The average company has over 500 apps, yet uses just over half that number on a daily basis1. Over time, organizations add applications and infrastructure without engaging in efforts to reduce their existing inventory. Inevitably, this leads to unused or underutilized apps that waste resources and decrease efficiency. Maintenance for these unused applications drive ever increasing costs over time and can have a dramatic effect on overall IT cost trends. Maintenance costs constrain IT budgets and crowd out new projects and innovation that can add value to the company.
This process also leads to IT accumulating a greater number of legacy applications until it ultimately becomes predominantly legacy. Once a company reaches that point, effectively managing the IT budget and evolving the organization becomes increasingly difficult. To prevent this from happening, companies must have the discipline to review their application portfolio regularly and remove outdated, obsolete, or redundant items.
What is app rationalization?
App rationalization is a critical part of taking back control of your application portfolio. It is the process of assessing IT applications across the organization to identify those that should be eliminated, consolidated, or replaced. By creating a comprehensive list of IT applications and evaluating their role within the organization, companies have a roadmap for transformation to a more efficient, lean IT enterprise. Although app rationalization is only a first step to optimizing your application portfolio, it forms the foundation for a highly scalable and dynamic IT organization.
How can app rationalization help your business?
App rationalization allows companies to deliver better service at reduced costs. It is important for IT to actively manage its applications like a portfolio. This portfolio needs to be tracked and adjusted each year and IT leaders must make critical decisions to invest, consolidate, retire or replace certain applications.
Reduced costs – It is estimated that 10% of all application spending is a result of applications that are no longer being used within the organization. Retiring applications leads to retirement of servers, storage, databases, and other costly pieces of infrastructure. The manpower needed to maintain these applications is also reduced. This can ultimately result in significantly reduced IT operations cost.
Improved service – A bloated app portfolio makes it difficult for organizations to deliver the best possible service. When resources are being wasted on unnecessary applications, more critical components inevitably suffer. App rationalization allows you to focus your resources where they’re most needed.
Room for growth – Budgets constrained by outdated applications won’t have as much room to allow your company to invest in new technologies. By pruning the application portfolio, IT leaders can free up resources to grow.
Mergers & Acquisitions – App rationalization can be a critical component of a successful merger. As two companies attempt to reconcile their varied app portfolios, there will inevitably be redundancies or pieces that don’t make sense for the new organization’s goals. By assessing both companies’ app portfolios, IT leaders can ensure they chart a unified course.
App rationalization is a critical component of IT efficiency. As these decisions are made, they will have wide reaching effects on IT operations and infrastructure. It is crucial that IT leaders understand its importance in order to build a culture that makes app rationalization a priority.
Given the immense importance of the data ecosystem, many CIOs may wonder what their role will be in ensuring that the company is positioned for data success. IT leaders need to assess their people, processes, and technology and provide the leadership that underpin these contemporary data ecosystems. This means having a clear understanding of both business goals and the technology that can help drive them. The CIO’s role is one of IT leadership and business advisement to ensure that the company uses the data ecosystem effectively.
Connect with business leaders
One of the most important roles for the CIO is serving as a connection between business leaders and the technology world. A company cannot effectively use the data ecosystem unless it has strong buy-in from business leaders. This means that the CIO must strive to show the real value of data and data-driven processes and tools. Building a coalition of partners in business and IT units is critical to ensuring that every facet of the company is using data to drive insights and innovation. The CIO must work with business leaders to motivate collaboration at all levels.
Build relationships – IT’s role is one of business support. It works to ensure that the business is using data in a way that allows employees to work more effectively and innovate. This means that the CIO must constantly build relationships both within and outside of IT. The data ecosystem should be a part of every business unit and every decision made within the company. The CIO needs to listen to the needs of the business and collaborate with other units to implement solutions that work for everyone.
Make the business case for data – Developing the infrastructure necessary for companies to fully embrace the data ecosystem means significant time and resource investments. Many business leaders will be hesitant to make significant outlays without a strong business case. It’s the responsibility of the CIO to make this case and work with business leaders to develop solutions that meet the needs of the company.
Invest in the data ecosystem
The CIO must ensure that time, resource, and cultural investments are made into making a company data-driven. The forward-thinking CIO needs to invest in IT skills and technology partners that will foster a culture that is motivated to understand the business data at deeper levels and that will be able to collaborate with business at a data-context level. IT must play a major leadership role in enabling the necessary frameworks, architectures, and governance of the data ecosystem. The CIO needs to harness core competencies in managing data-ecosystem services that consume both structured and unstructured data, providing analytics “sandboxes” that allow for exploration, hypothesis modeling, and prototyping. These new structures require agile technologies and methodologies that don’t demand “perfect” quality scrubbed data.
Shadow IT is becoming increasingly common as workers go outside of the CIO’s purview to implement solutions that meet their needs. This can cause problems for the IT department, as they must often fix technical issues and security breaches introduced by these solutions. However, the CIO cannot afford to simply pretend these outside needs do not exist. The knowledge worker is demanding self-service tools that facilitate using data environments very quickly without long lead times and eliminating the dependence on IT organizations. IT should focus on building self-service frameworks that liberate the knowledge worker, providing more independence for experimenting, data exploration, and modeling, but in a way that works with the company’s overarching technology goals.
Ensure data readiness
Today’s data-driven organizations need secure, clean, and in-context data. These are high hurdles for most IT organizations, due to a lack of data centralization and the challenges around data integration when connecting disparate structured and unstructured data sources. Implementing master-data management and other similar solutions can help organize, centralize, and clean data, ensuring greater accuracy and consistency across the business. The CIO must spearhead these initiatives, working with business leaders to collect and collate data, reducing duplicate records, and improving the overall cohesiveness of the company’s data.
Increase compatibility and connectivity
Collaboration across the enterprise is a critical element of the data-driven workplace. Technology tools and flexible infrastructure, such as cloud and mobile, have emerged and are becoming more commonplace. This allows for the connection of these complex data ecosystems to enable more natural data exploration in serving the dynamic, interdependent needs of organizations. However, it is the responsibility of the CIO to ensure that these tools are adopted and that data is cross-compatible between platforms. Ensuring that data is clean and consistently formatted requires significant oversight and governance. The IT department must help guide the business to ensure an effective, overarching strategy for data across the enterprise.
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When most consultants evaluate a client’s IT operations, they rely on benchmarks to provide a cost and performance baseline, set goals, and measure progress. But there’s a problem with this approach: It simply doesn’t work. Cost benchmarks force client data into a generic model that isn’t able to capture the unique differences in client service strategies and can’t account for service quality, performance levels, or consumption issues. These limitations ultimately lead to assessments based on invalid data that don’t help the client company meet its objectives.
Benchmarking is broken
Benchmarking suffers from several critical limitations that make it an inadequate tool for assessing a company’s IT services and measuring progress.
Generic models – Perhaps the greatest issue with benchmarking is that it relies on standardized models that aren’t fit to the unique characteristics of each organization. This means that they can’t account for differing client goals and strategies. For example, they may not accurately reflect the equally viable strategies of focusing on lowest-cost services versus managing IT as a strategic investment. Forcing data into a standardized service and cost model doesn’t align with how most companies view their IT services, which means that the benchmark results don’t mean very much.
No accounting for financial parameters – Companies have a wide range of financial options when building out their IT applications, infrastructure and services. They must decide whether to lease versus buy, capitalize versus expense, time the acquisition and manage the volume of purchases. Unfortunately, many benchmarks don’t take these parameters into account.
Out of date data – If a benchmark relies on data that is more than six months old, it may have limited validity today. In order to be effective, benchmarks must be based on fresh data that accounts for recent changes.
Not fit to client profile – Every client will have different requirements and amounts of leverage. Most benchmarks don’t provide a practical assessment of what is available within the industry as it relates to the client’s industry position and financial considerations.
A better approach
At WGroup, we believe that traditional benchmarks are problematic and have no place in IT consultations. Our approach differs in that we use data from our engagement experiences in combination with more conventional benchmark information to create a comparison between the client’s cost structure and those of our other clients. The relative subjectivity of comparing client services with those of other organizations requires us to provide as many details as possible to compare and contrast the IT services including the scope of services performed, service delivery models, service level attainment, and, if applicable, contractual terms. This provides a more comprehensive, up to date assessment that’s fit to the client’s unique needs.
A complete and uniform understanding of the client’s current performance, limitations, and challenges provides a better foundation for future planning. This allows for a more natural progression to sourcing strategy development, scope and timing of RFPs and other critical strategic decisions. With a full understanding of current capabilities, risks, constraints, and goals, it is possible to create a better roadmap for IT service development that reduces costs and delivers better results.
Key considerations for technology integration in mergers and acquisitions
There are several elements that should be considered when planning for a technology integration following a merger or acquisition. This framework will help form the foundations of an integration effort that builds on the strengths of both companies to drive the business goals of the unified whole.
Synergy – The integration should combine pieces of each company to form a more complete, more effective whole. This involves the maximization of revenue streams through embedding key products from the target company into the parent company, or vice versa. It also involves recognizing that some elements should be left segregated in order to achieve maximum cost effectiveness or efficiency. Elements that should be considered include people, operational elements, applications and services, and enabling technology.
Time to Market – As a combined entity, a variety of factors will change the time to market for products and services. Leveraging skills and resources from both companies can help expedite development, testing, and production, allowing products to be created faster and less expensively. In some cases, this can also work in the opposite direction, as integration problems can cause inefficiency and other problems.
Cost – The costs of any integration efforts will be a major component of developing effective strategies. Companies must examine the expenses of a chosen integration roadmap, as well as the savings it will allow for, in order to make better decisions about what to keep segregated and what to combine.
Innovation – Bringing together the varied talent and resources of two companies can lead to a dramatic increase in innovation. Companies may have the ability to develop new products faster, combine technologies to create more effective solutions, and benefit from an influx of ideas. However, it is also important to take steps to make sure that innovation is not stifled by incompatible culture changes or processes that aren’t effective in a new environment.
Creating an integration plan
In order to agree upon an integration model and ensure that the IT organization is ready to carry out the necessary changes demanded by that model, careful evaluation and planning is necessary.
Start with a baseline assessment
Designing an effective plan for technology integration that meets broader business goals should involve careful assessment of both companies. This assessment should identify any redundancies in people, systems, infrastructure, applications, vendors, capabilities, and costs. It should also identify opportunities to add value through integration or collaboration and look for areas in which there are gaps that need to be addressed. This process should be broken down into the examination of several distinct components for each company:
People and organization – Assessments must evaluate the skills, capabilities, and overall organizational structure of both companies. Look for overlaps in employee capabilities, potential power structure problems, and any issues that could arise from mismatched culture.
Processes – Each company has processes in place of particular maturity levels and other characteristics. Learning how to mesh the way both companies accomplish goals is a critical step in achieving a successful union.
Infrastructure & Applications – A careful inventory of each company’s applications, systems, and infrastructure must be made to look for areas of overlap and to allocate resources in the most effective way. Other issues to address include relative scalability of infrastructure, the suitability of adopting resources to new tasks, and adherence to industry best practices.
Strategic alignment & governance – During a merger or acquisition, there should be mechanisms in place to ensure each company is aligned in terms of its goals and accountability. This will help avoid conflicts of interest and problems in the power structure of the new organization.
Financials – There should be a careful analysis of IT costs by function and activity for each company. This allows the company to identify items that do not provide a positive value and to integrate in the most cost effective way.
Create timeline & project portfolio – After making an assessment of the current state and deciding on an integration model, companies must begin creating a plan for the projects necessary to accomplish those goals. This should involve a structured timeline with milestones and metrics to judge progress. This allows IT to prioritize projects according to the needs of the business and allows for a more organized approach to integration.
Address risk mitigation – Technology integration inherently involves risk. IT leaders should look at every decision in terms of the potential costs and pitfalls compared to its benefits. This allows for planning that is based on logical analysis of the facts and reduces the chances that the integration will fail due to unforeseen outcomes.
Develop a structure for execution – Planning is only half the battle. Companies must also put solid structures in place to ensure any projects that have been delegated are followed through on. This involves ongoing dedication to the integration process and requires substantial commitment on the part of IT management to ensure that early work is not undone by later mistakes or lack of will.