Last month, I discussed the reasons behind why IT rationalization is essential to compete in the modern digital marketplace. To be successful amid so many constant changes, companies must build a comprehensive rationalization strategy that lets them leverage the value of their portfolios, and not lose sight of opportunities to reduce costs, achieve efficiencies and innovation.
In this post, I’m moving on to the “how” behind IT rationalization, and the steps necessary for organizations to implement these practices.
Business and Technology Valuation is Essential — The IT Rationalization Model
IT Rationalization is a set of disciplines that starts and continues throughout an application’s lifecycle (e.g. Emerging, Strategic, Core, Declining or Sunset) and typically has repeatable processes and reusable templates.
Before you build your strategy, the following are the foundational building blocks for a viable rationalization, and must be taken into consideration. While these may seem similar, they’re all integral cogs to starting a successful IT rationalization:
- Process Rationalization – Process rationalization is the review and alignment of manual and/or automated business processes across multiple business units. These processes then support or enhance business priorities through improvement activities that ultimately improve customer satisfaction.
- Functional Rationalization – Functional rationalization is the review and reduction and/or redistribution of business services to ensure maximum functionality coverage across multiple business units or processes. The goal: improve capabilities and agility.
- Application Rationalization – Application rationalization is the review and reduction of the application portfolio to ensure that applications are aligned with business objectives. Also key here is to provide the necessary business functionality for the lowest cost while maintaining operational and architectural standards.
- Technology Rationalization – Technology rationalization is the review and reduction, virtualization or redistribution of technology, software or infrastructure to ensure maximum operational capability and flexibility for the lowest cost.
Risk Profiling to Derive Investment Potential and Value
An important component of understanding the application portfolio and its associated parts is the chronic element of risk. Risk profiling helps identify where to build contingency into the portfolio when exceptions occur. Why? The goal is to ensure that the business is protected from unnecessary or prolonged outages that have a potential negative effect on customers, suppliers and shareholders.
Classification and profiling methods used in determining value, risk contingency planning, and continuous impact analysis, provide the information necessary to understand where the investment resides in relationship to the portfolio. It doesn’t exist in isolation.
In addition, key insights are gleaned regarding business transaction value and prioritization using consistent templates and defined metrics. Rationalization is a vital activity in the valuation of IT assets.
Tools and Methods to Consider
Progressive organizations that leverage their capabilities with enhanced processes and tools to understand their overall portfolio, gain transparency, manage risk more effectively and actively manage their applications to make use of the following:
Application Profiling – creates value through classification by using a set of defined measurements that organize assets by business value, lifecycle and age, and where they align from a roadmap perspective.
Complexity Modeling – encompasses application, technology, integration and migration factors with the explicit goal to determine costs and ability to position assets according to directional or technological advances.
Architecture Maturity – is a very specific discipline that helps determine current or future investment strategies for an organization. Key areas around risk are reviewed and documented. Business and technology expectations are derived from this activity as well.
By using proven IT rationalization approaches, organizations can gain deeper insights into their portfolios. The real value of IT rationalization is knowing when to invest, and knowing when to divest. Such decisions are essential to short and long-range planning. An organization taking such an approach is more nimble, practical, and is able to provide real value to their business constituents and customers.