Driving financial value: Unlocking cost efficiency with application portfolio rationalization

Not all applications in your enterprise software repository are created equal.

In fact, over time, most organizations tend to accumulate thousands of unorganized applications with overlapping functionalities, varying lifecycles, and disparate supporting technologies that simply do not deliver the anticipated business benefits. This is where application portfolio rationalization (APR) comes in. It assesses and optimizes an organization’s suite of applications to unlock cost efficiencies and effort optimization.

Not surprisingly, the market valuation of application management services, encompassing application portfolio assessment and rationalization among other initiatives, is projected to reach $94,786 million by 2030.

Benefits of APR: Simplifying IT

As competitive forces push organizations to reimagine their offerings while keeping costs down, application portfolio assessment and rationalization can help them evaluate the performance and technical debt incurred by their sprawling application portfolios. Let’s delve deeper into the business benefits of APR:

1. Identifying cost reduction opportunities: APR identifies redundant or underutilized applications that can be retired or consolidated by assessing their business criticality and the current application landscape. This eliminates the unnecessary expenses associated with managing multiple applications. At a retail bank, for instance, a collaborative effort between business and IT executives led to the identification of over 50 unused applications for decommissioning and 150 redundant applications for consolidation, among other findings. Overall, this effort was designed to deliver a return on investment (ROI) of over 50% and reduce time to market by at least 30%.
2. Streamlining IT infrastructure and resources: A bloated application portfolio often results in complex and fragmented IT infrastructure. As enterprises expand, consolidating applications helps optimize your digital architecture and reduce cloud According to a Gartner case study, a global pharmaceutical company seized a $30-75 million cost optimization opportunity by assessing the abundance of applications within its portfolio. Such initiatives also improve resource allocation, as IT teams can focus on managing a leaner and more efficient set of applications.
3. Optimizing licensing and vendor management: Because APR also evaluates software licenses and vendor contracts, enterprises are in a better position to negotiate more favorable terms, consolidate vendors, and leverage volume discounts. It also ensures licensing compliance and mitigates the risk of costly penalties. According to a global study conducted by the Everest Research Institute, organizations that have reduced their number of vendors, experience an annual decrease in the total cost of ownership (TCO) ranging from 22% to 28%. This underscores the financial advantage of optimizing licensing and vendor management practices.
4. Enhancing operational efficiency: Many companies excel at innovating but struggle to retire outdated technologies. The U.S. Government Accountability Office (GAO) performed an audit on information technology systems within federal agencies and discovered that a minimum of 65 systems with unsupported hardware and software were still in use. As of May 2023, two such agencies have yet to create comprehensive modernization plans. APR can resolve such issues as it streamlines workflow processes by standardizing a smaller set of applications. It automates many tasks such as application inventory and software usage tracking. This simplification improves workflow efficiency, reduces manual workarounds, and minimizes the risk of errors.
5. Capitalizing on modernization opportunities: Despite migrating a portion of workloads to the cloud, approximately 80% of CIOs acknowledge that they have not achieved the desired level of agility and business benefits they anticipated through modernization efforts. This is often due to a lack of APR assessment which evaluates every application’s current state and determines its appropriate destination within the cloud environment. So, APR assessment is a non-negotiable business requirement. It is the crucial first step toward APR optimization and figures out the right blueprint for every application. The approach identifies and evaluates applications that can be replaced or upgraded with more efficient solutions to lay the groundwork for ROI-driven innovation and modernization programs.

Maximizing value: The impact of application portfolio assessment with NSEIT

 APR is not only a cost-saving measure but also a strategic initiative that sets the stage for future growth. In an era where businesses are constantly seeking ways to maximize financial value, NSEIT’s APR Assessment delivers comprehensive application assessment diagnostics for optimizing your application portfolio through advanced, tool-based and metric-based methodologies.

It eliminates unnecessary expenses, improves resource utilization, and optimizes operations. NSEIT’s APR Assessment toolkit does this by identifying and cataloging all the applications in your portfolio based on purpose, functionality, user base, dependencies, and technical details.