In this time of financial turbulence and economic slowdown, IT executives are facing the following challenges
· Demand for trimming down the IT spending
· Availability of limited infrastructure and human resources to execute
· Misalignment between business strategy and IT strategy
While under tremendous pressure to
· Improve bottom line
· Generate. savings
· Run and optimize IT operations
· Deliver values to the enterprise

“Reducing cost and improving productivity”, looks like to slogan for today’s CIOs. The expectations from the business executive from their IT counter parts are becoming stricter day by day. CIOs are working with their team to

o Optimize their IT portfolio
o Reduce IT OPEX (Operational Expenditure)
o Improve value delivery to end users and customers
o Outsource IT operations
From many sources and through my work experience, I have realized that in many IT organizations, “salaries are the black hole of IT budget and maintenance expenditure are the black hole of IT salaries” and lights on maintenance costs are normally out of control. These monstrous apps which were built in 80s might add up to 80% of your application portfolio and demand majority portion of your IT budget while delivering 20% value to your enterprise.

The question is, how did we even get in to this situation? Applications and solutions were designed and built based on IT’s good faith to support the business, as demands from business and complexity in IT environment grew up, IT folks started building applications after applications to control the situation and to supplement the immediate needs. As the number of applications grew up in the IT portfolio the budget to operate these apps also went sky rocketing thus creating chaotic situation. This scenario is very typical in almost all of the large IT organizations.

CIOs and IT executives are looking for an answer to the above mentioned problem. How do I reduce my operational expenses and generate more value for the whole enterprise rather than just pleasing the IT? Cost cutting across the board is dangerous, what we need is a well structured IT or investment strategy and tools that will deliver more values to companies top and bottom line by creating new efficiencies and increasing revenues while reducing the overall IT spending. One strategic tool to solve this problem is “Application Portfolio Rationalization”

Application Portfolio Rationalization is a structured process to assess the current IT portfolios, identify the value generating and under performing applications and prioritize IT investment.

Application Portfolio Rationalization process typically has 5 steps

1- Portfolio Cataloging
2- Applications Inventory
3- Portfolio Analysis
4- Portfolio Disposition Recommendation

5- Investment Sequencing and Roadmap

Portfolio Cataloging: In majority of IT organizations managers doesn’t know how many applications are there in their department or for that matter in the whole enterprise. Redundant applications within various departments in a large IT organization is very common.
· First step in the rationalization process is to identify the sources and resources to collect information regarding existing applications.

Application Inventory: Once the source and the resources for application related information are identified
· Next step is to create an inventory of application portfolio in a spreadsheet or database to collect and store all the related information that could be used to perform various analyses in the next step. It also helps creating a single business view of the application portfolio across multiple corporate groups.

Portfolio Analysis: Collected raw data will be of no use if it can’t be synthesized to derive meaningful information for executives to decide the next action. According to many consultants cataloging and inventory steps are the most difficult and time consuming tasks in this process. Once the data is collected next step is to analyze the date in various dimensions. Some of the typical analyses include TCO, Cost Benefit, ROI, Technical – Business alignment, Application – Business Process mapping and Risk assessment. There are many other analyses that could be done depending on the situation and objective of the project.

Portfolio Disposition Recommendation: This is where the client gets there value for the money from the consultants. After numerous interviews and analyses of the current state applications data, applications or IT portfolios are ranked on various attributes. These attributes are basically divided in to 3 categories

Technical suitability: How well the applications or IT portfolios fit in the current technical environment of the enterprise.
Business alignment: Are these applications or IT portfolios aligned with the business objective? Validate if these applications can support enterprise’s business strategy
Cost: How much are we or much have we so far spent on the applications or IT portfolios vs. how much does this application contribute towards achieving the business strategy





Investment Sequencing and Roadmap: Once the recommendations are approved by the CIO or IT executives, next is to plan for the execution. It is advised to thoroughly understand the corporate strategy before planning the roadmap for the execution. Once the roadmap (Schedule) is crafted, look into the IT budget/Investment Plan and allocate budget for different phases of the execution. As the roadmaps are normally planned for a longer duration, it will be helpful to create 90 days -120 days – 1 year stop gap check, to validate if the plan is getting executed as per the plan.

Conclusion: At this time, when every big or small enterprise is facing overwhelming challenges to survive, spending unwanted money in IT organization is the last thing in C level executives mind. More than ever, CIOs are challenged to bring some level of objectivity to the task of selecting which IT applications or processes, to retain, replace, renovate or remove.
In summary, CIOs and Enterprise Architects should focus more time on optimizing IT spending and improve contribution to the whole enterprise by using a strategic tool like IT Portfolio Rationalization.