Application rationalization and portfolio management involve thoroughly analyzing an organization's IT systems and applications to identify opportunities to improve efficiencies and optimize costs. This involves taking an inventory of all applications, analyzing how they support business processes and strategic objectives, and identifying redundant, underutilized or outdated systems. Recommendations are then made to upgrade, retire or consolidate applications. Establishing an ongoing application portfolio management process ensures IT continues to demonstrate business value and align with the organization's strategy.

1. APPLICATION
RATIONALIZATION
By Carolyn Reid
CSR Consulting LLC

2. Application Portfolio Management
A thorough analysis of IT applications and systems in most organizations should reveal many
opportunities for savings and improved efficiencies. Application rationalization is a process in which
an organization’s IT assets are thoroughly reviewed and analyzed to develop a plan for
improvements across all systems. Application Portfolio Management (APM) is a process to maintain
and optimize the Portfolio of applications and systems.
The Business Drivers for Application Portfolio Management
What are the issues and concerns addressed by Application Rationalization and Application Portfolio
Management? The table below shows the issues from the user, IT Management and software
management perspectives.
Figure 1:Issues Driving the Need for Application Rationalizationand ongoingApplicationPortfolio analysis
Application rationalization looks at the business processes along with the IT systems, analyzing
procedural issues as well as system issues to determine what needs to be improved or fixed.
•Takes too long to get information
•Data accuracy is suspect
•Technology issues areaffecting the efficiency of the business Processes.
•Cannot obtain reports needed in a timely manner.
•Manual data entry and re-entry is required.
IT Customer
Complaints
•The IT Asset inventory is too largeto be maintained by the limited IT
resources.
•The Business does not see the value added from IT investments - Results in
IT not having sufficient funds to complete required improvements.
•DatabaseCentralization is needed as data is entered in more than one
place manually or kept in individual spreadsheets, or paper forms.
•Systems arenot Retired prior to the point where they fail.
IT
Management
Pains
•Costs include unused licenses as the license tracking process is inefficient.
•Software is in use that is no longer supported by the vendor.
•Maintenance costs are out of control.
•Duplicate applications for the same purpose.
•Underutilized applications that should be eliminated.
Software
Management
Issues

3. Application Rationalization
3
What Application Portfolio Management does for the business
Application Portfolio Management extends the value of IT to the business by ensuring IT is making
an optimized contribution to the business. The improvements that result from the Application
Rationalization effort will be very visible to the business providing cost savings and providing
improved efficiency of business processes.
Application Rationalization optimizes the operation of the IT systems and applications, ensures data
accuracy and ensures compliance with regulations. From the business perspective, the analysis ties
IT to the business strategy and streamlines and improves processes.
How does Application Portfolio Management work?
The following are critical to successful Application Portfolio Management and Application
Rationalization:
 Clear and relevant IT strategic objectives that are tied to the business strategy,
 Mutual (between IT and business) understanding of business value for the organization,
 Buy-in to the analysis by the user community and the executive level of the organization.
Inventory
The first step in the process is to inventory all applications, systems and processes. Questions to be
answered for the entire application inventory include:
 How are the applications being used and who uses them?
 What processes does each application support?
 What data is input and output to the application?
 What is being spent to maintain, support, upgrade?
 What is the business value of the application?
 What strategic objectives does the application contribute to?
 What are the technical requirements?
 Determine level of customer satisfaction with the application or system.
 Assess risk associated with the application or system.
 Is the system managed and supported well?
Answers to these questions provide a clearer understanding of the state of the IT assets.
Analysis
Application Portfolio Management requires thorough analysis of processes, operations, data and
systems to enable good decision making regarding plans for the IT systems and applications. The
relationship of each asset to process, function, capability and data input and output need to be
examined.

4. Application Rationalization
4
As shown in the following diagram, tools used for the analysis include: Process flow diagrams, Entity
Relationship Diagrams for each application, Enterprise Architecture, functional and technical specs,
user lists, help desk data, application budget data, and IT asset data. Analysis of this information will
identify redundant capability, identify costly assets (high cost to maintain), determine underutilized
assets and highlight downtime issues. This analysis will be combined with the process analysis to
determine required activities to optimize the portfolio.
Figure 2:Input and Output for ApplicationPortfolioAnalysis Phase
With regard to process, the first questions to be answered: are the processes written and are they
accurate? Just like applications, processes need to be easy to use and follow. Feedback from those
who use the processes will determine which processes need re-engineering. A review of all
processes together will determine gaps, overlaps and areas where the process flow is not optimal.
This analysis will also determine opportunities for process automation.
Data accuracy and accessibility are essential to efficiency. Is data entered in more than one place?
This would indicate opportunities for integration of systems. Users need to confirm that data is easy
to find.
While data is gathered separately for applications and systems, processes and data, the information
must be cross referenced. It is important to look at the relationships between the processes,
applications and data. Which applications support which processes? What data is collected for each

5. Application Rationalization
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process? Are there labor intensive processes that can be automated? The Application Portfolio
analysis will determine improvements for processes, applications, database structure and data
collection. Decisions will be made to upgrade, sunset, combine and replace applications.
The analysis provided in application rationalization provides a great opportunity for IT to provide
business value in cost savings and improved efficiency. Establishment of an ongoing Application
Portfolio Management process ties IT to business as it clearly demonstrates the business value of
the IT strategic plan.
Figure 3:High Level ApplicationPortfolio ManagementProcess Steps
The diagram above shows the very basic steps of Application Portfolio Management. Once the
analysis is complete, recommendations are provided for all applications. Most of the
recommendations translate to projects which are then processed through the Portfolio Management
prioritization and onto the Project Management process. Application Portfolio Management is an
ongoing process requiring update to the inventory, information, analysis and recommendations as
capabilities are added and as applications are retired. In addition, the Application Portfolio must b e
monitored and re-evaluated to ensure it is contributing to the business strategy.
An example of Application rationalization and establishment of Application Portfolio Management
can be seen in a case study in which the purpose was to develop an IT roadmap for a government
agency. First information/ data was collected. The applications were inventoried and each
application was assigned a Point of Contact as the person who “owned” the application. A survey
was prepared with a series of questions for the application owners. After reviewing the information
provided from the survey results, the team set up user meetings to discover issues from the user
community and discuss the survey findings. The surveys and discussions provided excellent
information for determining actions required to optimize the IT systems and applications. The
agency’s corporate strategies were tied to the initiatives developed from the analysis to prioritize
Inventory Collect Information Analyze
Recommendations Projects Prioritize

6. Application Rationalization
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projects required to complete the plan. This application rationalization resulted in a valuable IT
roadmap for the agency.
As this case shows, Application Portfolio Management can be used to develop a holistic IT solution.
The solution will provide continued cost savings and efficiency.