Application portfolio rationalisation: Getting the house in order

Application portfolio rationalisation offers the promise of reduced ICT maintenance costs and improved data quality

Many organisations in Australia and New Zealand are being asked to “do more with less”. It is therefore a good time to consider the many disparate benefits and advantages that can result from application portfolio rationalisation.

Application portfolio rationalisation offers the promise of reduced ICT maintenance costs while improving data quality, process support and usability for end users and increasing organisation effectiveness and efficiency.

An effective approach to application portfolio rationalisation involves five steps:
1. understand your business architecture;
2. understand your applications portfolio;
3. develop principles for rationalisation;
4. assess opportunities for rationalisation; and
5. rationalise.


Cost reduction This comes in many areas including vendor licencing, hardware, support, etc.
Risk reduction The reduced application surface area means less vulnerability to information security risks.
Improve information quality Fewer applications have less likelihood of applying inconsistent business rules.
Improved usability Fewer applications to learn, less skills need across the organisation, a more flexible workforce. Usability is particularly improved if the most usable application replaces others.
Improved organisational effectiveness This has many sources, for example business process automation can be more easily optimised.

Understand your business architecture:

An understanding of the business architecture is required before embarking on application rationalisation. The following considerations should be covered:

Activity Result
Build a 'Business Capability Model' (BCM). View of what the organisation is capable of.
Determine the optimal type of operating model for the organisation: diversified, unified, replicated, or coordinated.Understand the intended way of working. Allows the development of suitable principles for enterprise architecture and ICT strategy.
Business strategy: goals, outcomes, objectives, growth strategies, differentiators, client types.Understanding of rationale, importance and priority of business capabilities and therefore the applications that support those capabilities.
Key enterprise business processes: at a very high level what are the key processes and how do they relate to the BCM? Overview of what the business does.

Understand your applications portfolio:

This is the second step in developing a plan for application portfolio rationalisation. The following information should be gathered.

Required information Why it is important
Business capabilities supported Allows overlaps to be identified (i.e. multiple applications supporting the same capability). Provides the basis for understanding the significance of the application and its business value.
Business value – relevance to business strategy, goals, outcomes, differentiation, information insights, competitive advantage, business criticality, etc.This is critical – high value applications must be treated very carefully and are not good candidates for decommissioning.
Business and IT owners Many organisation struggle to identify owners who are willing to be accountable and responsible, especially for shared or corporate applications. However these people are key stakeholders in any rationalisation decisions. Their perspective and their accountability for decisions is essential.
Age and lifecycle Aging applications or those reaching end of useful life must be treated differently to new investments.
Maintenance cost This is part of the business case and ROI consideration. Applications with low ROI are generally better candidates for decommissioning.
Technologies required There may be opportunities to consolidate or rationalise the number of supporting technologies, with associated reduction in cost and complexity.
Vendors There may be opportunities to consolidate or rationalise the number vendors – dealing with less vendors reduces the cost and complexity of vendor management.

Develop principles and assess opportunities:

The following considerations should be covered when developing principles to guide a rationalisation process and assessing opportunities for rationalisation.

1. The business value provided by applications is paramount: understanding this can be complex but it must be done.
2. If multiple applications support the same business capability pick the app that provides the most business value and retire the others.
3. Business process improvement goes hand-in-hand with application rationalisation. Business processes are to some extent dictated by applications. Applications that support the most optimal business processes are good candidates to keep.
4. Aging, low-value applications are good candidates for retirement.
5. If multiple applications use the same technology there may be an opportunity for consolidation at the technology layer as well as the application layer.
6. Consolidating vendors reduces the cost of vendor management and may bring discounts.

There are many dimensions to consider in assessing applications. The chart below shows two of these dimensions and offers a useful starting place in assessing an applications portfolio.

High valueRemediateMaintain
Low valueRetireContain

Next steps:

  • Application portfolio rationalisation brings enormous benefits to many organisations but requires sponsorship: make a clear case and sell it to your executive board.
    • Develop a one-page graphic overview of the state of your organisations application portfolio. Graphically show the costs, overlaps and opportunities for rationalisation.
    • Application portfolio rationalisation is not a goal in its own right – tie your application portfolio rationalisation plans to business value impacts.
  • Define ongoing application portfolio governance mechanisms in order to contain application sprawl and maintain an appropriate set of applications.
    • Make the link between application portfolio management and other enterprise architecture functions such as business capability modelling and technical reference architectures.

Justin Butcher has spent many years helping organisations manage and rationalise application portfolios. Justin welcomes contact from organisations that are struggling with complex and costly applications portfolios, or those who have success stories to share.

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