Consolidation of applications

Transcription

1 Consolidation of applications The potential for cost savings and increased efficiency by consolidation of applications should not be overlooked by organizations aiming to enhance overall IT performance. This white paper discusses the potential of IT consolidation and some practical approaches to its implementation. White Paper IT Advisory

2 Cost cutting and/or improvements in quality and efficiency are major aspects of corporate functions and IT is no exception. IT consolidation is one of the appropriate methods to achieve this. In this white paper Identifying the potential...3 Consolidation of applications - a practical approach and roadmap...5 Conclusion and summary...7 Contacts...7

3 IT consolidation can be described as to combine similar operations, assets, facilities or other resources in order to achieve economies of scale and avoid duplication. Consolidation is also commonly used as a term to describe termination of unused, discontinued, redundant or non-strategic products, resources or services. In this paper the focus is on the consolidation of business IT applications. We describe the background and the reasons for initiating consolidation activities and present our practical experiences of how to set up a successful business-driven application consolidation program. Identifying the potential When investigating cost cutting opportunities or ways to improve operational efficiency and thereby provide assurance to business management that IT costs are in line with industry, there are good reasons why consolidation can make IT service delivery more efficient and cost effective. There are many examples of scenarios leading to a situation where IT consolidation is a cost saving opportunity. These include: Post-merger and acquisition situations. These often result in a need to remove unnecessary duplication of business processes, IT applications and infrastructure. Fast-growing businesses, where the IT department may need to stop wild infrastructure growth and gain control of service needs and demands. Mature organizations with a limited governance of IT over a long period of time, leading to different parts of the organization developing and maintaining their own business supporting IT applications and infrastructure. Any of the above scenarios, or a combination of them, is likely to result in a fragmented application landscape if an IT strategy and governance model is not in place. Looking at IT application consolidation from an implementation perspective, the short-term (or most straightforward) opportunities typically include termination of not used legacy systems still running. Surprisingly often, old IT applications are retained when new ones are implemented, primarily for the reason of having access to historic data. Usually there are no major changes in the total cost of ownership for the application when the usage changes to read-only. But the business as well as the IT organization needs to maintain competence on the tool as well as the technical infrastructure (such as operating system, hardware, integrations and storage) and application license costs often remain the same. The strategy is usually to challenge the actual need for keeping legacy data, and to archive only the information that is really required for regulatory or key business reasons. A generic digital data archiving solution is useful to have in place in order to implement efficient legacy application shut down activities. Surprisingly often, old IT applications are retained when new ones are implemented, primarily for the reason of having access to historic data Mid-term opportunities for application consolidation typically represent dealing with redundancy IT applicationss. Many larger organizations have a history of mergers and acquisitions, and/or businesses operating in silos. As a consequence, IT applications solving similar functional needs may be implemented in several areas within the organization. White Paper IT Advisory 3

4 FIGURE 1: BUSINESS PROCESS REDESIGN The longer-term application consolidation opportunities are typically related to more radical improvements. An example is business process redesign, or simplification of the infrastructure and technical architecture; moving from a diverse application portfolio with various small solutions integrated over time, to one common business system supporting all or most processes. Such initiatives produce longer-term cost savings, but tend to require larger investments. Concerning consolidation of business applications, such a project must be a businessdriven initiative. The IT organization can assist with functional and technical assessment, as well as supporting the development of a consolidation roadmap. However, it must be a business management decision to phase out one application and consequent roll-out of another application providing similar functional support. Each application exchange may require changes in working processes, and thereby training and communication for the affected users. BearingPoint experience related to the amount of work needed to execute IT consolidations as described here, ranges from less than three months for short-term opportunities, while mid-term initiatives may take three to six months, and the longer term perspective is up to one to two years. Timing is also dependent on the size and complexity of the organization, as well as the strength of the governance model for IT. Typical expected savings in application consolidation initiatives according to BearingPoint experience is between percent cost reductions over time in most cases, with even greater potential in some others.. 4 White Paper IT Advisory

5 Consolidation of applications a practical approach and roadmap In this section we describe a practical approach to consolidation of applications based on our experience and provide tips on how to succeed with an application consolidation project. FIGURE 2: A PRACTICAL APPROACH Data gathering and analysis Information on applications Information on projects Strategy & need for application support Analysis of gathered information As already noted, an application rationalization initiative cannot be driven by the IT department. It needs to be the business side controlling the process and making the decisions regarding which redundant applications to phase out and which ones to keep and perhaps extend the usage of. Concerning shut down of legacy applications the business, as the owner of information, should be responsible for defining what historic data is to be archived. There are some guiding principles and key factors that should be put in place before starting the consolidation process: Have strong business management sponsors of the project, giving it the weight and mandate it needs to succeed. In many cases there will be strong advocates for the systems that are selected for decommission and termination. Establish one version of the truth gather and work with only one list or database of applications. Base all analysis and decisions on facts. Implementation Terminate not used applications Ensure termination of legacy by projects Analysis of consolidation areas Execution of consolidation potential Address all known stakeholders on both central and local level at the earliest possible opportunity in order to facilitate change management via setting expectations, creating community involvement and enabling an early response to opposition and criticism. The initiative should be seen as a joint venture between business and IT, where the business drives the change process and IT supports with analysis and execution on the technical side. In general a correct and continuous flow of information from the project to both business and IT through the organization s commonly used internal channels for communication adds awareness and is a vital part of the change management around the consolidation initiative. Phase 1: Data gathering and analysis FIGURE 3: DATA GATHERING AND ANALYSIS Data gathering and analysis Implementation Information on applications Information on projects Strategy & need for application support Analysis of gathered information Step 1 Gather information about all applications within the organization into a common database if this does not exist already. Categorize by main function (accounting, invoicing, purchasing, scanning, etc.). Gather information about what parts of the organization use an application; try not to miss applications that are not used (they tend to exist). White Paper IT Advisory 5

6 Establish dependencies on other applications. Establish the technical environment and infrastructure. Establish what costs each application is generating (infrastructure, license and support fees, application maintenance, etc.). Step 2 Gather information on what projects are ongoing and planned. What functionality is implemented? Is the intention to replace any current applications? Step 3 Take into consideration the overall strategy for both the business and IT and assess the current and future business needs for application support. Step 4 Based on the data gathered in steps 1-3, perform an analysis on what functions or areas are supported by more than one application (areas with consolidation potential). Identify the straightforward opportunities with applications that are redundant or not used. The analysis results in a roadmap for phase 2: implementation with appropriate actions and addressing the areas with consolidation potential. Phase 2: Implementation FIGURE 3: IMPLEMENTATION Data gathering and analysis Implementation Short/mid term Long term Terminate not used applications Ensure termination of legacy by projects Analysis of consolidation areas Execution of consolidation potential Action 1 Execute the termination of applications that are not in use or do not have a strong business rationale to be kept for reference purposes. For all systems that are terminated, be sure to archive or migrate required historic data and to end all contractual obligations with suppliers. Action 2 Confirm that all ongoing and future projects that implement new applications actually do terminate the legacy system it is supposed to replace if possible. Make legacy termination part of the implementation project methodology and if necessary make the project owner accountable for legacy termination. Action 3 Analyze the potential for consolidation identified in step 4 in the previous phase. For each respective consolidation area investigate and determine a course of action for each application resulting in a suggestion on what applications to keep and what applications to retire and terminate. A good support for the analysis is to develop a model for prioritization where total cost versus benefit of an application is defined by parameters relevant to the organization. The model builds up a business case within each application area and should hence also take into consideration the costs of actual replacement and termination of an application. Action 4 Act upon the identified potential in action 3 by consolidation area. Once the project has started and some initial goals have been achieved it is important to keep up the momentum and keep looking ahead. Hence the project should strive to define and establish its process for defining candidates for consolidation and the means of achieving results. 6 White Paper IT Advisory

7 Conclusion and summary The potential for increased efficiency and cost saving via consolidation of applications can be realized by an organization that has the will to implement them, and which designs an effective process. The initiative should be seen as a joint venture between business and IT, where the business drives the change process and IT supports with analysis and execution on the technical side. It is the business side that will feel the greatest impact during the consolidation program thus the need for the strong support of the business leadership. However tough the journey, keep in mind that it is the business that reaps the rewards of an efficient, consolidated and aligned IT service delivery with lower costs, common processes and data models that facilitate reporting and performance analysis being just some of the benefits. Contacts Frode Dahl Partner frode.dahl@bearingpoint.com Martin Wigvall Senior Manager martin.wigvall@bearingpoint.com Tommi Nylander Senior Manager tommi.nylander@bearingpoint.com About BearingPoint BearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world s leading companies and organizations. Our 3500 people, together with our global consulting network serve clients in more than 70 countries and engage with them for measurable results and long-lasting success. For more information, visit White Paper IT Advisory 7

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