Authored by Steve Patti

One of the hot topics in application portfolio strategy over the past few years has been portfolio rationalization.  That is, inventorying and evaluating all of the applications an enterprise is running to look for ways to reduce redundancy, costs, and improve business efficiency.  On the surface, portfolio rationalization appears to be a noble cause and an exercise that every enterprise should undertake.

There are no shortage of vendors willing to step up to help today’s enterprise businesses in this endeavor, and each have their own agendas for doing so.

  • For software developers: Portfolio rationalization is great way to “go fishing” for new development projects.
  • For systems integrators: Portfolio rationalization provides an opportunity to identify legacy applications that can be moved to SaaS platforms thereby generating application licensing, application configuration, and data migration revenue.
  • For the large international consulting firms: Portfolio rationalization offers an opportunity for both new development and application migration revenue, but also an opportunity to sell ongoing “performance engineering” and program management services.

For others, portfolio rationalization allows them to sell project and portfolio management (PPM) tools (e.g. CA Clarity), or portfolio and resource management tools (e.g. Planview).

While all of these pieces to the puzzle can be valuable, they take the long road to solving the primary business challenge CIOs need addressed — aligning IT resources to support the business technology (BT) agenda.

In my conversations with Forrester Research analyst Phil Murphy in early 2015, Phil describes the traditional “bottom up” portfolio rationalization as the old way of thinking. That is, companies taking the time to inventory every application in the portfolio over many months and then trying to disposition those applications in an objective manner while balancing turf wars with internal IT and/or business stakeholders that want to preserve their current application models.

If you’ve ever engaged in an application portfolio rationalization exercise, the truth is that if the app inventory process becomes too burdensome and/or takes too long, internal IT and stakeholder attention span wanes as they become distracted with urgent business priorities and the rationalization initiative can stall. Even if the app inventory and information discovery process doesn’t stall, the sheer volume of application dispositions and regression analysis of application options becomes overwhelming. The C-suite cannot understand it and the IT department lacks resources to execute it.

Utilizing the Top-down approach. The Pareto-like approach.

Phil suggests that the new way of thinking about portfolio rationalization is a “top down” approach whereby a Pareto-like approach is applied. Specifically, identify the 20% of the application inventory that is consuming 80% of the IT budget. By evaluating those applications against not just technical and business impact dimensions but also measuring them against the business strategy, an enterprise can get the “biggest bang for their buck” in terms of freeing up valuable IT resources (staff, infrastructure, budget) that can be realigned to support line-of-business objectives – and therefore not only deliver better ROI but drive collaboration between IT, Finance, and business unit executives.  The tops down approach works because it’s focused on business transformation and accelerating ROI impact – not serving the agenda of a vendor looking for development work or to sell consulting and tools.

Headspring’s approach to portfolio rationalization mimics the same rapid delivery framework they apply to Agile development projects — accelerated iteration and delivery means earlier ROI recovery for clients. By starting with asking not just the Pareto-type questions but digging into the “what” questions around key business strategy goals and desired business outcomes, and then “why” questions related to current process models: the goal is crystalized in a way that fast tracks ROI “wins”. These wins will help IT support line of business leaders and demonstrate measurable ROI impact in alignment with corporate strategy.

If you are considering a portfolio rationalization exercise using the bottoms up approach – perhaps it’s worth taking the time to rethink your options and consider a smarter approach to generate quicker ROI impact while building IT credibility.

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