Rationalization is a cornerstone of Application Portfolio Management (APM), focused on optimizing an organization’s application portfolio to maximize value, minimize redundancy, and ensure alignment with business objectives. At its core, rationalization involves systematically evaluating and adjusting the portfolio by identifying underperforming, redundant, or obsolete applications and deciding their future: whether to keep, consolidate, modernize, or retire them.
Why Rationalization Matters
As organizations grow and evolve, their application portfolios tend to expand organically. New applications are introduced to address emerging business needs, but old ones are rarely retired or consolidated. This results in bloated portfolios with overlapping functionality, unnecessary costs, and operational inefficiencies. Over time, maintaining such a portfolio becomes a significant drain on IT resources, both financially and operationally.
Rationalization provides an opportunity to regain control over the portfolio, ensuring that every application serves a clear purpose, aligns with organizational goals, and delivers measurable value. The process helps eliminate waste, reduce technical debt, and free up resources for innovation and strategic initiatives.
Key Drivers for Early-Stage Rationalization
Several drivers make rationalization a priority for organizations embarking on APM:
- Cost Reduction: One of the most compelling reasons to rationalize is the immediate cost savings. Rationalization helps reduce licensing fees, maintenance costs, and infrastructure overhead by retiring underutilized or redundant applications.
- Improved Operational Efficiency: A streamlined portfolio simplifies IT operations, reduces complexity, and enables teams to focus on maintaining and enhancing critical systems rather than managing unnecessary applications.
- Risk Mitigation: Legacy or unsupported applications can expose organizations to security vulnerabilities and compliance risks. Rationalization helps identify and address these risks proactively.
- Alignment with Strategic Goals: Rationalization ensures that the application portfolio supports broader organizational objectives, such as digital transformation, customer experience enhancement, or market expansion.
- Fostering Innovation: By freeing up resources previously tied to maintaining redundant applications, IT departments can allocate more capacity to strategic projects and innovation.
Challenges in Early-Stage Rationalization
While the benefits of rationalization are clear, organizations often face challenges during the early stages:
- Incomplete or Inaccurate Inventory: Without a comprehensive and accurate inventory of applications, it is difficult to make informed rationalization decisions.
- Stakeholder Resistance: Users and business units may resist the retirement or consolidation of applications they perceive as critical, even if they are underutilized or redundant.
- Lack of Clear Governance: Without a governance framework to guide rationalization efforts, decisions can become inconsistent, subjective, and difficult to enforce.
- Data Quality Issues: Poor data quality related to application usage, costs, and performance can hinder effective decision-making.
Goals of Early-Stage Rationalization
The primary goal of early-stage rationalization is to lay the foundation for a leaner, more efficient application portfolio. This involves identifying low-hanging fruit—applications that can be retired or consolidated with minimal disruption—while establishing processes and governance structures for more comprehensive efforts in the future. Specifically, early-stage rationalization aims to:
- Achieve quick wins to demonstrate value and gain stakeholder buy-in.
- Build organizational momentum for ongoing APM efforts.
- Develop a systematic approach for evaluating applications based on business value, cost, and risk.
- Create a framework for continuous improvement in application portfolio management.
The Role of Rationalization in APM
Rationalization is not a one-time activity; it is a continuous process integral to the success of APM. By regularly evaluating and optimizing the portfolio, organizations can maintain alignment with evolving business needs, technological advancements, and market conditions. Early-stage rationalization sets the stage for more advanced practices covered in later chapters and volumes, such as strategic modernization, integration with DevOps, and leveraging AI for decision-making.
By addressing immediate inefficiencies and building a strong foundation, organizations can create a culture of proactive application management that drives long-term value and adaptability in an ever-changing business environment.
