5 ways CIOs can rationalize application portfolios

By Thor Olavsrud , CIO |  Software, Application Portfolio Management

And there's the rub: Even as the business is beginning to look at IT as a strategic enabler that can help it get its arms around these new technologies, IT is struggling to deal with an application landscape that is more complex than ever before.

"There's a striking difference from 2011: IT is considered much more, particularly by the business side, as something that helps them innovate and inform themselves," says Ron Tolido, senior vice president, Application Services, at consulting, technology and outsourcing services provider Capgemini.

"Despite the ambitions CIOs had a few years ago to simplify their IT landscape, in practice they haven't really been able to do it." -- Ron Tolido, Capgemini

Tolido is also the author of Capgemini's recently released Application Landscape Report 2014, a follow-up to a 2011 report on the same subject.

"In 2011, there was much more looked at for cost reduction," Tolido adds. "Now it's seen as a strategic enabler. It puts a lot of the CIOs that we've been surveying under a lot of additional pressure."

Even back in 2011, CIOs clearly felt the pressure to rationalize the application landscape, Tolido says.

"Despite their worries - and clear recognition of the need for action - many CIOs indicated that they found it difficult to actually start rationalizing their portfolio," Tolido writes in the report. "The impediments of complexity, cost constraints and the inability to define a convincing business case were simply too big to take on."

Now, he says, the need is becoming critical. He has five recommendations to help CIOs get rationalization programs under way.

1. Industrialize and Standardize First

Nearly one-half (48%) of respondents to Capgemini's study reported they have more applications in their portfolio than the business actually requires. That's a large jump from 2011, when 34% of organizations reported the same.

"Most CIOs will admit that they have far too many applications," Tolido says. "It's a clear increase compared to 2011. Despite the ambitions CIOs had a few years ago to simplify their IT landscape, in practice they haven't really been able to do it."

One of the big contributing factors to the growing number of applications in the portfolio is that few businesses are willing to decommission applications, even as individual business units turn to software-as-a-service (SaaS) solutions to meet their needs, either with IT's approval or in the form of shadow IT. These SaaS solutions add to the complexity as well.

Capgemini recommends starting by taking a fresh look at your application landscape, seeking ways to apply industrialization and standardization to rationalize its foundation. Fully 70% of respondents to Capgemini's study believe that at least one-fifth of their applications could be consolidated by eliminating redundant functionality.

"Look for opportunities to mutualize resources, improve documentation, refactor software, consolidate overlapping applications, eliminate redundant applications, replace aging and high-risk technologies, get rid of excessive customization and to improve development and application management productivity," Tolido writes in the report.

2. Consider More Radical Rationalization Scenarios

Despite efforts over the past few years to streamline the application landscape, Tolido says that, in many organizations, the problem has reached the point that CIOs need to consider "extreme" strategies. He points to two such rationalization strategies that more and more organizations surveyed by Capgemini have begun adopting: "enhancement" and "rip-and-replace."

In the enhancement scenario, Tolido says, IT leaves legacy applications in place but doesn't touch them or spend time adding new features. Instead, IT wraps next-generation technology - like a mobile front-end or cloud-based API around them.

In the rip-and-replace scenario, IT simply jettisons the old applications and replaces them with new, standard applications, often cloud-based applications.

"Though the first strategy is a pragmatic, relatively low-risk one that delivers quick results without massive change, it's radical in the sense that it moves the focus away from rebuilding core applications to the outer layers of the application estate," Tolido writes in the report. "The second strategy is much more radical though, and is likely to be ignited by the impatience of the business, frustration by earlier rationalization attempts and the availability of a new generation of relatively low-cost, easy-to-implement cloud-based solutions."

While Tolido notes that these strategies would have been unthinkable by most CIOs just a few short years ago, the pressure from the business is mounting these days and CIOs that are struggling to make progress in application rationalization need to consider more radical solutions.

3. Leverage Next-Generation Solutions

"In most cases, the single biggest reason not to be able to rationalize is the inability to create a business case," Tolido says. "This simply has to do with a lack of metrics."

But here, Tolido says, the business landscape has begun tilting in favor of CIOs. Social, mobility, big data and cloud solutions are big drivers of the need for application rationalization, and CIOs can use the perceived high business value of these solutions to build compelling business cases for improvements to the underlying core applications.

"There's much more pressure from the business side to rationalize the application landscape because they want to do these innovative things," Tolido says.

"Also, the new wave of applications typically comes with advanced (cloud-based) platforms that provide alternative ways to unlock legacy applications and link them to the new front ends," Tolido writes in the report. "Done in the right way, the application portfolio would be a convincing mix of new, high-value solutions and critical changes to the underlying foundation."

4. Embed Innovation in the Application Lifecycle

Most CIOs are familiar with the old 80-20 rule: 80% of your time and resources are spent "keeping the lights on"-running and operating existing applications. That leaves only 20% for innovation. The way to slay that bugbear, Capgemini says, is to embed innovation within the application lifecycle (and into any application management or support contract, if applicable).

"For example, this can be done through organizing periodical trend workshops, the obligation to dedicate a well-defined part of the project portfolio to innovative solutions or more organizational measures such as establishing an innovation governance element (like a "value office") or simply crowdsourcing suggestions for improvement," Tolido writes in the report.

5. Systematically Use Facts and Metrics to Create More Mutual Understanding

Underlying it all, the key to succeeding in rationalization and innovation efforts is a solid base of agreement between business and IT on the current state of the application landscape and the priorities for improvement. With both the business and IT on the same page, you can create a forward-looking, collaborative atmosphere that can enable digital transformation success.

"Consider tools for application mapping and assessment, and for application portfolio management," Tolido writes in the report. "Use these tools -among other things-to relate applications to business processes so that the business impact and value of applications become clearer and more tangible. This helps to make rationalization decisions and establish priorities based on business criticality. Also, pay more attention to business case development, business outcome-driven dashboards and even "value engineering," as they provide powerful, objective means for communication between the various stakeholders."

Thor Olavsrud covers IT Security, Big Data, Open Source, Microsoft Tools and Servers for CIO.com. Follow Thor on Twitter @ThorOlavsrud. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.

Read more about applications in CIO's Applications Drilldown.

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