A comprehensive approach to application portfolio rationalization will enable organizations to maximize the business value of their applications and focus on strategic opportunities.

1. • Cognizant 20-20 Insights
A Comprehensive Approach to
Application Portfolio Rationalization
Executive Summary Application portfolio rationalization leads to other
cost and business benefits realized through quick
Ongoing economic uncertainty is imposing
cost savings, reductions in total cost of ownership
stringent cost pressures on organizations across
(TCO), heavier reliance on more flexible Op-Ex
industries. In response, many businesses are prior-
models, maximization of ROI to drive long-term
itizing their investments to drive operational effi-
business value and architectural alignment. If
ciencies and minimize IT spend on their application
executed correctly, our approach eliminates
portfolios. However, several factors — including
functional overlaps and ensures stricter
the expanding size and complexity of the appli-
compliance with regulatory requirements and
cation portfolio, poor license management, rising
alignment with corporate strategy. The rational-
total cost of ownership and increasing inflexibility
ization exercise we lay out is not merely another
— are challenging many organizations to adapt to
instrument for cost cutting but is a strategic
the rapid changes in the business environment.
initiative for improving the business effectiveness
Many IT organizations are working to lower the
and operational efficiency of the organization.
percent of the budget spent on operations and
maintenance, which tends to hover at 70% or
Making the Business Case
above, according to industry estimates.
With change being the only constant in today’s
This paper provides a methodical approach, with hyper-competitive global economy, organizations
embedded critical success factors, for application need to innovate to adapt quickly to ever-fluctu-
portfolio rationalization. It also describes a robust ating market conditions. To keep pace, organiza-
model for assessing the business value, technical tions have tended to invest aggressively in IT ini-
health and strategic fit of the application estate, tiatives, resulting in a wide array of disparate and
as well as prescribed solutions, such as decentral- disconnected applications across their portfolios.
ization of the software/application procurement Mergers and acquisitions, niche applications, IT
function and other overlooked components of upgrades and in-flux replacement projects add to
cost avoidance in the portfolio. A comprehen- the application cacophony.
sive approach allows organizations to utilize the
residual business value of the existing portfolio, Through application rationalization, organizations
which frees key resources and funds to support a can transform a highly complex, costly and only
focus on high-value opportunities. moderately effective application catalog into an
agile, lean and productive portfolio, aligned with
cognizant 20-20 insights | november 2011

2. key business needs and adaptable to an ever- • Strong commitment from top management:
changing macro-economic climate. Creating a Top-level support is mandatory, since initia-
business-aligned portfolio can enable operational tives like this have organization-wide impact.
agility and flexibility; however, it may necessitate The leadership team must align application
changes in the organization’s governance and portfolio rationalization strategically with key
fundamental operational processes. It will also organization objectives to first overcome and
require IT leaders to shift core resources from then resolve conflicting business needs. Most
tactical to strategic initiatives. Key considerations experts would agree that strategic planning
for rationalizing the application portfolio are: should be at the heart of the IT leader’s
agenda.
• Establishing a quantitative baseline on the
efficiency and effectiveness of the current • Clear communication of objectives and
expectations: Clearly conveying top-priority
application landscape so that prudent
objectives to all relevant resources is extremely
management decisions can be made regarding
critical. Objectives must be “SMART,” as in,
current and future application development,
specific, measureable, achievable, realistic and
application phase-out and remediation.
time-framed.
• Ensuring proper business/IT alignment (i.e.,
making sure IT is working on initiatives that • Access to and active participation of stake-
holders: Data collection is a crucial part of
the business values the most) and prioritizing
the application rationalization exercise. It is
applications that need the most attention.
essential to assemble both fact-based data, as
• Determining management options for trans- well as information regarding the perception
lating application value improvement theory of business users to properly measure overall
into meaningful results. application portfolio effectiveness. So, access
to and involvement of stakeholders in the data
Critical Success Factors collection process, as well as validation of the
To control the leakage of value realization from hypothesis, is essential.
an application portfolio rationalization program,
it is important to understand the critical success • A robust model for applications health
analysis on key dimensions: A model for
factors that drive the value expected from such
application health analysis will increase the
an initiative (see Figure 1), such as the following:
probability of developing recommendations
Drivers of Success
Strong commitment from top management team
Clear communication of objectives of portfolio rationalization
Access to and active participation of all the stakeholders
Robust model for application health analysis on key dimensions
Critical
Success
Factors Experienced team of consultants with right mix of skills
Higher degree of confidence on financial data
Availability of budget and resources to implement recommendations
Application rationalization as an ongoing process requiring regular evaluation
Figure 1
cognizant 20-20 insights 2

3. that drive successful rationalization of the ization projects fail is lack of budget, resources
application portfolio. The assessment can or both to implement appropriate recom-
be performed based on strategic, business, mendations. The organization must assess
technical and commercial dimensions, using a the cost and level of involvement required
comprehensive questionnaire for surveys and before executing the application rationaliza-
interviews. tion initiative to ensure desired benefits are
realized.
• A higher degree of confidence regarding
financial data and information: Decisions • Application rationalization as an ongoing
on which recommendations are implemented, process with regular evaluations: Applica-
and in what order, are made on the basis of tion rationalization is a continuous improve-
translated financial benefits. The financial ment program that requires regular re-eval-
model for realizing benefits must not only be uation to determine the effectiveness of the
robust; it must also be reinforced by a high portfolio and its alignment with organizational
degree of confidence in the financial informa- objectives.
tion supporting it.
A Framework for Transforming
• An experienced team of consultants with
the Application Portfolio
the right mix of skills and knowledge: A
cross-functional team comprising highly expe- A robust framework for application portfolio
rienced business consultants, domain experts, rationalization involves data collection, applica-
process consultants and technology architects tion profiling, application value analysis, identi-
is an essential parameter for successful appli- fication of opportunities and defining an imple-
cation rationalization. A cross-functional team mentation roadmap. The framework is focused
helps drive synergies and improve collabora- on understanding, analyzing and transforming
tion, as well as bring multiple perspectives to the current application portfolio to arrive at the
a case, which helps in gaining alignment more most effective rationalized application portfolio.
quickly. Following the application portfolio analysis, an
opportunity domain grid is created for categoriz-
• Availability of budget and resources to
ing the opportunities identified by the framework,
implement recommendations: One of the fun-
as well as other hidden costs that, if surfaced,
damental reasons some application rational-
reveal potential cost-cutting opportunities.
A Step-by-Step Process for Application Rationalization
Application Profiling Opportunity Benefits Realization
Data Collection & Implementation
& Value Analysis Mapping
Roadmap
Finalize project scope
Prepare business
Create Develop
value and technical
rationalization map recommendations
health model
Prepare interview/
survey questionnaire
Identify opportunity
Profile the domains Develop business
Collect data from
application portfolio cases
application support team
for data inventory
Map applications
on opportunity Conduct cost/benefit
Collect data from Score applications on analysis
business value and domains grid
application estate
register and portals technical health
Analyze application
Interview/survey of Create
Discuss with clusters
application service implementation
business team roadmap
managers
Figure 2
cognizant 20-20 insights 3

4. During the rationalization process, the value of analysis. Applications are also clustered based on
each application is computed. According to the their business function.
analysis conducted on each application, a rec-
ommendation is made to either retire or decom- Applications Profiling and Value Analysis
mission end-of-life applications or conduct a In the next phase, a robust application portfolio
functional upgrade to applications determined rationalization model factors in the key
to be critical to the business or with significant parameters that influence the business value
business potential (see Figure 2). and technical health of an application. Each of
the parameters identified under the business
Data Collection and technical dimensions is assigned a weight
In the first phase, the application inventory is fil- based on its relative importance to the other
tered to remove applications that are obsolete parameters within a dimension (see Figure 3).
or have been earmarked for retirement. Applica- Individual applications are assessed on each
tion portfolio profiling starts parameter, reinforced by the data collected
Application portfolio with issuing a questionnaire through interviews and surveys. The business
that is intended to assemble value and technical health index identifies each
profiling starts data elements across busi- application’s lifecycle positioning, assesses the
with issuing a ness, technology, strategic opportunity for improvement, calculates the cost
questionnaire that is fit functionality and cost savings and determines the actions needed to
dimensions. The question- optimize the application’s business effectiveness.
intended to assemble naire can be customized to
data elements capture the essence of the A rationalization map is generated using the
quantitative data model to identify the under-
across business, domain to ensure the most performing assets and propose measures for
accurate and useful informa-
technology, strategic tion is captured for analysis. improvement.
fit functionality and The primary information is Opportunity Mapping
cost dimensions. obtained through interviews, In the third phase, a rationalization map is gen-
using the questionnaire, with
the application service man- erated, using the business value and technology
agers and business system owners of the process. health index. The rationalization map identifies
A kaleidoscopic view is generated on the demo- opportunities for application decommissioning,
graphics of the portfolio to develop a high-level application consolidation, technology/platform
Key Parameters for Weighing Business Value, Technical Health
Key Parameters for Weighing Business Value and Technology Health
Scalability Usage Data
and Scalability Analysis and
Documentation
Flexibility Functionality and Dependencies
& Training
Coverage Flexibility Documentation
& Training
Stability & Financials Complexity
Usage Stability
Criticality
Criticality
Business Value Technology Health
Figure 3
4
cognizant 20-20 insights 4

5. Converting the Application Rationalization Map
to an Opportunity Domain Grid
Rationalization Model
Rationalization Map
0.900
Enhance Maintain/
Functionality/ Evolve
Consolidate
0.800
0.700
0.600
Opportunity Domain Grid
Technical Health
0.500
Support Service
Applications
Team Category 0.400
Consolidation
Consolidation Savings
0.300
Instance/ 0.200
Enrichment Technology Retire/ Rewrite/
Versions
Opportunity Upgrade Consolidate Replace
Consolidation 0.100
0.100 0.200 0.300 0.400 0.500 0.600 0.700 0.800 0.900
Business value
Decommissioning/ License Functional
Retirement Consolidation Overlap
Figure 4
upgrade and functional enrichment. After the reduce the overall license spend by the simple
application rationalization map is generated, an principle of economies of scale. Centralization
opportunity domain grid is created. The oppor- also enables IT to identify the right number of
tunity domain grid maps the opportunity based users in advance, which streamlines management
on decommissioning, consolidation and upgrad- and improves utilization.
ing the application environment, and identi-
fies additional opportunities for cost avoidance Benefits Realization and
(see Figure 4). Implementation Roadmap
In the last phase, an implementation roadmap is
Traditionally, most large organizations allocate
created. It collates a set of actions, clustered on a
and manage IT budgets in silos; as a result,
time-scale basis, that are required to achieve sus-
many similar applications are procured and used
tainable business results. This roadmap supplies
by different business units. By centralizing the
the organization with immediate, short-term and
software procurement function across business
long-term opportunities to improve the applica-
units/geographies, the IT organization can help
Prioritizing the Opportunities
Wave 3: Longer Term
Wave 2: Near Term 3
2
Wave 1: Immediate
Rationale
1
Rationale
Rationale
Figure 5
8
cognizant 20-20 insights 5

6. Improving Operational Efficiency Through Rationalization
Payback Opportunities Cost/Benefit Attributes
1
Optimizing Business
IT Cost Innovation
IT Efficiency
Payback from
Application
Portfolio
Rationalization
Process
Improvement
2
Improving
Operational Ease of
Efficiency Governance
Figure 6
9
tion portfolio. The opportunities can be prioritized Long-term payback from application portfolio
based on the ease and cost of implementation, rationalization will be realized in four ways:
savings and inter-dependencies (see Figure 5).
> Reducing TCO by retiring the redundant
applications.
Spotlight on ROI
Rationalization enables organizations to signifi- > Consolidating multiple versions of similar
cantly alter their cost structures (Figure 7). While applications and services running at differ-
rationalization demands an initial investment, it ent locations.
can significantly reduce the cost of running the > Maximizing the reuse of common utilities
business. For instance, an initial investment in across various business functions.
the consolidation of similar applications, utilities
and services will create a foundation for medium- > Reducing total cost of quality by minimiz-
ing the number of applications that would
and long-term payback by reducing maintenance
undergo the quality compliance process.
expenses and improving operational efficiencies.
Quantifying Application Portfolio Rationalization
Expenditure Pattern
Cost ($) Lights-On Transformational
Development Overall
+ savings
growth
Initial
consolidation
Minimum cost to run Development
the business Cost can +
= be reduced growth
operations through
rationalization
+ Operations
application +
maintenance application
maintenance
Time
Figure 7
cognizant 20-20 insights 6

7. Case Study: Life Sciences • Identified the business function cluster and
developed business cases focused on applica-
Client Situation
tion consolidation. This reduced the functional
A leading pharmaceutical organization faced the overlap and complexity of individual clusters,
challenge of increased size and complexity of generating further cost savings.
its application landscape, making it difficult to
respond quickly to dynamic business changes. The Building a Lasting Infrastructure
company was looking to reduce the total cost of
Companies across industry face overwhelming
ownership of its applications, identify cost savings
challenges to gain operational efficiencies and
and cost avoidance opportunities and assess the
reduce the complexity and TCO of their appli-
impact of tighter IT architectural alignment with
cation portfolios. A decentralized approach for
its global business architecture. The IT organiza-
managing the application portfolio typically leads
tions’ goal was to identify the functional overlaps
to organizational inefficiencies. As the need for
and opportunities for application portfolio ratio-
new business applications arises, the portfolio
nalization.
landscape changes quickly, which necessitates
Value Delivered a rationalization exercise to be performed at
regular intervals to ensure an applications infra-
We worked with the IT leadership team to perform
structure that supports business requirements.
the assessment/analysis of a global drug devel-
opment applications portfolio, with the following The desire for continuous improvement and
results: realization of rationalization opportunities will
help organizations reduce license costs, tap the
• Simplified the application portfolio by reducing
existing portfolio’s residual business value and
portfolio size by 40%.
reduce functional overlap — all of which are key
• Proposed savings of $1.5 million from quick ingredients in an IT infrastructure that supports
wins — $1 million from near-term actions and today’s business requirements and anticipates
$600,000 from long-term opportunities. tomorrow’s needs.
• Concluded that 20% of the application had
license savings opportunities, a key parameter
for cost avoidance.
About the Authors
Dinesh Singh is a Lead Business Consultant within Cognizant Business Consulting’s Life Sciences Practice.
He is a seasoned advisor with nine-plus years of experience in strategy, business and domain consulting
across the life sciences industry. He has worked with leading pharmaceutical clients on addressing key
business problems with an aligned IT strategy. He can be reached at Dinesh.Singh@cognizant.com.
Rajesh Kuppuswamy is a Practice Director within Cognizant Business Consulting’s Life Sciences
Practice. He has over 14 years of experience across pharmaceutical R&D, clinical R&D, safety and risk
management and R&D IT. Rajesh specializes in providing strategic leadership to help life sciences
organizations more effectively leverage the global delivery model. He can be reached at
Rajesh.Kuppuswamy@cognizant.com.
Dr. Andrew Hill is an Assistant Vice President within Cognizant Business Consulting’s Life Sciences
Practice. He has more than two decades of IT industry experience and deep knowledge of the life
sciences domain. Andrew is responsible for providing leadership to help Cognizant’s Life Sciences
consulting clients achieve their business goals. His areas of specialty include strategic planning and
long-term partnerships, as well as relationship and delivery management. He can be reached at
Andrew.Hill@cognizant.com.
cognizant 20-20 insights 7

8. About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 118,000 employees as of June 30, 2011, Cognizant is a member of the
NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and
fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
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