Decoding the Application Rationalization Process: A Step-by-Step Guide

February 16 - 2024

Application rationalization optimizes your organization’s application portfolio to align your tech stack with business strategies. It’s essential for accelerating digital transformation while reducing costs and setting the foundation for future growth. 

However, the process involves many moving parts. You must develop a 50,000’ view of everything in your infrastructure and drill down to the nuts and bolts to turn insights into action. A proven process is essential for capturing all the details and generating accurate and meaningful insights. 

Let’s explore the 6 steps to successful application rationalization, the top challenges organizations must overcome, and how to get the most out of this process. 

6 Steps of a Successful Application Rationalization Process 

What does it look like when the rubber meets the road? Here are 6 essential steps for a successful software application rationalization process. 

Step 1: Conduct an Assessment and Identify Gaps 

Work with key stakeholders to understand your organization’s business and technical requirements. Discuss each department’s or team’s tech stack and tool-related IT challenges. You may create a survey to gather information about each software's business value, technical fit, and total cost of ownership (TCO).  

Cover these key points in your application rationalization assessment questionnaire: 

  • Is the application effectively supporting your business goals? 

  • What are the complexity and costs of customizing the software?  

  • Is the tool user-friendly? Does it require substantial employee training? 

  • What are the technical requirements (e.g., storage, bandwidth, data)? 

  • What are the dependencies? Does the tool rely on other software to perform its function? 

  • Are you satisfied with the interoperability, scalability, and adaptability? 

  • Does the application meet the organization’s security and compliance standards? 

Step 2: Create an Application Inventory 

You may use an application rationalization tool to automate the discovery process and take stock of all the applications used across the organization. If you have a list of approved applications, compare it with the inventory to see if you need to address shadow IT issues. 

Review your inventory and identify software that may be costing you. These include different applications serving the same purpose, tools used by only a few employees, applications the company pays for but no one uses, and legacy applications with high operating costs and security risks. 

Step 3: Assess the Business Value and Technical Fit 

Weigh the business value and technical fit of each application. Determine an application’s dependencies (i.e., how the tools connect) to understand how it may affect the complexity of your infrastructure. Use the insights to optimize spending without disrupting workflows. 

Also, identify duplicated applications. For example, one department purchases features from a platform while another team uses different components from the same vendor. You may benefit from an enterprise plan with a broader feature set to gain efficiency and minimize redundancies. 

Step 4: Estimate the Total Cost of Ownership (TCO) 

Calculate the TCO of each tool at the current and future state. Look beyond the obvious to identify hidden or unknown expenses, such as projected future costs (e.g., maintenance, customization), depreciation value, and the extra administrative burden caused by complicated service level agreements. 

You may also estimate the expense per user and identify cost outliers that don’t offer the corresponding high business value or technical fit. Conduct further reviews to weigh the pros and cons of keeping them in your application portfolio. 

Step 5: Score Each Application 

Establish a consistent and unbiased scoring system to evaluate the combined impact of business value, technical fit, and TCO on each application. Develop a communications strategy to help stakeholders understand the scoring process, encourage internal discussions, and gather feedback to refine the methodology.  

Transparency is critical for the success of the application rationalization process. Winning stakeholder buy-in will facilitate change management and drive user adoption as you implement the recommendations. 

Step 6: Prepare For Implementation 

Categorize applications to determine the next step: 

  • Review applications with low business value but a high technical fit. You may maintain current funding levels, expand the tools’ business value, or seek lower-cost alternatives. 

  • Reward applications with high business value and high technical fit. You may increase investment, enhance functionality, or expand its use in the organization. 

  • Refresh applications with high business value but low technical fit. You may invest in modern and secure systems to achieve the same business value. 

  • Remove applications with low business value and low technical fit. You may decommission them or consolidate their functions with another software. 

Also, develop a migration and change management plan to support execution. Get buy-in from senior leadership and create a communication strategy to inform stakeholders about the changes. Implement a vendor management plan to align contracts with your migration strategy and design a training program to encourage end-user adoption. 

Decoding the Application Rationalization Process: A Step-by-Step GuideAvoid Application Rationalization Pitfalls to Ensure Successful Implementation 

To reap the benefits of application rationalization, organizations must navigate various challenges. Here are the common pitfalls to avoid: 

  • Resistance to change from stakeholders and employees could create roadblocks for replacing or retiring applications. 

  • A lack of visibility into the organization-wide application landscape may lead to an inaccurate evaluation of each application's usage, cost, and value.  

  • Technical complexity may hinder system integration, software updates, and data migration during execution.

  • Organizational silos could make gaining a comprehensive view of the application landscape challenging and prevent effective collaboration. 

Also, some IT teams use application rationalization tools but lack the expertise to accurately interpret the findings — impacting their ability to turn insights into meaningful action. 

Getting expert support is critical to managing all the moving pieces and maximizing the benefits of application rationalization. When you partner with Compugen Systems, our experts will be there with you every step to understand your requirements, conduct the assessment, interpret the results, provide vendor-agnostic recommendations, orchestrate change management, and establish governance mechanisms to ensure long-term success. 

Learn more about our Application Rationalization services and get in touch to see how we can help you maximize ROI with our proven process. 

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