Pankaj Agrawal
Pankaj Agrawal

This is the first part of a two-part series on application rationalization.

The average company has over 500 apps, yet uses just over half that number on a daily basis. Over time, organizations add applications and infrastructure without engaging in efforts to reduce their existing inventory. Inevitably, this leads to unused or underutilized apps that waste resources and decrease efficiency. Maintenance for these unused applications drive ever-increasing costs over time and can have a dramatic effect on overall IT cost trends. Maintenance costs constrain IT budgets and crowd out new projects and innovation that can add value to the company.

This process also leads to IT accumulating a greater number of legacy applications until it ultimately becomes predominantly legacy. Once a company reaches that point, effectively managing the IT budget and evolving the organization becomes increasingly difficult. To prevent this from happening, companies must have the discipline to review their application portfolio regularly and remove outdated, obsolete, or redundant items.

What is app rationalization?

App rationalization is a critical part of taking back control of your application portfolio. It is the process of assessing IT applications across the organization to identify those that should be eliminated, consolidated, or replaced. By creating a comprehensive list of IT applications and evaluating their role within the organization, companies have a roadmap for transformation to a more efficient, lean IT enterprise. Although app rationalization is only a first step to optimizing your application portfolio, it forms the foundation for a highly scalable and dynamic IT organization.

How can app rationalization help your business?

App rationalization allows companies to deliver better service at reduced costs. It is important for IT to actively manage its applications like a portfolio. This portfolio needs to be tracked and adjusted each year and IT leaders must make critical decisions to invest, consolidate, retire or replace certain applications.

Reduced costs – It is estimated that 10% of all application spending is a result of applications that are no longer being used within the organization. Retiring applications leads to retirement of servers, storage, databases, and other costly pieces of infrastructure. The manpower needed to maintain these applications is also reduced. This can ultimately result in significantly reduced IT operations cost.

Improved service – A bloated app portfolio makes it difficult for organizations to deliver the best possible service. When resources are being wasted on unnecessary applications, more critical components inevitably suffer. App rationalization allows you to focus your resources where they’re most needed.

Room for growth – Budgets constrained by outdated applications won’t have as much room to allow your company to invest in new technologies. By pruning the application portfolio, IT leaders can free up resources to grow.

Mergers & Acquisitions – App rationalization can be a critical component of a successful merger. As two companies attempt to reconcile their varied app portfolios, there will inevitably be redundancies or pieces that don’t make sense for the new organization’s goals. By assessing both companies’ app portfolios, IT leaders can ensure they chart a unified course.

App rationalization is a critical component of IT efficiency. As these decisions are made, they will have wide reaching effects on IT operations and infrastructure. It is crucial that IT leaders understand its importance in order to build a culture that makes app rationalization a priority.

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Pankaj Agrawal

Pankaj brings over 20 years of experience in various management consulting and senior IT operational roles to Wavestone US. His engagements have included IT strategy development, strategic planning, IT organizational assessment, global technology procurement, cost reduction, and Six Sigma improvements.

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