Six Benefits of an Application Rationalization Initiative

Maximizing efficiency and effectiveness in enterprise IT environments

Six Benefits of Application Rationalization

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 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

Fund More Innovation

Application rationalization can help businesses free up resources previously tied up in maintaining redundant or unnecessary applications. This can enable them to redirect those resources towards funding new innovation initiatives such as research and development of new products or services. Additionally, a streamlined application portfolio can reduce costs and improve operational efficiency, which can further contribute to the company’s ability to invest in innovation.

Reduce Infrastructure & Operational Costs

With a proper application rationalization framework, companies can eliminate redundancies and unnecessary complexity in their IT infrastructure, leading to a reduction in licensing fees, hardware costs, and maintenance expenses associated with maintaining multiple applications. This can also simplify operations, reduce the need for IT staff, and lower operational costs.

Free Development Resources

By streamlining applications, companies can reduce the burden on developers who were previously required to maintain multiple applications. This can enable them to focus on more critical development projects, accelerating the development process and reducing time-to-market. Moreover, a leaner application portfolio can make it easier for developers to integrate and customize applications, optimizing development resources and achieving greater efficiency in the software development lifecycle. By leveraging an effective application rationalization strategy, businesses can reduce costs and free up resources to drive innovation and growth.

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 Prevent Future Application Sprawl

Application sprawl refers to the uncontrolled proliferation of applications across an organization, which can result in a complex and unwieldy IT environment. By consolidating and streamlining their application portfolio, the company can establish clear policies and governance procedures to prevent the proliferation of unnecessary or redundant applications. This can prevent future application sprawl and ensure that the company’s IT environment remains manageable and secure. Moreover, a leaner application portfolio can reduce the number of applications that need to be maintained and updated, thereby further reducing the risk of application sprawl.

Demonstrate Realized Financial Gains

Optimizing an application portfolio can help an organization achieve cost savings and improved operational efficiency, which can be quantified and used to demonstrate the financial benefits of the rationalization effort. These financial gains can be used to justify additional funding for other projects, such as innovation initiatives or digital transformation efforts. Moreover, by establishing clear metrics for measuring the financial benefits of the rationalization effort, the company can continue to track and report on these gains over time, which can further support their case for additional funding.

Better Align Strategic & Financial IT Planning to Business Goals

By consolidating and streamlining their application portfolio, an organization can gain a better understanding of their IT environment and how it supports their overall business objectives. This can enable IT leaders to identify areas where technology investments can be better aligned with business goals, and ensure that IT spending is focused on the most critical initiatives.

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 application rationalization framework, download the cheat sheet 20 Questions for App TCO Analysis.

Application Rationalization Success Stories

Marshfield Clinic Logo - 6 Benefits of an Application Rationalization Initiative - Apptio

Reduced applications and services unit costs by 80%

Unilever logo

Rationalized service catalog from 4000 to 2000 services