Getting Started with Application Rationalization

Learn what Application Rationalization is, what it entails, and why it is important for your organization.

Jon Scott avatar
Written by Jon Scott
Updated over a week ago

A key factor that determines an organization’s success is its ability to adapt to change. Organizations must make sure their IT environment is an agile one, which is able to support the new business goals and guarantee the continued delivery of their services.

Rationalizing the application portfolio is a good place to start to achieve an agile IT ecosystem. Application Rationalization enables organizations to:

  • Align business with IT

  • Reduce the application portfolio complexity

  • Make informed investment or divestment decisions

  • Lower the total cost of ownership (TCO) of applications

Table of Contents

What is Application Rationalization?

Application rationalization is the continuous process of assessing your organization’s application portfolio and strategically deciding which applications can be kept, replaced, retired, or merged. This is normally based on the business value they give, technical fit, functional fit, purchase price, and cost of owning them long-term.

application rationalization

The result of Application Rationalization is an organization that can adapt to changing business conditions and market needs. The process uncovers new available capital which is ready for investment and keeps the IT landscape agile.

Why Is Application Rationalization Important for Organizations?

Many organizations end up with a bloated application portfolio as a result of mergers and acquisitions or organic growth. Enterprises accumulate applications in an attempt to keep up with the fast-paced nature of today’s business world. More often than not, however, enterprises are failing at strategically planning, assessing and purchasing new and relevant applications.

This is known as application sprawl, and it poses a huge challenge for businesses, as each application demands active maintenance. This in turn increases operational, infrastructure, and support costs. Most importantly, it represents a serious business risk, as many of the applications are left unused and unattended, leaving organizations vulnerable to cybersecurity threats.

Avoiding application sprawl is one of the most important reasons why Application Rationalization is crucial for organizations. Other highly relevant reasons are:

  • To achieve good governance.

  • To simplify portfolio complexity and increase visibility of apps.

  • To avoid siloed purchasing and redundant applications.

  • To improve IT efficiency.

  • To free-up resources for innovation.

  • To improve security by eliminating software vulnerabilities.

Some of the Big Challenges for App Rationalization, and How to Overcome Them

Challenge: Lack of understanding of the company’s application landscape

The result of Application Rationalization is an agile application ecosystem that enables your business to quickly respond to ever-changing market demands and technology. To get there, organizations need to first have an understanding of what their current application portfolio looks like. Business leaders will otherwise struggle to make informed decisions that increase IT effectiveness and ensure that the IT landscape is actively supporting the business goals and objectives.

Many organizations find this difficult to do and might be tempted to give up on the initiative all together when facing the challenges of creating an application portfolio. It is easy to get overwhelmed when thinking of how to get started, and even more so once you start the data collection process. Be careful not to fall into the trap of thinking you need a comprehensive list of your applications before taking any further steps. This will only stall your Application Rationalization efforts.

Know that you do not need 100% of your portfolio completed in order to start generating value. Ardoq’s approach to Application Rationalization brings together the experience of what actually works on the ground in a format that delivers fast results. Value can be quickly realized if the most important parts of your portfolio are captured. An overview can then grow organically as you continually build and maintain your application landscape.

We often find that successful customers start with a scope defined by a major change initiative, like an ERP or CRM system upgrade or migration. These types of initiatives are perfect for kick-starting your data collection and rapidly build an overview that can be used later down the line for application rationalization.

Challenge: Lack of engagement

Application Rationalization won’t happen overnight. The process entails identifying application owners, gathering data from relevant stakeholders, and understanding what the application does. Only then can they consider if the application is useful, if it supports the business, or if it’s being used at all. This rather long process with no guarantee of collaboration can often discourage business leaders, resulting in the initiative being dismissed.

To avoid this, start by making a case as to why Application Rationalization is beneficial to the business. Your IT colleagues will be your best ally to break down the benefits specific to your organization that will encourage business leaders to carry on with the initiative. Be sure to highlight the number of ways that the organization can automate and speed up the data gathering process with the right tools, such as Ardoq’s out-of-the-box integrations, Surveys, and Broadcasts. Surveys are a fast and easy way to gather application data, while Broadcasts enables you to automatically reach the right people, at the right time, with the right message.

Challenge: Poor application value assessment

It is tempting to list the name of applications without defining their business value, and call it an application portfolio. However, skipping this crucial step in the Application Rationalization process will only leave you with double licensing costs and a portfolio full of applications to support a single business capability. The key to a successful Application Rationalization is then to make sure your applications are not underutilized.

To avoid redundant applications, remind stakeholders that the first option should always be to evaluate how currently deployed applications can add more business value instead of purchasing new ones. They will then also be helping prevent siloed purchasing of applications, helping streamline the entire organization.

ardoq apm

How to Drive an Application Rationalization Initiative

To kick-start your Application Rationalization initiative, the very first step to take is towards understanding what your current application landscape truly looks like.

1. Create a list of all applications deployed on your system

More than likely, your application data is not all in one place. Some of it may live in spreadsheets or lists, some of it in a CMDB (Configuration Management Database). Much of it probably lives in fragmented project documentation and even in the heads of SMEs (Subject Matter Experts), both in IT and the business. You’ll need to create a single source of truth and store your application data in an easily accessible and collaborative place such as Ardoq.

You can upload your application data using Ardoq’s:

Take advantage of our Excel import templates to streamline data entry and speed up the process:

You can use our features Surveys and Broadcasts to ask key stakeholders across your entire organization about unmapped applications they might be using. Use a simple pre-made survey such as the Application List survey to gather the name of the application, owner, and type of data you are using it for. Or, create a more comprehensive one such as the Application Details survey to collect additional information like a live date or annual cost, for example. Ardoq’s Surveys are highly customizable, which makes it easy to collect the exact details you are looking for.

ardoq brodcasts

2. Identify the application owners

Assign an owner to each application. This will facilitate the assessment process when the time to survey stakeholders comes, and will also give you the first glimpse of your IT landscape. You may find applications that sit unused or that are used by very few people through this first simple step.

The next step is to reach out to your stakeholders and enrich your application data so you can make informed decisions about your applications.

Start by defining the business value. Two common attributes used to evaluate Applications are their relationships to Capabilities and People. This will allow you to uncover duplicate or underutilized applications, or even ones that are not supporting anything at all.

To get the best overview in Ardoq, we recommend using the Component Matrix with the view modifiers set as:

  • Row Grouping = Incoming Reference: Is Realized By (Technical Capabilities)

  • Column Grouping = Incoming Reference: Is Expert In

ardoq component metric view modifiers

Next, determine and store the total cost of the application. You can do so by looking at the initial cost plus the cost of operation, maintenance, downtime, and production. Alternatively, you can look at the TCO (total cost of ownership) of similar applications used in the industry to have a better idea. Getting this type of accurate data for your applications can be challenging, so even estimated amounts can paint a better picture for discussions.

A great place to store this kind of data in Ardoq is the Total Direct Cost field. This field is used to capture costs attributable to a given component. With all cost fields, we recommend that you standardize the currencies across your organization. Check out this article on what fields are, and how to add them to your application components and references.

ardoq fields

Two views that are especially useful in looking at cost in Ardoq are the Table View and the Pages View. While the Table View has a format many are familiar with, the view also includes references from people, integrations, and capabilities. Having this dynamically updated enriches your overview dramatically. The Pages View brings a similar overview but also includes better support for descriptions.

Ask relevant stakeholders to score your applications based on their business, technical, and functional fit. Scoring helps identify and implement changes, but it also helps to clearly see hidden investment and cost-saving opportunities.

To collect this data, you can use Ardoq’s predefined Business Fit and Technical Fit surveys, which can be found in the Survey Overview on the left bar. They are named accordingly:

  • Application Portfolio Management Business Fit Survey

  • Application Portfolio Management Technical Fit Survey

Each survey comes with three predefined questions based on industry best-practice, plus room to add more. This helps indicate how well the application supports current needs and the plans. At its minimum, this is the kind of insight you will need to gather in order to decide the next steps for your applications and quickly see value. When adding questions, keep in mind the data management aspect. Each question is, after all, a field that will need to be populated across your entire application portfolio. We therefore recommend only using questions that will truly help you drive rationalization.

ardoq survey builder

Once your applications are scored, they are ready to be placed and visualized in the TIME (Tolerate-Invest-Migrate-Eliminate) Bubble Chart. TIME for APM provides a great framework to triage your applications into one of four investment categories, determining what your portfolio and investment approach to that application needs to be. The four investment categories are:

  • Applications to tolerate: These are high-quality applications that require little time or money to keep them running, but are providing low business value. Phasing them out would result in a waste of time and resources, and the retirement cost could potentially be higher than the support cost.

  • Applications to invest: These are applications that you want to keep. They are high-quality, stable applications that provide high business value and don’t require a lot of support.

  • Applications to migrate: These are applications your IT team is dreaming of showing them the door. While these applications are providing business value, they are not meeting IT requirements. Their support costs are high and are likely to make the business vulnerable to security risks. Therefore, it is better to migrate those applications.

  • Applications to eliminate: These applications are low quality and providing low business value. You may find that they are for the most part legacy applications, and only very few people are using them.

ardoq TIME bubble chart

While the Bubble Chart provides a detailed overview of where your applications stand, the current lifecycle stage of your applications also matters. For example, knowing the contract length of an application and how far away the end date is will give you clear next steps for those applications.

In Ardoq this is provided via the Timeline view. You can filter your application portfolio by their strategic fit fields (e.g tolerate, invest, migrate, eliminate) to better visualize your applications’ lifespan.

ardoq timeline view

You can also look at more relationship-oriented views like the Block Diagram, Component Matrix, or Dependency Map if you wish to gain a more contextual understanding of your applications. It will give a better comprehension of the ecosystem impact and therefore prioritization criteria.

ardoq relationship-oriented views

4. Plan and execute

This is the time for business leaders, IT leaders, and Enterprise Architects to review and execute the recommended actions for each application.

Building this rationalization roadmap will detail which applications will replace those being phased out, along with when and how new applications will be implemented or migrated.

5. Repeat

Application rationalization is a continuous process that ensures an agile long-term application portfolio. Rationalizing your portfolio once has isolated short-term advantages, and old issues quickly become obstacles to grow and innovation once again.

Continuous assessment will ensure your IT landscape is actively supporting business goals and objectives while improving IT efficiency.

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