Application Rationalization: A Detailed Guide

Application rationalization is a strategic process aimed at assessing and optimizing an organization's application portfolio. The goal is to reduce complexity, eliminate redundancies, and improve overall efficiency. By rationalizing applications, organizations can save costs, enhance performance, and ensure better alignment with business objectives. This white paper provides a comprehensive overview of application rationalization, detailing the steps involved, benefits, challenges, and best practices.

What is Application Rationalization?

Application rationalization involves evaluating an organization's existing applications to determine their value, usage, and cost-effectiveness. The process helps in identifying which applications should be retained, replaced, retired, or consolidated. This systematic approach ensures that the application portfolio supports business needs efficiently and effectively.

The Importance of Application Rationalization

• Reducing the number of redundant or obsolete applications can significantly lower maintenance and operational costs.
• Streamlined applications lead to better performance and reduced complexity in IT operations.
• Fewer applications mean fewer potential vulnerabilities, thus improving the overall security posture.
• Resources can be redirected from maintaining legacy systems to developing innovative solutions that drive business value.

Steps in Application Rationalization

Inventory Applications - Create a comprehensive inventory of all applications in use.

• Compile a list of applications, including their versions and instances.
• Document application ownership, user base, and business functions. Set default ownership to someone on the business side if no owners are found.

Assess Each Application - Evaluate the value and performance of each application.

• Analyze application usage metrics and user feedback.
• Assess the technical performance, including uptime, response time, and scalability.
• Evaluate the cost of ownership, including licensing, maintenance, and support costs.

Classify Applications - Categorize applications based on their assessment results.

• Retain: Applications that are critical and perform well.
• Replace: Applications that are essential but underperform or are outdated.
• Retire: Applications that are redundant, obsolete, or no longer needed.
• Consolidate: Applications with overlapping functionalities that can be merged.

Develop a Rationalization Roadmap - Create a strategic plan to optimize the application portfolio.

• Prioritize applications for action based on business impact and feasibility.
• Develop timelines and milestones for retiring, replacing, or consolidating applications.
• Allocate resources and assign responsibilities for execution.

?Building Heat Maps for Complexity

?The purpose of Heat Maps is to visualize the complexity and interdependencies of applications to identify areas that need attention.

Steps to Create Heat Maps:

1. Gather data on application integrations, dependencies, customizations, and support requirements.
2. Define complexity metrics such as the number of integrations, customization levels, and support demands.
3. Use visualization tools to map application complexity based on the defined criteria.
4. Identify high-complexity areas and develop strategies for simplification and optimization.

Best Practices for Application Rationalization

• Involve business and IT stakeholders in the rationalization process to ensure alignment with business goals.
• Apply standard frameworks and methodologies, such as TOGAF or ITIL, to guide the rationalization process.
• Use automation tools to gather data, assess applications, and manage the rationalization process efficiently.
• Ensure that the data used for evaluation is accurate and up-to-date.
• Manage organizational change effectively to ensure smooth transitions and user adoption.

Challenges in Application Rationalization

• Ensuring the accuracy and completeness of application data can be challenging.
• Overcoming resistance from stakeholders who are attached to legacy applications.
• Allocating sufficient resources and expertise to conduct thorough assessments and implement changes.
• Managing the complexities of integrating new applications with existing systems.

Detailed Steps and Phased Implementation

Phase 1: Preparation and Planning

Objectives: Set the foundation for the rationalization process.

• Identify and engage key stakeholders from IT and business units.?
• Clearly define the goals and objectives of the rationalization project.
• Compile a comprehensive inventory of all applications and establish a baseline for performance and costs.
• Choose appropriate tools for data collection, analysis, and visualization.

Phase 2: Assessment and Analysis

Objectives: Evaluate applications based on various criteria.

• Gather detailed data on application usage, costs, performance, and dependencies.
• Define evaluation metrics such as business value, technical performance, and total cost of ownership.
• Score each application based on the defined metrics to determine its value and necessity.
• Create heat maps to visualize application complexity and identify high-priority areas.

Phase 3: Classification and Planning

Objectives: Categorize applications and develop a rationalization roadmap.

• Putting time limits or guidance on application reviews.
• Any apps that are retained should be reviewed again in a year or two.
• Decide in advance who will pay for replacement costs in advance of this exercise. Otherwise, the final work may be ignored.
• Categorize applications into retain, replace, retire, or consolidate groups.
• Create a detailed roadmap outlining the steps and timelines for rationalizing the application portfolio.
• Assign resources and responsibilities for executing the roadmap.

Phase 4: Execution and Implementation

Objectives: Execute the rationalization plan and implement changes.

• Use project management best practices to oversee the execution of the rationalization plan.
• Implement migration plans for replacement applications and decommission obsolete ones.
• Ensure new applications are properly integrated with existing systems and thoroughly tested.
• Provide training and support to users affected by the changes.

?Phase 5: Monitoring and Optimization

Objectives: Ensure continuous improvement and optimization of the application portfolio.

• Continuously monitor the performance and usage of applications.
• Establish feedback loops to gather user input and identify areas for further improvement.
• Conduct periodic reviews of the application portfolio to ensure alignment with business goals.
• Make ongoing adjustments to optimize application performance and value.

How ServiceNow can help with Application Rationalization?

ServiceNow can play a significant role in application rationalization by providing a centralized platform for managing the entire process efficiently. Here's how ServiceNow can help:

• Inventory Management - Create a comprehensive inventory of all existing applications within an organization. It allows you to capture detailed information about each application, including its purpose, usage, cost, owner, and dependencies.
• Application Assessment - Assess applications based on various criteria such as business value, technical complexity, maintenance costs, and strategic alignment. This assessment helps in prioritizing applications for rationalization efforts.
• Workflow Automation - Automate workflows associated with application rationalization. For example, it can automate the approval process for retiring or consolidating applications, streamlining decision-making and reducing manual effort.
• Collaboration and Communication - Facilitates collaboration among stakeholders involved in the rationalization process. It provides communication channels for discussing application rationalization decisions, documenting rationales, and obtaining approvals.
• Integration with ITSM Processes - Integrates with IT Service Management (ITSM) processes, enabling seamless coordination between application rationalization and other IT activities such as incident management, change management, and asset management.
• Cost Analysis - Analyze the costs associated with each application, including licensing fees, maintenance expenses, and infrastructure costs. This helps in identifying opportunities for cost savings through rationalization.
• Risk Management - Assess and mitigate risks associated with application rationalization. It helps in identifying potential impacts on business operations, ensuring continuity, and managing compliance requirements.

• Performance Monitoring - Monitor application performance and usage metrics. This data helps in evaluating the effectiveness of rationalization efforts and making informed decisions about application consolidation or retirement.

Enterprise Architecture Capabilities in ServiceNow APM

ServiceNow enhances the depth and breadth of application rationalization efforts by adding enterprise architecture capabilities into the module.

• Business Capability Mapping - Map applications to specific business capabilities or functions. This mapping provides insights into which applications support critical business processes and which may be redundant or underutilized. By understanding the relationship between applications and business capabilities, organizations can make more informed decisions about which applications to prioritize for rationalization efforts.

• Enterprise Architecture Repository - Serve as a central repository for storing EA artifacts such as business capabilities, information systems, technologies, and their interrelationships. This repository provides a holistic view of the organization's IT landscape, enabling stakeholders to understand how applications fit within the larger architectural context.
• Application Dependency Mapping - Map dependencies between applications, as well as between applications and other architectural components such as databases, servers, and interfaces. This dependency mapping helps in identifying potential impacts of rationalization decisions and ensures that critical relationships are not disrupted.
• Alignment with EA Principles and Standards - Align application rationalization efforts with EA principles, standards, and guidelines. By ensuring consistency with the overarching architectural framework, organizations can make strategic decisions that support long-term IT goals and objectives.
• Impact Analysis within the EA Context - Enable impact analysis within the EA context, allowing organizations to assess how changes to the application portfolio will affect broader architectural components and vice versa. This holistic view helps in identifying synergies, redundancies, and opportunities for optimization across the entire IT landscape.
• EA Governance and Compliance - EA governance by providing tools for defining and enforcing architectural standards, policies, and compliance requirements. It ensures that application rationalization decisions adhere to established architectural guidelines, mitigating risks and promoting consistency across the organization.
• Roadmap Alignment - Facilitate alignment between application rationalization initiatives and EA roadmaps.
• Scenario Planning and Modeling - Perform scenario planning and modeling within the EA context, allowing stakeholders to evaluate various rationalization scenarios and their potential impacts on the overall architecture. This proactive approach helps in making informed decisions that optimize the application portfolio while minimizing risks.
• Strategic Alignment - Assess the strategic alignment of applications with business goals and objectives. By aligning applications with key business capabilities, organizations can ensure that their IT investments are supporting the most critical aspects of their operations, enabling better resource allocation and prioritization during the rationalization process.
• Impact Analysis - Show changes to the application portfolio will affect business capabilities. This helps in identifying potential risks and opportunities associated with rationalization decisions, enabling organizations to make informed choices that minimize disruption to business operations.
• Optimization Opportunities - Mapping applications to business capabilities, ServiceNow can highlight opportunities for optimization and improvement. For example, it may reveal instances where multiple applications are performing similar functions across different business units and suggesting opportunities for consolidation or standardization to improve efficiency and reduce costs.
• Governance and Decision Making - Provide a centralized platform for governance and decision-making related to application rationalization based on business capabilities. It enables stakeholders to collaborate on rationalization decisions, ensuring that they align with broader business strategies and objectives.

By leveraging these capabilities, organizations can use ServiceNow as a strategic tool to streamline the application rationalization process, optimize their application portfolio, and drive efficiency and cost savings.

Getting Started with ServiceNow Application Portfolio Management

Great guides and playbook examples

CIO Government Application Rationalization Playbook

Collaborative Consulting Application Rationalization

Thank you to the following resources who added feedback to this blog!

• Randy Rempel: https://www.dhirubhai.net/in/randyrempel/