Posted by Mike Rollings
In my recent blog post Do-it-yourself SaaS and the application portfolio I made the comment that if you are looking for ways to reduce operating costs -- why run applications that you do not need to run at all?
In many organizations, applications are deployed and then run forever leading to an endless proliferation of IT systems that is not sustainable. The practice of adding new software applications without retiring old ones will eventually cause the entire IT budget to be consumed by the maintenance and operations burden of legacy applications. So how does an organization understand what applications need retirement?
The way organizations identify the anchors dragging down application costs is by conducting an application portfolio analysis and rationalization exercise. Application rationalization is a methodology that develops a health rating for applications by analyzing the relationship between the application’s ability to support the business functional requirements, its technical condition, and a categorization of value-add versus sunk cost spending. The resulting health rating not only identifies applications that exceeded their useful life, but it also provides a critical input for project investment decisions.
For instance, an application enhancement may be proposed for an application that has low functional value to the business. If the proposed enhancement is not correcting the business functional deficiencies, it may not be the best use of funds. Also, if that same application has a low technical condition, then that proposed investment should correct some of the technical deficiencies. If not, these dependencies should be considered to accurately reflect the hidden enhancement cost. In all cases, the hidden treasure is the elimination of unneeded applications, cost reductions, and cost avoidance.