Total Cost of Ownership
- Business Fit
- Technical Fit
Total Cost of Ownership
With Total Cost of Ownership (TCO), you estimate the expenses associated with an application’s purchase, deployment, use, maintenance, and retirement. TCO is your actual cost, and they quantify the total cost of an application’s purchase across the entire lifecycle.
Business Fit
Business fit identifies how much an application supports your existing business processes and functionalities. If your organization can leverage or redefine an existing business process, you might want to start an application selection process. If a current application does not fit the business (anymore), you can advise the business to retire/replace the application.
Technical fit
A technical fit defines the technological health of an application. You must continuously assess the application to align with your organization’s ICT and business goals.
Portfolio assessment
After analyzing and addressing a score for all your applications, the next step is to group your application portfolio. You can group your application portfolio based on the following criteria:
- Invest
- Tolerate
- Migrate
- Eliminate
Invest
Applications marked with “invest” have a high business and technical fit. All applications with this label should have the entire focus of your ICT department and your business process owner. The potential of these applications has to be optimized, teaching all users how to utilize these applications as fully as possible by your functional supporting team. Additionally, optimize these applications as much as possible by adding new features and improving performance. They should be the only applications you assign internal or external development resources.
Tolerate
All applications in the “tolerate” group have a low business fit but a high technical fit. You should only assign maintenance-related and primary supporting resources to these applications: just “keeping the lights on.” Make sure to monitor these applications regularly in case their value decreases in the future, and don’t waste any development resources on them.
Migrate
Applications in the “migrate” group serve the business well (high business fit). Still, they only have a limited technical fit, meaning you need to modernize these applications to keep them valuable for the business. You can do this by replacing them with an application with the same or even greater business value or upgrading the current application, making it technically fit again. Business process owners sometimes have to adjust their business processes to be compatible with an upgrade or replacement of an application in the “migrate” group. Make sure to involve them at the start of such a process.
Eliminate
Applications marked with “eliminate” have a low technical and business fit and should be depreciated and (if possible) replaced with applications with both high business and technical value. The decision to eliminate is not with the ICT team, and business process owners, key users, and general management make these decisions.
Visualize your portfolio assessment/application matrix
An application landscape can be vast and complicated and might be hard to grasp by stakeholders/decision-makers if you provide only hard data. By creating pre-defined visualizations and reports, you can easily illustrate your analysis, improve decision-makers clarity, and prevent unnecessary delays in decisions. Using the analysis methodology previously discussed, a matrix to visualize all applications will be clear for all stakeholders/decision-makers.
Based on the application matrix and good storytelling, discussions will immediately focus on the core content, and business process owners/stakeholders can make decisions most efficiently without meaningless talks. Immediately start describing the “problem” and provide a list of potential solutions to solve this problem.
The offered solutions should reflect potential savings and other positive adjustments, such as removing redundant applications and offering other applications that require rationalization.
The driving factor behind these discussions should be a one-pager based on the categories mentioned (consolidate, invest, maintain and retire), conveniently prioritized from high business value to low business value.
Final Thoughts
Getting a technical edge over your competitors is more important than ever. Because of this, the number of applications an organization uses has dramatically risen. This development has created a dynamic business climate regarding applications, and successfully operating an agile application landscape is invaluable for a company. ICT architecture needs to adapt to the changing needs and solutions the market has to offer that follow each other in quick succession. Sometimes, the ICT department has to reinvent itself and step away from a classical approach to keep up with all these changes. Unfortunately, this is not always the case. Many organizations still spend 70-80% of their ICT budgets on supporting aged and low-value legacy applications, leaving insufficient funding to invest in optimizing business processes. With the approach of Application Rationalization, you articulate an architectural vision, enabling the business goals, responding to the strategic drivers, conforming with clear architectural principles, and addressing stakeholder concerns and objectives.
Every application that runs in a company should provide business value, which is precisely why the application Rationalization methodology will help you optimize your stack of applications. With Application Rationalization, you will establish transparency between stakeholders, departments, and business processes. Doing so will deliver value to business process owners and cut costs, saving cash to invest in trending ICT topics.
Implementing a methodology of Application Rationalization is not something you can implement in a few days and stop with it after implementing it. It’s a process of hard work to set it up and requires routine and discipline to maintain once you have set this up: it takes time and dedication, but in my opinion, it is worth the effort. It is the most beneficial tool in your enterprise architecture toolkit if appropriately utilized, resulting in huge gains for the business in different areas.
Feel free to contact me if you have questions or in case you have any additional advice/tips about this subject. If you want to keep me in the loop if I upload a new post, make sure to subscribe, so you receive a notification by e-mail.
