Application Rationalization: Moving to a Second Circle Portfolio

I wrote a few weeks ago about strategic outsourcing and technology rationalization. Today, I am sharing some further views on successful technology portfolio assessment and a transformation strategy to Second Circle Technology ™. As the economic downturn continues we are seeing and increasing number of companies looking at cost reduction through application portfolio transformation. Application transformation with Second Circle Technology drives more flexible and lower cost while legacy systems constrain IT’s ability to meet business needs. We have seen reductions in cost that range from 15% to 30% of IT spend.  At the same time, legacy application portfolios constrain the ability to meet business needs. Some of the typical constraints are:

• applying systems and processes consistently throughout the company
• adapting quickly enough to address changing business needs
• ensuring the skills needed to make critical changes to systems

There are also inhibitors that make changing the application portfolio a challenge:

• Users have grown up with ‘their’ application (often built in-house) and are very protective over them
• Users perceive risks from the fear of unknown while others dislike possible loss of exclusive ownership/control
• Change may appear to be more manually intensive to the users than the existing applications
• Technologists push new technology based on personal interests and to develop their own skills and market value
• Organizations lack an effective approach to maintaining an effective portfolio and demonstrating how all the pieces fit together.

We see many instances where companies fail in their efforts to transform their application portfolio. Often, there is insufficient up front focus  securing business sponsorship and commitment. Transformation to a new or updated application portfolio is complex and there is an insufficient focus on the culture changes and buy-in needed to support the new approach. If you are trying to assess your application portfolio, you must ensure the transformation is driven by the business strategy – establish the business vision, leadership and sponsorship required to drive the program. When evaluating each application in the portfolio, you can use a structured analysis to select the most appropriate transformation approach. Begin with an inventory of applications and an overall mapping of how systems all fit together. From that point, you can assess each component of your architecture for the right strategies. Once the overall view is in place, you can make decisions at the application level. Options include:

• No change to current systems – leave current situation apart from routine support and maintenance
• Incremental enhancement or “bolting on” extensions to existing systems/architecture or “ring-fencing” legacy applications
• Replacement with a Software Package – use best of breed commercial off the shelf package or combination of packages to replace existing systems
• Replacement with a Custom Developed Application – replacement of existing systems with new, purpose-built applications
• Outsource with an on demand service provider– pass applications, infrastructure or development to a 3rd party. This is particularly popular with the advent of cloud computing and service provider expertise.

To ensure success, make sure you treat your initiative as a business change program – put in place the required capabilities, skills and resources to deliver the transformation, define and communicate your approach.