Reducing the high cost of low-value applications

The speed of technology advancements and rapid pace of today’s business environment often force companies to rely on an application long after it has ceased to provide maximum value, says Keane's Walid Farha.

Commentary - Every company faces the challenge of maximizing return on investment in IT applications. However, the speed of technology advancements and rapid pace of today’s business environment often force companies to rely on an application long after it has ceased to provide maximum value.

Such an application becomes increasingly costly to operate and impedes IT productivity because of its complexity and constant support requirements. Add costly non-core technology, redundant applications inherited from mergers and acquisitions and underutilized packaged solutions that most medium sized companies invest in, and it becomes clear how application portfolios can quickly – and quietly – drain IT resources and corporate bottom lines.

Although IT application portfolios are, as a whole, immensely valuable assets, they universally contain a mixture of high, low and medium value-producing applications. Once an application reduces in value-production, steps need to be taken to eliminate or renovate before it becomes disproportionately expensive to the level of business value it produces.

By objectively evaluating an application portfolio and measuring the cost of each application against the business value it provides, companies can then “rationalize” applications that generate little or no business benefit and simultaneously extend the lifecycle of aging applications that can still provide a desirable ROI. This approach, called “Applications Rationalization,” seeks to systematically and proactively, eliminate non-core technologies and platforms. Disciplined management of application portfolios allows these assets to achieve full potential by capturing greater benefit from production systems, freeing funds and IT resources to pursue high-value opportunities and providing the foundation and flexibility to respond more quickly to changing business requirements.

The following categories of low-value applications are typically found in corporate IT portfolios:

  • Aging assets
  • Redundant functionality
  • Disparate and incompatible applications
  • Non-Core functions
  • Non-core technologies

How Applications Rationalization can help
Applications Rationalization addresses low-value applications from a business point of view. Using objective measures, it identifies underperforming assets and, depending on the situation, either restores them to profitability or decommissions them to save funds and free resources. Typically, 10-20 percent of applications are targets for retiring and 20-30 percent of core applications are at risk because of their dependence on limited resources, small vendors or a lack of documentation. Applications Rationalization encompasses four major tasks as described and illustrated below.

Analyze the portfolio
Goal: Target your efforts to the areas of highest return
Analyzing the state of the applications within the IT portfolio is important to understand current conditions, quantify cost of operation and support, and measure value to the business. This information creates a prioritized action list to maximize the benefit of rationalization investments.

Eliminate redundant applications
Goal: Reduce costs and support efforts
This step identifies overlapping functionality and determines which application is stronger and should thus remain. Equally important is the clean-up and migration of data from the redundant applications to the remaining applications and decommissioning the extraneous applications.

Retire end-of-life applications
Goal: Reduce costs and support efforts
An end-of-life application can drain IT resources for years before it is noticed and retired. On average, over 99 percent of applications targeted for retirement are not decommissioned by the company in a timely fashion. In cases where the original business purpose still has merit, the best strategy may be to develop an archiving strategy application operating on a less costly and more strategic platform and retire the aged one.

Renovate worthwhile applications
Goal: Maximize the residual business value of all applications
Migrating an application from a non-core technology to a newer, more strategic platform extends the application’s useful life by enhancing its flexibility and scalability while eliminating the costs associated with supporting the older platform. Much of this highly defined work is suitable for assignment to offshore development facilities to lower cost and further increase ROI.

Rationalizing the benefits
IT organizations typically focus so intensely on application development and operational management of production applications they miss the straightforward, immediate and quantifiable benefits they could receive from addressing low-value applications. Investments in Applications Rationalization are easily justified. In tight economic times, it provides significant cost savings that flow directly to the corporate bottom line and frees resources for projects that would otherwise be deferred. In abundant times, it provides the resources and flexibility to respond more rapidly to business opportunities.

Conclusion
Disciplined management of application portfolios allows companies to maximize return on investment in IT applications, directly affecting the bottom line. By eliminating non-core, redundant and end-of-life applications and extending the lifecycle of any aging applications that can still provide a desirable ROI, companies can save money and resources previously spent on underperforming applications, experience enhanced flexibility to respond to or initiate business changes and see greater value from an application over a longer period of time.

biography
Walid Farha leads the portfolio solutions practice within Keane application management and outsourcing. He is responsible for implementing disciplines and processes to optimize client application portfolios and reduce their total cost of ownership. Mr. Farha's expertise spans every facet of large-scale application development, outsourcing and program management, including enterprise architecture planning and governance, IT portfolio management, development of IT strategy, and planning and management of end-to-end implementation.

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