Six Benefits of an Application Rationalization Initiative

Are you spending the majority of your IT budget just to “keep the lights on”? Most businesses—including many that profess to run “highly lean” IT infrastructures—spend 70 to 80 percent of their IT budgets on run-the-business spending, leaving little to invest in improving business processes. A contributing factor to this dilemma is application sprawl, and a major reason for application sprawl. The biggest reason for application sprawl is simple: the people who use the business applications that you deliver don’t know the cost of those applications. So, they can’t be held accountable for these costs.

An application rationalization initiative—a framework or process for “rationalizing” which applications can be retired, consolidated, or migrated to the cloud—can help you address the growing challenge of application sprawl.

First, you’ll need to get a handle on all the applications you have. This includes the total costs to deliver and support each one, plus how each application is being used. Armed with that information, you’ll then be ready to have fact-based conversations about those applications with their business owners in a language they’ll understand: within the context of business value. Speaking in the same language includes identifying cost drivers, business impact, and potential savings.

If you’re starting to suspect that some up-front work is required, you’re right. You’ll need to do your homework first so that you can present a defensible business case for any recommendations. But the potential benefits are too compelling to ignore. Approach application rationalization in the right way and you can:

• Fund more innovation by freeing additional budget for new change-the-business initiatives.
• Reduce and/or avoid infrastructure and operational costs by repurposing, resizing, and retiring infrastructure and system management resources from decommissioned apps.
• Free development resources from supporting as many applications, enabling them to deliver new business applications with greater speed and capacity.

While these benefits are compelling, they’re also contingent on you successfully engaging with business partners, who won’t be inclined to retire applications if the total cost of ownership (TCO) isn’t defensible or trustworthy. Fast but oversimplified TCO analysis—such as ignoring fixed vs. variable costs—is often lacking in sufficient detail to be compelling, while deep and broad cost analysis can be too slow and expensive to cover enough applications to make a meaningful impact. Such point-in-time analysis also becomes quickly out-of-date, making it hard to follow up on application rationalization decisions and demonstrate their ROI.

Because of this, a scalable, repeatable process for making business sense out of all the raw data related to your application portfolio is critical. What’s more, by operationalizing application TCO and portfolio reporting—to the point of automated monthly reports on each application’s total cost, usage, and value—you’ll be able to:

• Help control or prevent future application sprawl.
• Demonstrate potential and realized financial gains from application rationalization to justify additional funding for other projects.
• More closely align strategic and financial IT planning to business goals, spending appropriately based on an application’s business value and criticality.

If you haven’t already considered an application rationalization initiative, now may be the time.

Just remember two things. First, you’ll need to have fact-based conversations about application TCO within the context of business value, with defensible analyses to support your recommendations. Second, if you’re going to do the legwork required for proper TCO analysis, don’t overlook the importance of operationalizing and automating the process so that your investment in application rationalization can continue to pay off in the years to come.

For best practices on building an IT app rat framework, download the cheat sheet 20 Questions for App TCO Analysis.