Trim your application portfolio for savings

Paul Valente, a Chicago Public Schools systems engineer, jokes that his employer is "a $7 billion organization with a $6 billion budget." Not surprisingly, the underfunded department has a short-staffed IT team, so Valente is always looking for ways to cut costs and streamline operations -- and he feels he has struck gold with an application rationalization scheme.

"When we look at all the applications within the organization, we find commonalities and can steer purchasing toward these programs and achieve volume discounts," Valente says.

Reviews like the one Valente has undertaken usually involve a strategy that's referred to as software rationalization or application portfolio management (APM), where IT takes inventory of the applications in use across the enterprise and then determines, with input from stakeholders such as financial teams and line-of-business leaders, whether programs should stay or go. Those that aren't immediately shut down can remain as is, migrate to a hosted platform or software-as-a-service offering, or get marked for future retirement.

John Picciotto, senior principal at Accenture, says most organizations engage in portfolio reviews as part of an annual quest to wring savings of 5 percent to 10 percent out of their budgets. Application rationalization, which involves taking action on the review, can lead to streamlined operations and reduced complexity, and could possibly "jump-start more innovative solutions," he says.

But achieving savings can be tricky because applications "are rarely sitting in the data center with no one using them," Picciotto says. Migrating to another application or another iteration of the application, such as a hosted service or SaaS offering, causes "unanticipated disruption to the business resulting in pushback from the very customers the CIO is trying to save money for," he adds. Therefore, he recommends focusing more on matching the portfolio to the business need instead of just trying to eliminate applications.

Michael Biddick, CEO of Fusion PPT, a consulting firm in Vienna, Va., says organizations don't rationalize their applications enough. But when they do, they realize 12 percent to 15 percent in savings, which can be substantial, depending on the volume of applications in their portfolios.

He has noticed a shift in the reasons IT turns to application rationalization. In 2010, data center space savings and consolidation drove such efforts. "You rarely hear anyone talk about that now because they can always spin up another server instance elsewhere," he says. Now the goal is to make applications more efficient and effective and to meet higher customer demand.

Rationalization is in the spotlight once again, Biddick says, because of its potential to reduce costs associated with renewal of maintenance contracts and the infrastructure and staff required to support software.

First step: Full inventory

Valente hopes to see all of those benefits as he deepens his commitment to application rationalization.

In the first phase of his project, Valente used Flexera Software's AdminStudio inventory and rationalization tool to catalog applications and to start gathering application usage metrics for the system's 300,000 students and 40,000 faculty and staff members.

"We thought we were going to discover a couple of big software packages with 20,000 installations," Valente says. Instead, AdminStudio turned up 39,000 individual applications across 120,000 Microsoft Windows devices, 20,000 Apple Mac desktops, 90,000 Google Chromebooks and 80,000 Apple iPads.

"It shed light on what we have, which is a big mess of software," Valente says. For instance, he expected to find 10,000 copies of Adobe Reader, but only 100 turned up. Exacerbating the problem is the fact that education is an industry that attracts "a lot of weird software," such as testing and learning packages for individual textbooks, he says.

However messy the findings may be, they enable Valente to start the project's next phase, which is to work with Chicago Public Schools leaders to determine which applications are necessary and which are redundant or out of date. "If the packages are valid and useful, we might be able to bulk-buy them and negotiate a savings or, if they are free, make them safely available," he says.

"When we went into this, we didn't know if it was going to be worth the purchase price, since software rationalization is a high-dollar product," he says. Now, he not only thinks it was worth the cost, but also plans to open the user interface to the education technology and procurement departments to extrapolate critical data. For instance, he expects them to be able to glean information that will help the schools negotiate lower renewal fees for Microsoft Office, because officials now know that Office usage has decreased as usage of Google Apps has increased.

Mastering mergers

Frank Scavo, president of Strativa, a management and IT consulting firm, says mergers and acquisitions and business unit purchasing autonomy are leading causes of application proliferation and can result in a company overspending on IT by 25 percent to 30 percent.

When business units are allowed to choose their own applications, IT can end up with a lot to support even if each instance of a certain type of software is smaller, Scavo says. He recommends using a survey of users to assess an application's importance, the actual business value it delivers and its technical quality. Many times, an assessment of a system by actual users can be significantly different from IT's view.

"It's a very enlightening exercise that we can do relatively quickly," Scavo says.

He recommends that application rationalization project teams include an executive sponsor, a project manager, users who understand the applications, and business leaders who will review and take an interest in the results.

In the end, organizations might decide that, despite its faults, an application should be salvaged because of its value. "The IT organization might have a strong feeling about the health of its applications, but it really helps to have some quantitative evidence from users," Scavo says.

Picciotto takes a different approach, evaluating each application based on six criteria: strategic alignment, functional adequacy, technical adequacy, financial fit, technology risk and application redundancy.

Rather than just gather information, he says, IT should define "an approach that ensures the quality of the data gathered and the supporting analysis."

Francois Estellon, CIO at a big manufacturing company, calls application rationalization "essential," especially when it comes to mergers and acquisitions.

When a deal is imminent, Estellon, who has served as CIO at several large companies, says he makes sure he gets in on the early stages of due diligence to perform application portfolio reviews ahead of an offer. Having to migrate larger programs such as an ERP system can affect the value of the deal and the costs afterward. "If I know what systems they are using, there are synergies I can leverage right away such as purchasing and supply chain management," he says.

Ideally, Estellon likes to have a questionnaire filled out by the seller that provides a portfolio analysis, including what equipment applications are hosted on, how many people have access to them and other specifics. However, this doesn't always happen, he acknowledges.

Inventory software provides him with technical details, such as when an application was last accessed and what infrastructure it's tied to, but not its business value. Therefore, he also works with the owners of applications to figure out where the software fits in the buying company's portfolio or if it's necessary to migrate to something more modern. "It's a painful process," he says.

Gardner Denver

Once the deal closes, Estellon eliminates applications that haven't been used in years -- what he calls low-hanging fruit. For applications that are used but aren't business-critical --what he calls "nice-to-haves" -- he calculates the support costs and creates a chargeback if the business wants to keep them.

Typically, only 5 percent to 10 percent of the applications are left standing after that, and those are the ones that stay, he says. They include programs unique to a geographic region and those that fulfill essential functions, such as an accountant's cost center consolidation database. Compliance mandates might be another reason to keep certain systems, he says.

The price tag for application rationalization can run to six figures, he says, and the application discovery process alone can take three to six months. Shutting down applications is costly, too. For instance, Estellon once migrated 6,000 people who were using 400 Lotus Notes-based workflows and applications to Microsoft SharePoint, with each application costing $20,000 to $30,000 in development and testing.

And he warns that IT should never underestimate the attachment of a user to an application. "Don't come into the discussion thinking you are going to win with numbers and logic. It is emotional," he says.

Francois Tricot, CIO at Ceva Santé Animale, a 4,000-employee maker of veterinary pharmaceutical products that's based in Bordeaux, France, and has offices in the U.S. and more than 40 other countries, has had to rely on application rationalization to keep up with Ceva's acquisition rate of two to three companies per year. "I am always rationalizing," he says.

Tricot has optimized the company's application portfolio so acquired companies are assured that the platforms he's offering them are as good as what they had. He has developed a system whereby applications are put into three categories: corporate services supported by the IT team at headquarters, including QuickBase for sales, HR, CRM and project management; global services supported by local tech teams, such as information security; and local services that employees buy and operate autonomously in-country, such as payroll tools.

Making employees aware of the parameters of these categories avoids some of the murky waters other IT teams encounter in application support and takes the emotion out it. Standardizing core services, he says, fosters agility, which users appreciate because they can get up and running on Ceva's system quickly and can collaborate easily. "I would prefer to spend money on R&D rather than IT," Tricot says.

Tight at the core

Paul Martine, CIO at Citrix, has spent years fine-tuning his application rationalization process. Supporting Citrix's 10,000 employees in 39 countries and 100 offices, Martine has been able, despite numerous mergers and acquisitions, to keep a highly optimized portfolio of some 300 applications.

The key, he says, is to develop standards for core applications. For instance, the company at one time supported two CRM systems, Salesforce for the sales team and Siebel for tech support. It settled on Salesforce after ensuring that all Siebel business processes, including the ticketing system and services module, could be performed in that system.

Citrix

Collapsing onto one SaaS-based CRM platform enabled Martine to reallocate dedicated in-house resources such as staff and data center space. "We had a fairly large team managing Siebel CRM specifically for the tech support organization," he says.

Martine starts the application evaluation process each September, calling on business leaders to submit their requirements. "They have to list what they need and what they want," he says. He then helps them create an ROI model for each application. "Probably 70 percent of the time, we can meet their needs with the existing application portfolio," he says, adding that IT sometimes has to enhance a software program.

If a new application is needed, Martine will assess whether another one can go. All expenses associated with applications are tracked through Apptio, which analyzes metrics such as management costs, licensing and labor.

He points to one area where he finds application redundancy acceptable: business intelligence. When it comes to BI, Martine says, there are distinctions in capabilities, so he lets users choose from Birst, Tableau or Microsoft.

Delivering the application portfolio virtually from a storefront means Martine is rarely surprised by what's on the network. "All applications live within the data center," he says. "We don't put anything on the endpoint."

Even newly acquired companies are rapidly onboarded to Citrix's application portfolio. For instance, their finances are transitioned to a corporate- approved SAP system. "Less than 30 percent of acquired companies' applications have to be kept, as there is always something here [in our portfolio] they can migrate to," he says.

Martine says the attention he has given to application rationalization pays off. "The less you have to manage," he says, "the more you get to innovate."

This story, "Trim your application portfolio for savings" was originally published by Computerworld.