9.4. Scoring and Categorization

Scoring and categorization are essential techniques in early-stage rationalization. These methods enable organizations to evaluate applications objectively, prioritize rationalization efforts, and make data-driven decisions about which applications to keep, retire, modernize, or consolidate. By assigning scores and grouping applications into categories, organizations can align their portfolio with business and IT strategies while addressing inefficiencies.

9.4.1 Why Scoring and Categorization Are Important

• Objective Evaluation: Scoring provides a standardized way to assess applications, reducing bias and ensuring consistency across the portfolio.
• Prioritization: Helps focus efforts on high-impact areas, such as costly or redundant applications.
• Streamlined Decision-Making: Categorization simplifies complex portfolios by grouping applications with similar characteristics or outcomes.
• Strategic Alignment: Ensures rationalization decisions align with business goals, IT priorities, and resource constraints.

9.4.2 Key Criteria for Scoring Applications

To evaluate applications, consider the following criteria:

• Cost
  • Total Cost of Ownership (TCO), including licensing, maintenance, and infrastructure expenses.
  • Direct and indirect costs associated with each application.
• Business Value
  • Contribution to key business processes and strategic goals.
  • Importance to customer experience, competitive advantage, or revenue generation.
• Usage
  • Number of active users and usage frequency.
  • Adoption levels across departments or business units.
• Technical Condition
  • Age of the application and alignment with modern architecture principles (e.g., cloud-ready, API-driven).
  • Presence of technical debt or performance issues.
• Risk
  • Security vulnerabilities, compliance risks, and end-of-life status.
  • Potential impact of failure or downtime on business operations.
• Redundancy
  • Overlap with other applications in terms of functionality or purpose.
  • Potential for consolidation or standardization.

9.4.3 Developing a Simple Scoring Model

1. Assign Weightings to Criteria
   • Assign relative weights to each criterion based on organizational priorities.
   • Example: Business Value (40%), Cost (30%), Usage (20%), Risk (10%).
2. Define Scoring Scales
   • Use a simple scale (e.g., 1 to 5, where 1 = poor and 5 = excellent) for each criterion.
   • Standardize scoring definitions to ensure consistency (e.g., a score of 5 for Cost means “low cost relative to value”).
3. Calculate Composite Scores
   • Multiply each score by its corresponding weight and sum the results to derive a composite score for each application.
   • Example:
     • Business Value = 4 (weight 40% → 1.6)
     • Cost = 3 (weight 30% → 0.9)
     • Usage = 5 (weight 20% → 1.0)
     • Risk = 2 (weight 10% → 0.2)
     • Composite Score = 3.7

9.4.4 Categorizing Applications

Once scores are calculated, categorize applications into actionable groups:

• Keep
  • Applications with high business value and low cost.
  • Examples: Mission-critical systems, tools with broad user adoption.
• Invest
  • Applications with high potential but requiring enhancements (e.g., modernization, performance improvements).
  • Examples: Legacy systems critical to business but requiring re-platforming.
• Retire
  • Applications with low business value, high cost, or redundancy.
  • Examples: Duplicate tools, legacy systems no longer aligned with business needs.
• Consolidate
  • Applications with overlapping functionality that can be merged or standardized.
  • Examples: Multiple project management tools used across departments.

9.4.5 Visualization and Reporting

Visualize scoring and categorization results to facilitate decision-making:

• Heat Maps: Display applications based on business value vs. cost.
• Quadrants: Use frameworks like the Gartner TIME model (Tolerate, Invest, Migrate, Eliminate) for easy categorization.
• Dashboards: Present scoring data and categories to stakeholders for transparent communication.

9.4.6 Challenges in Scoring and Categorization

• Subjectivity in Scoring
  • Challenge: Scores may be influenced by stakeholder bias or inconsistent criteria.
  • Solution: Define clear scoring guidelines and involve cross-functional teams in the process.
• Incomplete Data
  • Challenge: Missing or inaccurate data can lead to poor decisions.
  • Solution: Use approximations for initial scoring and refine as more data becomes available.
• Stakeholder Resistance
  • Challenge: Business units may resist categorizing their applications for retirement or consolidation.
  • Solution: Communicate the benefits of rationalization and involve stakeholders in the scoring process.

9.4.7 Best Practices for Scoring and Categorization

• Start Simple: Use a basic scoring model and refine it as the organization matures in APM.
• Involve Stakeholders: Ensure scoring reflects both IT and business perspectives for balanced decision-making.
• Focus on High-Impact Areas: Prioritize applications with the greatest potential for cost savings or operational efficiency.
• Regular Updates: Treat scoring as a dynamic process, revisiting and refining scores as conditions change.

9.4.8  of Scoring and Categorization

Scoring and categorization provide a structured approach to rationalization, enabling organizations to:

• Identify and prioritize high-value opportunities.
• Develop actionable plans for application optimization.
• Build a strong foundation for ongoing portfolio management.

By adopting this process, organizations can make informed, data-driven decisions that deliver measurable benefits and align the application portfolio with business and IT goals.