Cost optimization is an essential pillar for businesses to thrive in a hyper-competitive landscape. With application portfolio rationalization, businesses can significantly optimize their application spending with a thorough assessment. Today’s businesses use a blend of bespoke and COTS software applications to address the diverse needs of business and IT Teams. While application development and consumption are growing steadily worldwide, the need for portfolio management has emerged stronger than ever before. In this blog, we will try to outline the best practices for businesses to maximize business value with application portfolio rationalization.

Identifying High-Value Applications with Application Portfolio Rationalization

Application portfolio rationalization is a comprehensive process to help organizations mitigate the challenges associated with portfolio management. Let us start with why you need to manage your application portfolio effectively. Companies seeking a head start in today’s competitive environment need to invest in a diverse suite of software applications. While having a large collection of business applications may look promising. However, without rationalization, you may fail to extract maximum business value. Application portfolio rationalization allows companies to filter the application portfolio and eliminate unnecessary costs. Moreover, this can also help enterprises with rapid assessment. Application portfolio rationalization helps build a superior organizational software environment, featuring higher efficiency, effectiveness, and minimal risk. This is expected to be the ground zero for future evolution of business. Application portfolio rationalization is gaining notable momentum, especially in the IT space. According to Gartner, global IT spending was projected at USD 4.5 trillion in 2023, up 2.4% from 2022. Anticipating a consistent rise in spending, several IT giants are looking for cost-effective operations. Thanks to application rationalization, companies can mitigate IT costs and risks and eliminate redundant technologies. It also helps simplify technology management with a robust alignment between IT and business.

The Roadmap to Business Value Maximization

Businesses embracing application portfolio rationalization can follow a set of general directives to extract maximum business value. These include:

1. Defining Goals for Application Portfolio Rationalization Assessment
Before you think of rationalizing your application portfolio, you need to conduct a readiness assessment to recognize specific needs and goals. With this, businesses can reduce their technical debt and spending, simplify cloud migration, and modernize the application environment by unlocking the full potential of rationalization.

2. Managing Application Inventory
Application inventory management is critical and should be simple. Multiple inventories elevate the risk of poor productivity. Application portfolio rationalization works best if you consolidate your application inventory.

3. Analyzing Inventory Surveys
Even before rationalizing your application portfolio, you must conduct surveys to gain a comprehensive overview of the current business scenario. The surveys should reveal the following:

• Which applications are redundant?
• How is the current suite of applications aligned with your goals?
• What is the current health of the business?
• Which aging applications need to be retired or be replaced?
• Total cost of ownership (TCO), licensing costs, and application costs.
• Potential opportunities.

4. Calculating TCO
Post survey analysis, businesses will know their TCO. Optimal TCO is key to business growth and provides clarity on business needs, resources, and the management of these resources.

5. Leveraging Scoring Tools and Setting Objectives
Next up, you need to identify scoring tools that are compatible with your business needs for generating the objectives. It takes you one step closer to implementing application portfolio rationalization and maximizing your business value.

6. Creating an Application Portfolio Rationalization Strategy
Now you are all set to develop an application portfolio rationalization strategy that is tailored for your business. By following the steps mentioned above, strategic roadmaps can be designed for better organizational outcomes and response. Businesses can also use this roadmap to make future-state models with a thorough understanding of the organization’s environment.

Up the Game with Continuous Application Portfolio Rationalization Process

A periodic application portfolio rationalization is a game changer for businesses. Typically, organizations do not rationalize their portfolio every quarter, as it may seem unnecessary. However, infrequent application portfolio rationalization may lead to ineffective management of the application portfolio. A continuous system allows businesses to re-survey participants, validate data, and identify trends.

Application portfolio rationalization can also help focus on applications that have a direct impact on your growth by enhancing customer satisfaction, consolidating strategic initiatives, generating high revenues, and gaining a competitive edge. As a business in this competitive and digitized paradigm, application portfolio rationalization will help you skate up the ladder of success.