Application rationalization in LeanIX

Application Rationalization: A Strategic Approach

In today's rapidly evolving digital landscape, application rationalization has become a strategic imperative for organizations aiming to streamline operations, enhance agility, and drive business value. Identifying rationalization opportunities is just the beginning of a complex journey that demands a strategic, collaborative approach.

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Understanding Application Rationalization

Application Portfolio Management is a key component of Enterprise Architecture Management. It involves evaluating, maintaining, and optimizing an organization's software applications. As enterprise architects, your role extends beyond overseeing the application portfolio to ensuring its alignment with business objectives, IT strategy, and the technological landscape. This alignment is crucial for maximizing the value derived from IT investments and ensuring that the application portfolio supports the organization's strategic goals.

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The Need for Application Rationalization

Inefficient, redundant, or outdated applications can become a significant burden, draining resources, and hindering business agility. This is where application rationalization becomes crucial. The primary objective of rationalization is to consolidate, modernize, retire, or replace applications, to:

• Reduce Costs: By eliminating redundant or unnecessary applications and optimizing the application portfolio.
• Enhance Efficiency: By streamlining processes, reducing complexity, and improving overall operational efficiency.
• Align with Business and IT Objectives: By ensuring that the application portfolio supports and aligns with the organization's business strategy, objectives, and technological landscape.

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The Rationalization Methodology

Our approach to application rationalization is built on a comprehensive and structured methodology consisting of four key components: Opportunity Analysis, Feasibility Assessment, Planning & Execution, and Continuous Insights. These components aim to reduce the subset of applications relevant for rationalization quickly, freeing up time for other activities.

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1. Opportunity Analysis

Opportunity Analysis serves as the foundational step in the application rationalization process. It involves a comprehensive evaluation of the application portfolio to identify potential rationalization opportunities. Utilizing frameworks like TIME or redundancy analysis based on supported business capabilities can be instrumental in this phase. The aim is to rationalize with purpose, ensuring alignment with the organization's application strategy, target architecture, or business strategy.

• Comprehensive Evaluation: The opportunity analysis involves a systematic evaluation of the application portfolio to identify potential rationalization opportunities. Depending on what the organization chooses to focus on, attributes in the evaluation should be weighed accordingly.
• Frameworks and Tools: Utilizing frameworks like TIME (Tolerate, Invest, Migrate, Eliminate) or redundancy analysis based on supported business capabilities are proven methods. Additionally, volunteer programs or crowd-sourcing initiatives can also be leveraged to gather insights and identify opportunities based on real-world operational knowledge. Regardless of frameworks applied, the metrics used to feed the frameworks must be related to e.g. business drivers and/or technical requirements. ‍
• Purpose-Driven Rationalization: The aim of this phase is to rationalize with purpose, guided by the organization's application strategy, target architecture, or business strategy. A well-defined and purpose-driven approach ensures that rationalization efforts are aligned with the organization's strategic objectives and deliver maximum value. Being clear on what criteria we value in relation to rationalization, enables us to collect the relevant data, and in a structured way do broader, semi-automatic reporting.  The Opportunity Analysis is often driven by the EA department. It requires insight into, and understanding of, broader elements of the organization. Business capabilities, organizational units, processes, data and dataflow, strategic insight and knowledge on the application strategies are some of the elements influencing the Opportunity analysis. Each of the investigated applications should be marked according to the opportunity they present in relation to rationalization.  

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2. Feasibility Assessment

Feasibility Assessment is the second phase that follows Opportunity Analysis. It involves prioritizing and conducting a deeper analysis of the identified opportunities to determine their feasibility for rationalization. This phase is driven by subject matter experts and involves collaboration across departments such as Enterprise Architecture, IT, and possibly PMO. The objective is to leverage collective expertise and insights to make informed decisions and prioritize rationalization efforts effectively.

• In this phase we transition towards a more subjective assessment. We need to respect the people working with the applications, and the knowledge they have in this relation. There are, however, still plenty of objective measurements that can go into this phase. We do however often see, that obtaining this data is less straight forward. How do you define an application cost as an example. It can be made up of Licensing fees, development costs, infrastructure costs, maintenance and support costs, security and compliance costs, training and documentation costs. To make matters more interesting, the costs can be split between departments and units.  
•   Collaborative Approach: The feasibility assessment requires input from various stakeholders as described. The risk in this phase is that responsibility of the rationalization process is not clearly defined. Likely the responsibility has shifted from EA in the opportunity phase, to an application responsible or rationalization manager.  
•    Prioritization and In-depth Analysis: This phase involves a deeper dive to prioritize applications based on critical features, user impact, re-training needs, costs, allotted budget and alternatives. If applications are feasible for rationalization, they will be tagged or marked as such. Working with a data-driven EAM tool, will make it visible to stakeholders, that this application is selected for rationalization. This should reduce the risk of expanding the use of the application in the organization.

3. Planning and Execution

Planning and Execution form the core of the rationalization process, focusing on translating the insights gained from the Opportunity Analysis and Feasibility Assessment into actionable plans and tangible outcomes. We move from discovery to execution. This collaborative phase entails assessing current and future states, developing a roadmap for rationalization, and ensuring adherence to target architecture as well as funding. Effective project management, stakeholder engagement, and alignment with IT change management frameworks are crucial to ensure successful planning and execution of rationalization efforts.

• Handover: Moving from the previous discovery phases to the execution phase will most likely also entail another handover of responsibility. Where Enterprise Architects often are tasked with identifying what applications to rationalize, the act of being the actual Application Undertaker falls to different departments.  
• Budgeting: Who pays for the rationalization projects? Data migration, re-training, interfaces and hyper-care, re-platforming or replacement applications. It all comes with a cost.
• Roadmap Development: A roadmap must be created, and initiatives linked to objectives, capabilities and applications, to create a transparent view on what is affected by the coming transformation. The Roadmap should contain milestones on gates to secure budget for application rationalization.
• Project Management and Stakeholder Engagement: The skillset required to effectively and with success rationalize applications, favors project management and stakeholder engagement. There will be many moving parts, and not one person will have all the required knowledge on ‘as-is’, and ‘to-be’. Here, again, working data-driven, and with one shared view on the Enterprise Architecture, will reduce the risk of miscommunication.

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4. Continuous Insights

Continuous Insights play a pivotal role in ensuring ongoing visibility and informed decision-making throughout the rationalization process. Providing stakeholders, sponsors, and contributors with real-time visibility into the progress of rationalization efforts is essential. Leveraging data-driven metadata tools like LeanIX facilitates informed decision-making, fosters collaboration, and enables alignment with the organization's rationalization objectives. The continuous generation and analysis of insights allows organizations to adapt and refine their rationalization strategies based on evolving needs and priorities.

   - Ongoing Visibility and Line-of-sight: Years down the line, it can be challenging to remember why we initiated rationalization efforts. Maintaining a clear line of sight to the objectives of each rationalization initiative helps keep projects on track. It's essential to demonstrate how effectively we are delivering on the promise of rationalization. Reporting on data instead of creating PowerPoint presentations provides a solid foundation for management to track progress.  

  - Data-driven Decision-making: Utilizing data-driven tools such as LeanIX enables both architects and managers to base their decisions on consistent data and shared knowledge. With a unified nomenclature, the risk of misunderstandings decreases. By aligning views on enterprise architecture, initiatives are directly informed by data, facilitating more informed and effective decision-making.

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Challenges and Mitigation Strategies

While the rationalization process offers significant benefits, it also presents several challenges that can derail your efforts if not addressed proactively:

•  Strategic Alignment: Ensuring that rationalization efforts support organizational strategies and objectives is critical for rallying support and securing buy-in.  
•  Data Ambiguity: A shared understanding of the application landscape and capabilities is essential to avoid derailed discussions and facilitate informed decision-making.
• Role Clarity and Ownership: Unclear roles and ownership can hinder collaboration, reduce efficiency, and impede decision-making. Establishing clear roles, responsibilities, and ownership is paramount to the success of rationalization initiatives. ‍
• Cost Management: Unclear expectations regarding costs and ownership can impact everything from process design to priorities. A transparent and well-understood cost structure is essential for effective rationalization.
• Process Design and Assumptions: Working without a well-defined and common rationalization process can lead to assumptions, a lack of accountability and decreased delivery rates. A structured and standardized approach to rationalization is crucial for success.  

Tool

Having a EA tool in place will help mitigate some of the challenges. It is by no means a silver bullet though.  

We still require the right people and trustworthy data, to let us rationalize with confidence. We have seen LeanIX take the role of interpreter, and enable Business, IT and Project Management to have a common ground run the rationalization effort from.  

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Conclusion

Application rationalization is not merely about leveraging the right tools; it's about striking a balance between defining clear objectives, implementing an effective system, and navigating organizational dynamics to drive the rationalization agenda forward. Whether you are embarking on your rationalization journey or looking to improve existing efforts, collaboration, shared understanding, and a data-driven approach are key to achieving success.

In this series on application rationalization, we will delve deeper into the challenges, best practices, and strategies for setting up your organization for success. Stay tuned for insights on how to leverage LeanIX effectively, drive engagement across IT and business departments, and build a robust and agile rationalization process tailored to your organization's unique needs and challenges.