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5 Ways CIOs Can Rationalize Application Portfolios

The pressure is mounting for CIOs and other IT leaders to help the business
enable new disruptive technologies like mobile, social, cloud and big data, but
many CIOs are struggling to do so because maintaining and supporting legacy
applications consumes the lion's share of the budget. Here are five
recommendations for rationalizing your application portfolio.
In many organizations, the complexity of the application landscape is becoming a
major challenge for the CIO. Maintaining and supporting legacy applications
consumes the lion's share of the budget, leaving little room for innovation. And
yet, disruptive next-generation technologies like mobile, social, cloud and big
data promise tantalizing benefits to the business if it can leverage them.
And there's the rub: Even as the business is beginning to look at IT as a strategic
enabler that can help it get its arms around these new technologies, IT is
struggling to deal with an application landscape that is more complex than ever
"There's a striking difference from 2011: IT is considered much more, particularly
by the business side, as something that helps them innovate and inform
themselves," says Ron Tolido, senior vice president, Application Services, at
consulting, technology and outsourcing services provider Capgemini.
Tolido is also the author of Capgemini's recently released Application Landscape
Report 2014, a follow-up to a 2011 report on the same subject.
"In 2011, IT was much more looked at for cost reduction," Tolido adds. "Now it's
seen as a strategic enabler. It puts a lot of the CIOs that we've been surveying
under a lot of additional pressure."
Even back in 2011, CIOs clearly felt the pressure to rationalize the application
landscape, Tolido says.
"Despite their worries and clear recognition of the need for action many
CIOs indicated that they found it difficult to actually start rationalizing their
portfolio," Tolido writes in the report. "The impediments of complexity, cost
constraints and the inability to define a convincing business case were simply too
big to take on."
Now, he says, the need is becoming critical. He has five recommendations to
help CIOs get rationalization programs under way.
1. Industrialize and Standardize First
Nearly one-half (48 percent) of respondents to Capgemini's study reported they
have more applications in their portfolio than the business actually requires.
That's a large jump from 2011, when 34 percent of organizations reported the

"Most CIOs will admit that they have far too many applications," Tolido says. "It's
a clear increase compared to 2011. Despite the ambitions CIOs had a few years
ago to simplify their IT landscape, in practice they haven't really been able to do

One of the big contributing factors to the growing number of applications in the
portfolio is that few businesses are willing to decommission applications, even as
individual business units turn to software-as-a-service (SaaS) solutions to meet
their needs, either with IT's approval or in the form of shadow IT. These SaaS
solutions add to the complexity as well.
Capgemini recommends starting by taking a fresh look at your application
landscape, seeking ways to apply industrialization and standardization to
rationalize its foundation. Fully 70 percent of respondents to Capgemini's study
believe that at least one-fifth of their applications could be consolidated by
eliminating redundant functionality.
"Look for opportunities to mutualize resources, improve documentation, refactor
software, consolidate overlapping applications, eliminate redundant applications,
replace aging and high-risk technologies, get rid of excessive customization and
to improve development and application management productivity," Tolido writes
in the report.
2. Consider More Radical Rationalization Scenarios
Despite efforts over the past few years to streamline the application landscape,
Tolido says that, in many organizations, the problem has reached the point that
CIOs need to consider "extreme" strategies. He points to two such rationalization
strategies that more and more organizations surveyed by Capgemini have begun
adopting: "enhancement" and "rip-and-replace."
In the enhancement scenario, Tolido says, IT leaves legacy applications in place
but doesn't touch them or spend time adding new features. Instead, IT wraps
next-generation technology like a mobile front-end or cloud-based API
around them.
In the rip-and-replace scenario, IT simply jettisons the old applications and
replaces them with new, standard applications, often cloud-based applications.
"Though the first strategy is a pragmatic, relatively low-risk one that delivers
quick results without massive change, it's radical in the sense that it moves the
focus away from rebuilding core applications to the outer layers of the
application estate," Tolido writes in the report. "The second strategy is much
more radical though, and is likely to be ignited by the impatience of the business,
frustration by earlier rationalization attempts and the availability of a new
generation of relatively low-cost, easy-to-implement cloud-based solutions."

While Tolido notes that these strategies would have been unthinkable by most
CIOs just a few short years ago, the pressure from the business is mounting
these days and CIOs that are struggling to make progress in application
rationalization need to consider more radical solutions.
3. Leverage Next-Generation Solutions
"In most cases, the single biggest reason not to be able to rationalize is the
inability to create a business case," Tolido says. "This simply has to do with a lack
of metrics."
But here, Tolido says, the business landscape has begun tilting in favor of CIOs.
Social, mobility, big data and cloud solutions are big drivers of the need for
application rationalization, and CIOs can use the perceived high business value
of these solutions to build compelling business cases for improvements to the
underlying core applications.

"There's much more pressure from the business side to rationalize the
application landscape because they want to do these innovative things," Tolido
"Also, the new wave of applications typically comes with advanced (cloud-based)
platforms that provide alternative ways to unlock legacy applications and link
them to the new front ends," Tolido writes in the report. "Done in the right way,
the application portfolio would be a convincing mix of new, high-value solutions
and critical changes to the underlying foundation."
4. Embed Innovation in the Application Lifecycle
Most CIOs are familiar with the old 80-20 rule: 80 percent of your time and
resources are spent "keeping the lights on"running and operating existing
applications. That leaves only 20 percent for innovation. The way to slay that
bugbear, Capgemini says, is to embed innovation within the application lifecycle
(and into any application management or support contract, if applicable).
"For example, this can be done through organizing periodical trend workshops,
the obligation to dedicate a well-defined part of the project portfolio to
innovative solutions or more organizational measures such as establishing an
innovation governance element (like a "value office") or simply crowdsourcing
suggestions for improvement," Tolido writes in the report.
5. Systematically Use Facts and Metrics to Create More Mutual Understanding
Underlying it all, the key to succeeding in rationalization and innovation efforts is
a solid base of agreement between business and IT on the current state of the
application landscape and the priorities for improvement. With both the business
and IT on the same page, you can create a forward-looking, collaborative
atmosphere that can enable digital transformation success.

"Consider tools for application mapping and assessment, and for application
portfolio management," Tolido writes in the report. "Use these tools among
other thingsto relate applications to business processes so that the business
impact and value of applications become clearer and more tangible. This helps to
make rationalization decisions and establish priorities based on business
criticality. Also, pay more attention to business case development, business
outcome-driven dashboards and even "value engineering," as they provide
powerful, objective means for communication between the various stakeholders.

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Jon Cohn ,CTO , VP IT Architecture

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