What is Application Rationalization and Why is it Important?

February 02 - 2024

As organizations grow, their application landscape often becomes complex and inefficient, hindering growth while increasing IT costs. In fact, 70% of CIOs believe they can consolidate at least 20% of their applications, while companies can reduce costs by 15% by eliminating redundant applications without affecting quality and business value. 

The Harvard Business Review says, “You can’t achieve progress without rationalization.” Meanwhile, a case study by McKinsey illustrated how a retail bank assessed its application portfolio to identify over 50 unused applications to decommission, consolidate 150 redundant applications, and move 800 point-to-point interfaces into an integration platform. 

Application rationalization gives you a bird’s-eye view of your application landscape. The insights help you make strategic decisions to support your growth and set the foundation for successful digital transformation. Let’s examine what application rationalization entails and how it can benefit your organization. 

What is Application Rationalization? 

The application rationalization process evaluates and optimizes an organization’s software application portfolio to ensure applications align with its business strategy while identifying opportunities to improve scalability and reduce costs. 

It uses application rationalization tools to analyze the current application landscape, identify duplicated functionalities or redundant applications, and map each software to business objectives. Companies can use the insights to make informed decisions about which applications to keep, retire, or replace to meet their current and future needs. 

The Application Rationalization Framework 

The application rationalization framework offers a comprehensive approach to assessing applications in your IT portfolio based on specific objectives: 



Strategic Approach 

Reduce IT overhead and lower maintenance costs. 

Identify functional redundancies and remove duplicate applications from the portfolio. 

Tackle a single business capability and evaluate the associated applications. 

Predict and orchestrate the retirement of outdated applications. 

Assess business fit and technical efficiency to identify underperforming applications. 

Identify applications with low business fit or technical efficiency. 

Increase efficiency and lower costs without impacting business value. 

Migrate or consolidate applications or improve architecture. 

Target critical applications with high business fit but low technical efficiency. 

Drive business growth and achieve your desired future state. 

Invest in and expand upon applications relevant to your growth strategy. 

Focus on applications with high business fit and high technical efficiency.


The Benefits of Application Rationalization 

Software application rationalization is essential for building and refining a modern tech stack. Here are the top benefits you can expect from this process: 

Increase Cost Efficiency 

Application rationalization identifies and removes redundant or obsolete applications to streamline your application portfolio, lowering maintenance and licensing costs. You can effectively allocate resources like personnel, hardware, and budget to optimize value. The process helps simplify workflows and increase visibility by reducing the complexity of your IT infrastructure. Also, you can prevent application sprawl by planning for future needs. 

Improve Business Agility 

Application rationalization helps modernize your tech stack and facilitate cloud migration for increased scalability, flexibility, and cost-effectiveness. It paves the way to building a robust hybrid IT infrastructure while improving interoperability and cohesion among applications to boost productivity. It also encourages the adoption of an iterative development process for faster time to market and improved responsiveness to business needs. 

Support a Data-Driven Culture 

Compatibility among software applications allows you to simplify and centralize data collection, processing, and analytics. Across the organization, stakeholders can gain complete and accurate data insights in real time to inform decision-making. Application rationalization also helps you build a tech stack to enhance data quality and ensure everyone in the enterprise can access the information they need when they need it. 

Enhance Employee Satisfaction 

Application rationalization helps create an integrated environment to streamline the user experience. Employees spend less time navigating a complex set of applications and become more productive with minimum frustration. Moreover, you can evaluate your applications’ capability to support a modern workspace to meet the expectations of today’s dynamic workforce and attract talent. 

Improve Security and Compliance 

Implementing and maintaining robust security measures is easier and less costly when you have a smaller, well-vetted set of applications. A streamlined software portfolio simplifies audits and compliance with regulations and industry standards. It also facilitates the implementation and enforcement of IT governance policies to standardize technologies, ensure data consistency, and minimize the risks of shadow IT. 

Accelerate Digital Transformation 

Application rationalization aligns your software portfolio with your business objectives and digital strategy while ensuring easy integration with new platforms and technology for future growth. The insights inform your IT roadmap and align stakeholders during planning activities to connect business strategies with execution. They also help you minimize wasted time and resources caused by the misalignment of business strategies and IT initiatives. 

cloud migration strategy

How to Ensure Effective Application Rationalization  

Application rationalization covers a lot of ground. You must have a 50,000’ view of everything in your infrastructure while getting down to the nuts and bolts to connect the dots. 

Develop a thorough understanding of your legacy systems and technical debt and create a comprehensive inventory of all applications in your organization. Also, standardize business value assessment to prevent biased decisions and understand the intricate dependencies among applications when retiring or replacing software.  

Some organizations implement application rationalization tools without the expertise to accurately interpret the findings. Solely focusing on technical aspects may cause them to overlook the user experience, which is critical to adoption. Meanwhile, a lack of from-the-trenches experience may impact their ability to prioritize resources in their execution. 

To reap the benefits of application rationalization, you must combine the latest technology and techniques with expertise from seasoned professionals. 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, establish governance mechanisms, and turn insights into action. 

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

A Definitive Guide to Implementing an Application Rationalization Framework:  An IT Leader’s Checklist


Topics: Application Rationalization

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