Enterprise businesses spend huge sums on software to meet demand and find competitive advantages. Still, this immense investment can get out of hand, which is where the process of application rationalization enters the picture.
Not every software solution will prove worthwhile, after all. An IT budget can easily become a burden, paying to retain licenses that fail to return sufficient value. At the same time, more economical and effective solutions may go unnoticed. Application rationalization can help address these inefficiencies.
This guide will provide an application rationalization definition, cover its key aspects (including benefits, challenges, and best practices), and touch on the increased need for IT streamlining.
Shortcuts:
What Is Application Rationalization?
Application Rationalization Benefits
Why Is Application Rationalization Needed?
What Are the Main Objectives of Application Rationalization?
What Are the Challenges of Application Rationalization?
Key Components of an Application Rationalization Framework
How to Build a Successful Application Rationalization Framework
Application Rationalization Best Practices
What Is Application Rationalization?
Application rationalization is the ongoing process of critically appraising an organization's application stack and identifying where it could implement changes to better serve its core business goals.
Through application rationalization, an organization may discover that several applications serve similar roles and could be replaced with one broader solution. It may find that one app is worth keeping despite its low ROI because it is an ideal fit for its role. In contrast, another warrants replacement despite its high ROI because there’s a superior alternative on the market that can do even more at the same price.
While this process is most commonly given urgency during system transitions (e.g., during or ahead of cloud migrations, preparing, and during M&A), it’s important for any organization using a complex array of applications to give them steady attention. The IT world moves quickly, and maintaining optimal efficiency is key to remaining competitive and maximizing profitability.
Application Rationalization Benefits
Stagnation within an application stack poses a serious threat to organizational stability, flexibility, and capability. A commitment to maintaining an efficient application lineup through application rationalization can reap benefits, including the following:
1. Improved Standardization
Due to proprietary technologies and locked-down ecosystems, it’s common for applications to work very differently (with great distinctions in their file formats, presentation styles, function names, and even security protocols). Since even the most reliable import or conversion features can be flawed, using a wide assortment of applications will inevitably lead to operational friction, slowing progress.
Application rationalization can help identify areas suffering from friction, improving the implementation of alternative solutions that use common standards to operate much more smoothly.
2. Reduced Redundancy
Due to a lack of awareness and communication, workers in separate departments with similar problems can unknowingly get separate applications with identical feature sets approved. This can lead to an organization paying for three comparable video editors instead of just one, for example, wasting money and causing confusion.
Furthering this issue, updates can lead to overlaps. Two applications with distinct feature sets might be expanded over time, leading to them doing similar things. Carrying out a full assessment of its application stack helps an organization uncover any such overlaps and make the changes needed to consolidate and eliminate them accordingly.
3. Greater Opportunities for Innovation
Application rationalization should be an ongoing process. By treating it as such, a practical organization can ensure that its application stack doesn’t stagnate for weeks or months on end. Clearing out stagnant applications frees up valuable resources and budget for reinvesting.
By monitoring not only what it’s already using but also what’s new to the software market, a business can pivot to fresh, cutting-edge applications while they’re at their most economical.
4. Lowered Costs
Cutting two apps and replacing them with one at a similar price point helps save money, as does moving down a subscription tier when paid-for features aren’t being used. Application licenses can often be bundled cheaply through developers or third-party software vendors.
There may also be tasks being handled manually at great expense that can be automated, allowing for the economical redistribution of human resources. In several ways, then, the process of application rationalization can yield financial benefits.
5. Refined Support
Whenever an application is removed, the need to support it is removed, freeing up resources. Better top-down awareness of an application stack can facilitate the creation of more useful overarching SOPs, helping workers get things done faster. And where a high-value application is deemed the best fit for its role, additional investment in training sessions and materials can extract even greater value.
In summary, an application stack managed through the application rationalization process is more streamlined, secure, cost-effective, robust, and dependable.
Why Is Application Rationalization Needed?
Operating a modern enterprise-level operation without a robust application stack is extremely challenging. Every operation needs file storage and management, cybersecurity, internal communication, payroll and HR software, and others. Managing all these applications can be demanding and costly, and the SaaS subscriptions can quickly add up to unwieldy monthly and annual charges.
Complicating things further, modern IT infrastructure can bloat in the background due to unsanctioned software. Remote workers and different departments can use their own tools, often without considering the security or efficiency implications.
The accumulation of applications outside organizations’ management (or even awareness) is called shadow IT. While shadow IT solutions aren’t inherently unworthy, lack of oversight on them and overall application portfolio cohesion can be problematic.
Application rationalization allows organizations to keep their applications in order, much as a human resources department right-sizes payroll and acts to address productivity lapses. A competent manager wouldn’t consider forgoing employee performance analytics. Just like people, applications can vary in the value they provide.
What Are the Main Objectives of Application Rationalization?
At its core, application rationalization is about combating the inefficiencies of enterprise IT infrastructure. Large businesses commonly accrue large application stacks that don’t warrant their costs, suffer from the impact of shadow IT systems, encounter compliance issues, and fail to embrace industry innovations. Application rationalization can help uncover and address these issues.
The main objectives of managing application portfolios, then, are as follows:
Highlight Unnecessary Costs and Optimize Investments
Even the most profitable organizations can benefit from eliminating waste, which readily accrues when application stacks are allowed to expand. Many organizations have a bloated application portfolio due to mergers and acquisitions or organic growth. Application rationalization helps highlight cost savings opportunities with applications that are overlapping, underused, poor fits for the business’s needs, or incurring far too much maintenance cost.
Streamline and Improve Compliance
Adhering to regulations (particularly concerning data collection and use) is hugely important for enterprise organizations, as failing to do so can result in serious fines and reputational damage. And since data security issues often stem from application and/or process flaws, application rationalization can help. Outdated systems can be identified and phased out, and new solutions geared toward enhanced compliance can be found and tested.
Facilitate Better Investment Decisions
Some applications get better over time through extensive updates, raising their value and making them worthy of additional investment. Others decline and are surpassed by alternatives with features that can provide competitive edges. By regularly assessing systems in use, application rationalization can make it much more straightforward for those in charge of investment to decide where the money should go.
It’s all too easy for IT department goals to move away from general business goals over time, and this process can prevent that from becoming a problem by bringing everything back to ROI. Any systems that deliver it can stay, while those that don’t need to go so their budgets can be used more effectively elsewhere.
Improve System Transparency
For best results, all the parts of an organization should work together seamlessly when required, which demands a shared awareness of how the organization is performing and how it can perform better. The application rationalization process helps grant such awareness in a clear and accessible way by determining and visualizing how applications fit together and support the business.
This also supports interdepartmental communication and notably cuts down the process of justifying IT costs to finance departments and upper management. Transparency helps everyone understand how much is being spent where and how those spends are delivering value to the rest of the business.
What Are the Challenges of Application Rationalization?
Despite the clear value of application rationalization, embracing this process doesn’t lack challenges. Here are the main obstacles organizations will need to address:
Choosing the Scope
Though good application rationalization should run the breadth of an organization’s application stack, it needn’t factor in every relevant element. For an enterprise-level organization, such a thorough approach can be too much to be practical. It is preferable to narrow the scope to focus on what matters most.
Too large a scope can make the application rationalization process too arduous. An organization looking to rationalize its applications must decide which goals or business capabilities to prioritize. It may help to first focus on one specific area of the organization (the department with the largest application spend, for instance, or the one using the most applications), as this can serve to clarify value.
It isn’t always clear what should be done with a given application, as it may have an excellent technical fit but poor business value or the reverse. This is another reason to keep the process relatively limited, at least to begin with, as it will help to produce quick wins that may justify additional expansion
Collecting Accurate Data
Some internal metrics are complicated to uncover. It can take great technical expertise and familiarity with the relevant systems to gather the data needed to assess performance properly, and placing things in context needs data from across the application stack.
Departments must collaborate closely with the IT organization to create a reliable dataset for evaluating the application portfolio. Incomplete or incorrect data will hamper decision-making and harm credibility with stakeholders.
It’s vital to avoid the temptation to extrapolate from small datasets to save effort. Though such an approach may still correctly identify the more obvious issues, it won’t reveal any niche insights and will set a poor precedent for future analysis.
Getting Stakeholder Buy-in and Change Management
People naturally resist change so it’s important to account for the adoption and introduction processes needed for successful changes to the application portfolio.
Open communication and support throughout the transition period are crucial for getting people comfortable with application changes. Plan for a gentle learning curve, and reassure everyone involved that they’re not expected to become experts overnight. Knowing they can take the time to get comfortable (and make some mistakes along the way) will help the workforce get on board.
How to Frame the Rationalization Discussion With Business Stakeholders Without Over or Underpromising
The ongoing nature of application rationalization can make it a tough investment to sell managers on. Promising too much risks premature project termination if performance doesn’t reach the predicted level, while promising too little can result in the project not being approved in the first place.
Here are some tips for creating a successful pitch:
Focus on General Benefits Instead of Specific Results
All the things that make application rationalization worthwhile can be communicated without reference to target metrics. Indeed, we covered them earlier: improved standardization, reduced redundancy, greater flexibility, lowered costs, and refined support. If a pitch can successfully explain why these benefits are on offer, it can make a strong case without promising anything specific.
Where projected results are necessary, it’s best to use ranges that indicate what might be achieved instead of specific figures that may be difficult to substantiate or prove.
Cater to Stakeholder Preferences
Everyone who stands to be affected by application rationalization has different priorities and preferences, so it’s important to shape communication accordingly. Managerial types will be eager to hear about cost savings and productivity gains, for instance, while workers will want to know how their workflows can improve.
Building a pitch that conveys the right benefits to the right people will give the greatest chance of getting sign-off. If the project is approved, it should make the implementation process less complicated by having more people eager to participate.
Key Components of an Application Rationalization Framework
For a software rationalization project to prove effective, it should contain certain key components. Ensure that the following are present in a clear application rationalization methodology before proceeding:
- Objective(s)
Is the framework meant to reduce spending, limit friction, find a technological edge, or highlight lingering issues with a particular core system? Perhaps there are two or three similarly important goals. Trying to run a rationalization process with no clear objective(s) will likely doom it to failure.
- Scope
How long does the initial project have to yield results? How much of the application stack is to be assessed, and to what level of depth? What system(s) will chart the data and provide takeaways? The scope covers the amount of work on the docket, how it should be handled, and how much investment it requires.
- Project Managers
Who will take ownership of the rationalization process? A combination of departmental leaders should prove ideal, but only if everyone involved is committed to taking the project seriously and giving it their best effort. If any segment of the gathered data is inaccurate or inadequate, it’ll impact the overall conclusions.
- Action Blueprints
Some focus on processes for the TIME quadrants (Tolerate, Invest, Migrate, and Eliminate). In contrast, others prefer more specific scenarios to account for categories such as the 6Rs of cloud migration (Re-host, Re-platform, Re-factor, Re-purchase, Retire, and Retain). Whatever the approach, this component is simply about knowing what to do with the applications that warrant changes.
Of course, the effort involved in retiring an application with a deep-seated role in legacy infrastructure will be much greater than when retiring a recent addition with limited use.
- Application Inventory
An appraisal will be of limited use if it doesn’t cover the full application stack, so it’s first necessary to complete an exhaustive application inventory. This must cover not only applications the organization is paying for but also all applications free to use or attained through one-time payments. This bears noting because the point is to address all problems stemming from using applications, not merely those involving costly subscriptions.
- Ordered Phases
Where should the work begin, and how should it proceed in practical chunks? Each phase should have a deadline, requirements, and deliverables. Scope creep is a persistent threat, so stick to the objectives and prioritize getting meaningful data plotted.
How to Build a Successful Application Rationalization Framework
1. Identify Key Initial Objectives
Consider what prompted the decision to pursue application rationalization, as this will provide the first objective. Due to the ongoing nature of the process, there’s no need to list everything it could plausibly achieve. Instead, tee up easy wins. Once those have been accomplished, more resources can be invested in achieving more.
2. Take a Full Application Inventory
Take advantage of existing records (purchase orders, app installations, SOPs, etc.) to accelerate this phase, but don’t trust that they’re comprehensive. Whether through workers installing freeware applications they prefer, or purchases going unrecorded through administrative failures, it’s common to find that an application stack is broader than anticipated. Leave no stone unturned.
3. Assign Data Collection Tasks
Having a list of applications is just the starting point. Next, performance data must be collected to enable appropriate categorization. Some systems will have clear internal metrics to speed this up, while others require extensive manual assessment effort. The key is to put the right people in charge. Those responsible must know what they’re looking for and how to find it.
Note that the pace of this process should be geared toward the organization’s scheduled commitments. It may be easiest to stop work for a day or two and get it all done, for instance. Alternatively, it may be preferable to issue surveys and tasks and complete the inventory over the course of weeks to reduce impact.
4. Rate and Rank Applications
Sort the applications according to whichever set of categories provides the best fit. It may be easiest to start by identifying the most decisive results: for instance, any applications that warrant strong investment or those that are wholly unsuitable and should be retired as a matter of urgency.
5. Identify Opportunities and Actions
With some or all of the application stack plotted, it’s time to decide what to do first, and this will depend on the key initial objectives. If costs are too high, focus on “quick wins,” like retiring unused applications and consolidating the costs of licenses where possible. If technology is outdated, propose a roadmap for retirement and line up future-proof industry standards to replace them.
6. Revisit Semi-Frequently
Application rationalization must be regularized to have maximum impact. This requires a major commitment from everyone involved but is much easier to handle when leveraging software solutions to aid the process. This can help with everything from data collection to rationalization and candidate prioritization.
Ardoq Quick Start provides an easy way to start your Application Rationalization and Application Lifecycle Management journey using clear guidance and easy templates. Reduce IT complexity and deliver IT cost savings in just 30 days. Book a demo now and see how much you can save.
Application Rationalization Best Practices
When following the path for implementing application rationalization, adhering to application portfolio management best practices will make things even more straightforward and effective. Here are three best practices to consider:
1. Make App Management a Systemic Priority
Relying on a spreadsheet to track an application stack is increasingly outdated due to the existence of powerful application rationalization tools. Investing in these tools to help track and optimize other applications is increasingly critical for any organization with substantial IT infrastructure.
2. Maintain an Interdepartmental Approach
Given how technical the application rationalization process can be, departments other than IT can easily drift away from it, but it’s worth fighting this drift. The fewer people participate, the less useful the data becomes, leading to inaccurate conclusions and proposed actions likely to cause as many issues as they solve.
3. Invest in Training and SOP Creation
In ideal circumstances, everyone within an organization will understand the value of application rationalization and know how their actions can best contribute to it. However, this is tough, especially if there’s extensive use of freelancers and/or a low employee retention rate. Clear processes to facilitate learning and set best practices for application acquisition will raise the standard for application management across the board.
Swiftly and Continuously Optimize an Application Portfolio and IT Spend With Application Rationalization
In summary, then, application rationalization is a high-value proposition for any organization reliant upon a costly software stack. Despite its strengths, though, it can prove challenging and time-consuming to implement.
Ardoq aims to address this challenge by offering an out-of-the-box solution for application rationalization. Its engagement features help ease the pain of data collection and analysis. By tying into existing infrastructure and presenting technical fit and business value in a straightforward dashboard, Ardoq helps make it relatively painless to see where an organization stands in improving its application portfolio’s overall health and efficiency.
Schedule a demo today to see how Ardoq can streamline the application rationalization process with automated data collection and processing. This often yields rationalization candidates in half the time that would otherwise be required.
