For today’s CIOs, managing a vast and complex application portfolio while optimizing resources and costs is a constant challenge. Application rationalization has emerged as a powerful strategy for CIOs seeking to streamline their IT environments and align them with core business objectives.
In this comprehensive guide, we’ll explore what application rationalization entails, outline the tangible benefits it offers, provide a step-by-step process, and showcase real-world examples of successful implementations.
Application rationalization refers to the systematic process of critically evaluating an organization’s application portfolio to determine the business value and effectiveness of each application.
The goal is to identify and eliminate redundant, outdated, and underutilized applications to arrive at an optimized portfolio aligned with strategic priorities. This enables organizations to maximize their technology investments.
Approached holistically, application rationalization facilitates both short and long-term benefits across critical areas like costs, productivity, and risk management.
The scale and complexity of enterprise application landscapes have exploded in the digital era. On average, large companies now use over 1,000 distinct software products and applications, with some utilizing as many as 10,000.
Much of this growth has been haphazard, driven by decentralized purchases and legacy systems staying in situ. The result is a labyrinth of interconnected applications, many of which are suboptimally used.
This application sprawl has become a massive resource sink for modern enterprises. Over 80% of IT budgets are spent just on maintaining current systems, leaving little for innovation.
Application rationalization has thus become a critical undertaking. Proactively optimizing the application portfolio and eliminating redundancies can free up resources to fund transformation. Other key drivers include:
Faced with such motivators, nearly 70% of CIOs report having application rationalization initiatives underway or being planned.
Launching a successful enterprise-wide application rationalization program requires rigorous planning and execution across three key phases:
This phase focuses on developing a comprehensive inventory of all applications currently deployed, including shadow IT from business units. With the inventory in place, each application can be evaluated based on factors like:
the number of users and usage frequency
Collecting data through surveys, focus groups, and application performance tools provides objective insights into the value delivered by each system.
With the assessments completed, applications are segmented into categories based on their strategic value and life cycle stage:
The categories are then sequenced into a priority order for roadmap planning based on criteria such as redundancies, projected ROI, and interdependencies.
The final phase covers executing the rationalization roadmap and tracking progress. This requires attention to:
Continually measuring costs, productivity, compliance, and other metrics provides visibility into outcomes achieved. Monitoring also highlights areas requiring corrective action.
Enterprises across industries have undertaken application rationalization to transform their IT environments. Here are two examples that demonstrate the benefits:
A large manufacturing company had over 1700 applications, including many niche legacy systems from past acquisitions and factory installations. This complex environment made it difficult to respond quickly to business needs.
Through an application rationalization initiative, they identified and retired over 900 applications. They modernized several hundred more using cloud platforms and containers. The result was a much more agile, cost-efficient application portfolio with seamless integration between systems.
Key Outcomes
A major regional healthcare provider saw declining productivity as doctors struggled to navigate 140 disconnected health IT applications. They also faced compliance risks from running outdated systems.
By optimizing their portfolio, they reduced the number of applications by nearly half. Investments targeted modernizing clinical and patient management systems, leading to higher user satisfaction. Decommissioning legacy systems also supported HIPAA and other regulatory compliance.
Key Outcomes
As these examples demonstrate, application rationalization delivers tangible improvements in key areas when executed successfully. The most pronounced benefits typically include:
While every rationalization initiative is unique, employing the structured approaches outlined in this guide will help maximize the likelihood of achieving meaningful and lasting impact.
For companies struggling under the burden of bloated, disjointed application portfolios, rationalization may seem like an insurmountable undertaking. But given the immense potential efficiency gains, it is becoming an essential business priority.
With deliberate planning around discovery, assessment, categorization, execution, and monitoring, CIOs can transform the quality and strategic alignment of their application landscape. The recommendations in this guide serve as a practical starting point for building effective programs.
Application rationalization is a continuous process. As technology and business strategies evolve, so must the application portfolio. Maintaining constant vigilance – through governance, data-driven evaluations, and user feedback – is key to sustaining peak performance over the long term.
The time for action is now. CIOs that proactively lead rationalization initiatives will be best positioned to unlock resources, accelerate transformation, and deliver a foundation for the future built on innovation.
At Trantor, we have helped numerous clients optimize their application portfolios through our comprehensive rationalization services. Our experienced consultants leverage leading methodologies, proprietary tools, and hands-on guidance to deliver maximum value. We partner with clients throughout the end-to-end process – from assessments to roadmap creation and change management. If you are looking to transform the efficiency of your IT landscape, let Trantor’s experts guide you towards strategic alignment and sustainable gains. Get in touch today to learn more about our application rationalization capabilities.
