At the Heart of Rationalizing Application Portfolio

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1 At the Heart of Rationalizing Application Portfolio Cut the Bloat: Right-Size Your Application Portfolio Continuous assessment and maintenance of applications is key to rationalization opportunities Abstract Enterprises across the globe have multiple applications deployed on their networks. Sadly, a large chunk of these applications are occupying space, and increasing costs and pressure on infrastructure without adding much business value. Many applications are either unused or underutilized and could be costing millions of dollars. To combat this redundancy and bloat, IT managers must develop an application strategy, which rationalizes their legacy portfolio and prepares it for emerging business requirements.

2 Need of the Hour IT teams of global businesses drive investments towards delivering new reliable applications and new technologies. However, with evolving business needs, compounded by economic uncertainty, deficient IT alignment, mergers and acquisitions, and compliance pressures, many organizations have become a hub of legacy applications and redundant processes. These applications are often sub-optimal, create information silos, have incompatible technologies, and an unmanageable application portfolio. Industry statistics suggest that almost 80% of the IT budget is spent on ongoing operations and maintenance, while only 20% is used for future business needs and innovations. In order to have a balanced application portfolio, many organizations cut IT spend by systematically identifying and decommissioning ageing applications to drive operational efficiency and reduce overall complexity. It is critical for businesses to continuously analyze their application portfolio for its business value, potential to deliver more value, and reduce cost of ownership. Such ongoing comprehensive assessments help CIOs and IT executives make strategic decisions on how to rationalize the application landscape, reduce cost of ownership and improve speed-to-market. This paper provides a robust approach to the Application Portfolio Rationalization (APR) framework for understanding functional and technical gaps, and recommends opportunities to replace/transform, retain, migrate, and technically or functionally extend an application to increase its usefulness. It also describes why we need APR, and the critical success factors to execute an effective strategy. It articulates a comprehensive approach to APR by tailoring processes as relevant and using a simple toolkit. Wide Scope of Application Portfolio Rationalization With the global economy slowly stabilizing, IT organizations face an unprecedented demand to maintain an effective application portfolio a collection of software applications to sustain growth and profitability. However, organizations need to ensure that the application portfolio health is continuously evaluated. Rationalization is essential in order to decrease business failures and help determine the extendibility potential of specific applications by identifying obsolete, redundant and business-critical applications. When executed right, Application Portfolio Rationalization (APR) ensures reduced Total Cost of Ownership (TCO) and maximization of business ROI, realized through application elimination, replacement, consolidation or modernization. Application rationalization is not merely a cost-cutting exercise. It is an initiative by the organization to transform a highly complex and moderately effective application portfolio into a more agile and productive, one aligned with the organization s business and IT needs.

3 The Nuts and Bolts of APR Tools and Mechanisms Organizations need a wide range of tools and mechanisms to keep the application portfolio rationalization process on track. As a result of successful APR engagements, there is a wide range of home-grown and industry standard tools and mechanisms available that can help assess applications, analyze, and communicate outcomes and the imperative for change, and make business decisions effective as a result. These tools are adapted for each requirement and are being evolved continuously. # Tools Purpose 1 Evaluation grids (4 A series of prioritization and focusing tools using the four quadrant quadrant (2 X 2) matrices) (2 X 2) grid with varying axes. These simple tools help in easy communication of alternatives and ratings/rankings 2 Pareto analysis Helps in ranking identified criteria or parameters, especially when attempting to focus on the most important and the most significant criteria 3 Architectural trade-off analysis Systematically evaluates architectural options against business and non-functional requirements, ensuring that the most critical are never compromised 4 Root-cause analysis Ensures that the real causes for any constraint or failure are systematically identified 5 Forced-Decision- Matrix (FDM) Builds consensus on the relative importance of the assessment factors, assigns relative weights, and chooses between these factors 6 Process-Data-Matrix A simple method of assessing functional overlaps and (PDM) interdependencies between business applications 7 Process flow-charts and Critical business processes shall be mapped using swimlane swimlane diagrams diagrams to identify bottlenecks and dependencies 8 Questionnaires and checklists Used to elicit perceptual and factual responses from stakeholders and ensure a structured uniform response that can be consolidated and analyzed 9 Risk cue charts, risk Used to ensure complete risk analysis and mitigation planning, risk radars management, and reporting 10 Architectural Industry standard architectural representations and analysis tool for representations communication, evaluation, and consensus building. 11 Decomposition diagrams Used for disaggregating complex areas like process flows into dependent constituents for ease of analysis and communication 12 Use case diagrams Documents, validates, and analyzes core processes supported by each touchpoint as viewed by each target customer profile

4 Framework A robust framework for APR provides solution strategies and necessary information on how to improve application health. It helps organizations in analyzing and transforming the application portfolio, and generates a final effective, rationalized application portfolio. Solution for Applications as Aligned to Intiatives Replace/ Transform Migrate Identify target architecture/ Identify Target COTS apportunities Functional Extension Platform for Migration Platform Migration Transform Application to Reference Architectures PMO Setup IT Governance Retain Manage Service Levels Improve Application Value Reduce Total Cost of Ownership (TCO) Technical Extension Code Cleansing/ Optimizations Modularization/ Componentization Standardization of Technology Stack Functional Gap Analysis Re-engineering for Enhanced Functionalities Functional Consolidations/ Integrations Database Migration Solution Strategies Implement Commercial off-the-shelf (COTS) Code Refactoring Optimizations Platform Standardization Consolidations (Functional & Technical) Platform Migrations Database Migrations Costs Implementation SOA Enablement Figure 1: APR Framework

5 Following an application portfolio analysis, the APR framework helps in making recommendations to retain, migrate, replace/transform, conduct functional or technical upgrades, and consolidate applications technically. Application Weightage An effective APR framework takes into account key parameters that assess the functional and technical health of an application. Each of the technical and functional dimensions (see Figure 2) of an application is assigned a weight based on its relative importance. Individual applications are assessed on each parameter to identify and understand critical functional and technical gaps. The functional and technical dimensions, when evaluated, identify each application s positioning in its lifecycle, assess the opportunity for improvement, calculate potential impact, and guide optimization efforts. Business Fit Maintainability User Friendliness Process Support Reporting Flexibility Compliance Source Code Complexity Scalability Maintainability Database Connectivity Deployment Stability Security Performance Portability Functional Aspects Technical Aspects Figure 2: Applications Functional and Technical Aspects

6 Rationalization Map and APR Analytical Model The rationalization map is the outcome of the bespoke analysis process. Nine quadrants identify opportunities for application migration, retention, replacement or functional and technical consolidation as illustrated below: <=30 (Low) >30 >60 (Medium) >60(High) Technical Gap High Medium Low Migrate Technical Extension Retain Migrate Functional Extension or Replace Technical & Functional Extension Functional Extension Replace Replace Replace >60(High) >30 >60 (Medium) <=30 (Low) Low Medium High Gap Functional Gap Figure 4: Opportunity Domain Grid

7 Analysis and Typical Outcomes Aligns application portfolio well with strategic business, and IT objectives Helps identify and understand critical, functional, and technical gaps Provides better informational support to business Lowers cost of maintaining the application infrastructure Simplifies and optimizes application portfolio making it easier to manage Less is More: Benefits of APR Strategic IT Roadmap Development This is the first step to aligning IT with business priorities. These strategies are built with the help of a cross-functional team including architects and business and IT leaders. They employ specific evaluation criteria such as alignment with business goals, IT or/and business strategy and objectives, budget availability, total cost (license, implementation, training, and support), technology maturity and longevity, people skills and motivation, and complexity and stability of business processes supported to create a comprehensive roadmap. The IT roadmap reflects a segmented, logical, affordable, and achievable plan for application disposition to decommission, remediate, re-platform, consolidate or enhance applications. It must define an effective framework to identify gaps, changes, and benefits specific to each phase in a transformation from current state to future state. A good roadmap contains the following details: Updated application portfolio inventory Application portfolio effectiveness assessment IT infrastructure effectiveness and adequacy, gaps, and remedies Outsource/ insource service scope and boundaries Management and governance structure for the transition and steady-state High level timeline and cost estimates for APR High level critical success factors, risks, and recommended mitigation strategies Application Modernization and Consolidation Organizations run numerous legacy applications built on outdated technologies, and hardware and software platforms. Such legacy applications are often difficult to maintain and operate, and limit an organization s ability to support evolving business requirements. An effective APR approach must help organizations identify and prioritize difficult-to-maintain-and-operate legacy applications for modernization and consolidation. Before modernizing and migrating legacy applications to newer, less expensive, and more efficient technology platforms, IT teams must identify applications that can be eliminated, consolidated or replaced. Opportunities to optimize every existing application must also be explored. Investment in complex business logic and data is protected by modernizing existing applications as appropriate. APR also defines consolidation opportunities while modernizing the legacy applications, thus simplifying the applications estate.

8 IT Platform Consolidation Platform consolidation helps organizations develop a robust transformation strategy to meet business goals. A wholesome approach to APR helps organizations consolidate multiple applications on more flexible technology platforms. This accelerates time-to-market, reduces operational costs, and facilitates multi-channel capabilities. Success Story 1: Aligned Application Portfolio for a Leader in Chauffeured services and Ground Transportation Services Business scenario: A leader in chauffeured services and ground transportation services, providing full-service solutions for discerning global travelers was using multiple application assets. They had no clear mapping between the business functions and supported technology. The technology spends for each business function were also not known leading to a complete lack of clarity on TCO for these applications. The organization wanted to take strategic inventory decisions on applications worth enhancing and those that needed to be decommissioned or revived. This need was being hampered by a lack of clear and quantifiable financial information. Solution and Benefits: The organization partnered with us to align its application portfolio with its strategic IT objectives. A comprehensive gap-analysis was conducted to identify and evaluate major discrepancies within the system and to map core systems and applications. Transformation was needed in three major areas: Organization Governance Process

9 The proposed solution aligned with cutting-edge industry trends and streamlined the IT processes, while delivering superior customer experience. The critical emerging benefits included: Improved alignment between IT and business teams Enhanced utilization of core team by freeing up 33% of resources Introduction of agile methodologies for developing future IT projects More effective solution development in the given time frame Reduced development and maintenance cost by more than 20% Established vendor selection and governance model processes Provided future IT roadmap leading to cost benefits of nearly 30% Defined a digital strategy for improving customer satisfaction Success Story 2: Rationalized Application Portfolio for a Europe-based Manufacturer regional growth. The IT division was required to optimize IT and IS resources, and reduce duplicate, redundant and complex applications. Solution and Benefits: The service provider worked closely with the IT/ leadership team to perform assessment/analysis of the existing applications and identify gaps in functionality and responsiveness based on key stakeholder requirements. The emerging benefits of the efforts included: Well-defined IS strategies to bridge identified gaps Standardized technology platforms APR for each operating unit with regional best practices Reduced cost of maintenance by 50% across the region Ensured sustainable gains from regional standardization Reduced direct IT staff by 22% and contract staff by 30% Business scenario: A leading, Europe-based multinational company faced the challenge of disparate information systems with varying usage and maturity. This made it challenging for the business to respond quickly to regional disparity, local requirements, and central governance needs. The company was looking to rationalize IT investments and identify opportunities to improve application efficiency. They wanted to asses the impact of tighter IT architectural alignment with information quality improvement to support

10 The NIIT Technologies Thought Board: Cut the Bloat: Right-Size Your Application Portfolio Why do Organizations Need Application Portfolio Rationalization? To reduce dependency To identify and To reduce total cost of To improve on legacy applications decommission ageing ownership speed-to-market applications How can Organizations Ensure that APR Efforts are in Line with Business Goals? Employ standardized tools and mechanisms for tracking progress Outline a framework on how to improve application health Take into account key parameters for application assessment Identify gaps in the portfolio and generate a rationalization map Continuously measure and analyze outcomes Employ APM to address the quality of applications What are the Benefits of a Successful APR Rollout? Strategic IT roadmap Application modernization IT platform Improved TCO development and consolidation consolidation What are the Critical Parameters of a Successful APR Strategy? Collaboration between Active participation of CXO level Well-defined budgets technology and domain all stakeholders management and resources experts support

11 Pruning for Optimized Performance Companies across industries have disparate IT applications and face overwhelming challenges to improve operational efficiency and reduce complexity and cost. As more and more applications continue to be developed, and mergers and acquisitions happen, the application portfolio s landscape changes. This increases the need to regularly rationalize the portfolio to best meet business requirements. A framework that can retain the existing portfolio s residual business value and reduce functional overlap can dramatically change the dynamics of the APR program. A robust framework acts as a guiding tool to assess the portfolio and quickly determine whether the applications are functionally and technically healthy to support the organization s business strategy. It maps the analysis made with the cumulative application portfolio, and identifies potential applications that can be retired. In addition, once the organization clearly visualizes the state of its application portfolio, it must build a strategic IT roadmap, modernize and consolidate legacy applications or move applications to flexible technology platforms to avoid application portfolio deterioration over time. Lastly, the application portfolio developed should be maintained and assessed regularly using effective teams of skilled technology and domain experts, and top management support to better serve a company s business objectives.

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