Global Consulting Practice. White Paper. Application Portfolio Rationalization How IT Simplification and Standardization Ensure Business Growth

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1 Global Cosultig Practice White Paper Applicatio Portfolio Ratioalizatio How IT Simplificatio ad Stadardizatio Esure Busiess Growth

2 About the Author Sombit Neogi Sombit Neogi is a seior cosultat with TCS' Global Cosultig Practice. He has over 16 years of cosultig experiece i various idustry domais. He is curretly workig as a solutio maager, resposible for coceptualizig, desigig ad deliverig comprehesive advisory solutios to address cliets' busiess ad IT problems across multiple geographies. His focus areas iclude busiess-it aligmet, eterprise IT trasformatio, IT strategy ad optimizatio, ad techology plaig.

3 As the world ecoomy rides over the ecoomic shock from 2008 ad 2009, the global busiess commuity is faced with reewed ecoomic, evirometal ad regulatory challeges. The chaged busiess cotext requires busiesses to be robust, i terms of product ad service coverage, ad agile, i terms of faster ad effective respose to exteral stimuli. Ad while busiess demads a faster tur-aroud time for their services ad offerigs to their customers, IT is madated to deliver the correspodig IT eablemet withi the stipulated time ad budget, with the desired value to busiess. Aligig the overall IT services capability with busiess priorities is a complex task that requires a strategy ad guidig priciples for the required IT capabilities ad the correspodig IT iitiatives. Whe it comes to improvig IT capabilities, the first step is to assess the preset state, risk ad techical viability of the applicatio portfolio, icludig how well it meets busiess eeds, ad determie the optios for remediatio. Applicatio portfolio ratioalizatio is the disciplie that helps orgaizatios aalyze the curret state of their applicatio ladscape ad idetify opportuities for improvemets to create a simplified, moderized, risk-averse ad agile system which is aliged with busiess strategies ad priciples.

4 Cotets 1. Itroductio 5 2. Applicatio Portfolio Ratioalizatio 5 3. The Applicatio Portfolio Ratioalizatio Jourey 8 4. Base Framework for Portfolio Assessmet 9 5. Critical Success Factor Realizig the Plaed IT ad Busiess Value Case Studies Coclusio 13

5 Itroductio The busiess operatios ad IT budgets of most large orgaizatios are still maaged i silos. As a result, orgaizatios are procurig ad maitaiig multiple systems with similar fuctioalities o diverse techology platforms. Over time, as the IT ladscape evolves with the additio of ew busiess processes, deploymet of bestfit IT solutios or icremetal ehacemet to overcome the legacy limitatios, the result is a highly itegrated, o-stadardized, complex ad iflexible IT ladscape. This ladscape caot be aliged to cotemporary busiess eeds i today's challegig eviromet. While IT teams are workig hard to deliver busiess results with their legacy platforms, busiess demads chage at a very fast rate. Peer pressure alog with costat market demads through multi-chael operatios, customer self-service portals ad mobility services have resulted i sigificat chages i busiess operatios, as compared to a decade ago. Techology advacemet has added further challeges to the mix as ewer IT solutio areas like cloud, big data, aalytics, mobility ad social media are drivig busiesses to trasform themselves i order to icrease reveue ad retai customers. I this challegig eviromet, IT has to operate i a more agile, robust ad cost effective maer to address the multi-directioal busiess growth demads. Years of operatig i silos, however, is ot the oly reaso for IT complexity today. May orgaizatios have used the ecoomic dow-time as a busiess growth opportuity ad have grow steadily, both orgaically ad iorgaically, i the last few years. I the process, they have iherited a complex applicatio ad ifrastructure ladscape resultig i high IT Total Cost of Owership (TCO) ad umaageable IT services. The eed for a iformed portfolio simplificatio ad stadardizatio is immiet i such cases eve to realize the evisaged busiess value from their strategic iitiatives. With this backdrop, we evaluate how a simplified, stadardized ad optimized applicatio portfolio ca deliver the desired level of agility ad robustess to a orgaizatio. Applicatio Portfolio Ratioalizatio Applicatio Portfolio Ratioalizatio (APR) is a systematic ad iformed approach to assess ad optimize the applicatio ladscape i order to address certai trasformatioal busiess demads or meet certai strategic IT objectives like lowerig TCO, stadardizig techology, reducig complexity, ad improvig risk cotrol ad iformatio system compliace. Portfolio ratioalizatio is accomplished through shufflig ad revampig of the existig applicatio service portfolio, which ca iclude retiremet of o-valued applicatios, elimiatio of fuctioal redudacy, replatformig or migratio of applicatios to more stadardized cotemporary computig platforms ad replacemet of legacy systems.the key steps of a APR exercise would iclude: 5

6 Decidig o the assessmet themes: A APR exercise eeds to start with idetifyig the goals of the APR exercise, the busiess ad IT beefits evisaged ad the correspodig metrics that will eed to be measured ad moitored to esure realizatio of the same. It is these themes that would drive the 'what' ad 'how' factor of the APR exercise. The result of this step would be decisios o the key assessmet dimesios ad correspodig attributes, the priorities ad the roadmap guidelies. These cocepts are further explaied i the followig sectios. Quatitative ad qualitative baseliig of the portfolio state: Based o the trasformatio objectives, the requisite data fields are fialized for assessmet. Data collectio is oe of the most importat activities of the whole applicatio ratioalizatio exercise. It is essetial to idetify the appropriate data sources ad assemble both factbased data ad subjective iformatio (like user perceptio) to accurately measure the health of the overall applicatio portfolio ad idetify the target applicatio dispositios. Portfolio data is captured usig tools ad templates. Key stakeholders like busiess liaisos, applicatio owers, the applicatio IT service maagemet team ad eterprise architects get ivolved though iterviews ad workshops to share their perspectives. Challeges i data collectio iclude multi-geo operatios, lack of applicatio owership, lack of applicatio iformatio readiess ad availability, ad stakeholder acceptace of the overall trasformatio story. Overcomig these challeges is critical for the success of a APR iitiative; we discuss them more i detail later i this paper. Assessmet of baselie iformatio: Oce the applicatio portfolio data is collected ad validated, the same eeds to be aalyzed usig a comprehesive framework. The framework should be imble ad robust eough to be able to be customized accordig to eterprise level priorities ad objectives of APR. Durig this phase, each applicatio will be scored for core value ad fitmet from busiess ad IT perspectives, IT risks i its cotiued operatio ad cost effectiveess i preset state. This activity gives us a profiled ad categorized portfolio based o the applicatio scorig. Decisio aalysis: This is the decisio makig process which makes determiistic recommedatios, amogst alteratives, o portfolio dispositios. The assessmet outcome is further assessed to esure aligmet with eterprise goals, eterprise strategies ad IT priciples, ad fial recommedatios are made. At the ed of the step, applicatios are categorized uder the relevat recommedatio buckets like retiremet, cosolidatio, ehacemet, migratio, re-platformig, ad so o. 6

7 Egagemet Objective & Orgaizatioal Perspectives Assessmet Bechmarkig Idetify Assessmet Themes based o Egagemet Objective Outcome Scorig Model Assessmet Dimesios & Data Attributes Decide o Portfolio Capture Attributes Leverage Applicatio Portfolio Iformatio ( apps) (Template data, Meetig miutes) APPLICATION SCORING PROCESS Applicatio Profile & OFIs (Profilig ad categorizatio based o applicatio stregths ad weakesses) (Iput) (Iput) (Outcome) FUNCTIONAL OVERLAP ANALYSIS Opportuity for System Cosolidatio (Iput) (Iput) (Outcome) Aalytics i Process Aalysis Criteria, developed based o the Assessmet Themes Guides MULTI-VARIATE ANALYSIS (Cube Model Assessmet) (Outcome) Leged Process Iput / Outcome OFI Opportuity for Improvemets Applicatio Dispositios (Ratioalizatio Opportuities - illustrative) Retire/ Replace Retai/ Re-egieer Cosolidate New Developmet Figure 1: APR Aalysis ad Solutio Defiitio Approach A typical APR exercise is depicted i Figure 1. As part of the portfolio ratioalizatio assessmet exercise, the future, or desired, dispositio for each of applicatios is idetified ad recommedatios are made to achieve the future portfolio state. Subsequet to the assessmet, detailed plaig eeds to be doe to realize the recommedatios ad moitor subsequet beefits based o the pre-defied metrics ad Key Performace Idicators (KPIs). Applicatio portfolio ratioalizatio eables a multitude of beefits to be realized across differet levels withi the orgaizatios: Busiess level: With system homogeeity comes process level stadardizatio, leadig to reduced complexity, improved quality of services ad greater agility. This helps busiesses maitai focus o growth ad cotrol ad receive accurate, meaigful, cosistet ad timely iformatio for improved ad educated decisio makig. Resources: Simplified ad stadardized IT operatios eed reduced or optimized skills ad resources. This allows redeploymet of skills, reduced head couts ad overall improvemet i resource utilizatio. IT ladscape: Stadardized ifrastructure eables faster upgrades ad scalable platforms while brigig i easier support ad maiteace capability. 7

8 Applicatio portfolio ratioalizatio however, should ot be a oe-time evet, as it provides maximum value whe it occurs as a allied activity as part of applicatio portfolio maagemet. Applicatio Portfolio Maagemet (APM) is the practice that establishes a disciplied ad ivestmet-optimized approach of cotiuous evaluatio of the applicatio (ad correspodig techology) portfolio to maximize portfolio performace ad effectiveess. APM is a iterative process with the followig key steps: Baseliig of the applicatio portfolio data Maagemet of APM ad APR themes, guidelies ad performace idicators Portfolio aalysis based o the assessmet themes ad guidelies Portfolio aligmet plaig Portfolio trasformatio APM goverace ad operatios maagemet The Applicatio Portfolio Ratioalizatio Jourey Chagig busiess dyamics i the last few years have also chaged the way we look at APR today. Alog with the traditioal drivers of IT simplificatio, techology stadardizatio ad cost optimizatio, a APR assessmet is also expected to validate the portfolio's suitability ad fitmet for cotemporary solutios like cloud services (SaaS, PaaS ad IaaS), service orietatio or mobility support. APR is ow beig viewed as a eabler to ot oly reduce eterprise IT heterogeeity but also to moderize the applicatio ad correspodig techology ladscape by adoptig ad itegratig with cotemporary techology solutios. Alog with traditioal assessmet perspectives, APR looks at portfolio suitability for differet solutio areas like: Cloud solutio fitmet (for example, IaaS, packaged replacemet) Fitmet for global deploymet ad iteratioalizatio Service orietatio Ease of mergers ad acquisitio itegratio Differetial service fitmet (for example, outsourcig, ear-shorig/offshorig) Mobility itegratio APR sposors ad executors are thus usig the exercise to achieve a robust framework that is: Fully customizable to address diverse APR ed objectives ad eterprise level priorities Supported by a comprehesive APR process with proper eablers 8

9 Supported by techology solutio ad platform for faster ad effective data capture (from both global ad local stakeholders) Secure eough to work with multi-geo ad multi-bu data with required access security Eabled with the required level of automatio to produce results ad reports i the miimal time Able to aalyze all the requisite areas of the portfolio, sufficiet eough to provide recommedatios for both traditioal ad ewer cocepts of cloud services, mobility, social media iteractios, service orietatio ad alterative solutio optios Capable of providig aalysis abstractio adequate eough for stakeholders to uderstad the ratioalizatio perspective while simultaeously eablig them to adopt the immiet path towards Applicatio Portfolio Maagemet. Primary buildig blocks ad priciples of a typical APR framework are discussed further i the followig sectios. Base Framework for Portfolio Assessmet The portfolio assessmet framework takes ito accout the exhaustive applicatio service capabilities for a 360 degree view aalysis with respect to busiess, techology, operatioal characteristics ad cost. The aalytics framework builds upo these aspects, statistically factorig i busiess priorities ad eterprise costraits to deliver recommedatios o applicatio dispositios. A basic portfolio assessmet framework should have the followig buildig blocks: A data capture model with processes that are robust eough to be accessed from multiple locatios, with provisio for parallel updates A mathematical scorig model usig a stadard prove methodology for portfolio health-check A aalytical model that creates logical determiistic clusters based o applicatio profiles Reportig capability to provide iformed profiles of a sigle applicatio or a cluster of applicatios A APR mathematical model should iclude the followig key compoets: Attributes: These are the lowest level of iformatio captured ad comprise the parameters that characterize a applicatio. Typical examples iclude applicatio ame, age, usage details, criticality, ad so o. The Dimesios ad Sub-dimesios are built usig these attributes. Dimesios ad Sub-dimesios: Decisio dimesios like Busiess Value of Portfolio or Portfolio Risks are the key logical compoets that guide the aalysis criteria of the framework. The aalysis dimesios ad correspodig sub-dimesios are built keepig i mid the fial objective to be achieved from a APR or APM iitiative. 9

10 Aalytics: This is the decisio makig process that makes a determiistic recommedatio, amogst alteratives, o portfolio dispositio. It establishes a multi-criteria decisio-makig methodology withi the framework ad is the backboe of the framework. Figure 2 illustrates the dimesios ad sub-dimesios that are used i a typical APR assessmet exercise. Dimesios Correspodig Sub-Dimesios Busiess Value of Applicatio Busiess Impact Aligmet to Global Stadards Operatioal Performace Usage Patter Techology Maturity Applicatio Portfolio Risk Cost Effectiveess Platform Maturity Operatioal Capacity Aligmet to Global IT Stadards Aligmet with Eterprise Architecture Teets Operatioal Risk Risk of Failure System Complexity Compliace Risk Applicatio Support Risk Total Cost of Owership Resource Itesiveess Busiess Value i terms of Quatitative ad Qualitative Beefits Figure 2: Assessmet Dimesios ad Sub-Dimesios The framework aalytics assess a applicatio portfolio based o the followig key assessmet areas or dimesios: Busiess Value of Applicatio tracks the importace of a applicatio to busiess as it measures its strategic fitmet i the eterprise. The decisio criteria also factors the strategic fitmet of a applicatio to address key busiess drivers like improved busiess agility, improved customer cetricity or scalability, mobility support, multichael support, etc. Techology Maturity assessmet looks ito the techology architecture aspect of applicatio deploymet ad assesses the fitmet from the perspectives of desired capacity, techology risks, techology utilizatio, operatioal behavior ad compatibility with ext geeratio iitiatives like cloud services adoptio ad service orietatio. Applicatio Portfolio Risk assesses the level of risk to busiess i terms of the probability of failure or degradatio of fuctioality as well as the extet of impact o busiess operatios due to applicatio, vedor ad/or platform obsolescece. 10

11 Cost Effectiveess assesses the TCO effectiveess of applicatios compared to their performace ad value to busiess. A low cost-effectiveess idex would idicate a value-eater, requirig immediate re-aligmet of IT budgets or replacemet. Figure 3 depicts how the portfolio iformatio that has bee captured should be urtured ad rated (usig certai repeatable ad defied frameworks of assessmet) to reach the fial dispositio, resultig i overall portfolio simplificatio. Step 1 Filter portfolio based o scorig model Step 2B Multi-Variate Aalysis, based o Aalysis Criteria Busiess Value Applicatio Risk TCO Techology Aligmet Applicatio Performace Dimesio 3 High Medium Low Migrate High Migrate Applicatios Scorig Model Dimesio 2 Medium Ehace Low Med High Low Retire High Medium Low Dimesio 1 Step 2A Multi-Variate Aalysis, based o Aalysis Criteria Based o the aalysis criteria, select the cluster of potetial applicatios for further aalysis Aalyze the cluster based o the third additioal dimesio i a DD- Cube model Dimesio 2 Dimesio 1 Applicatio Dispositios (Ratioalizatio Opportuities - illustrative) Retire/ Replace Retai/ Re-egieer Cosolidate New Developmet Figure 3: Demystifyig the portfolio assessmet 11

12 Critical Success Factor Realizig the Plaed IT ad Busiess Value All IT iitiatives are udertake with the best iterests of the eterprise i mid. However, for a applicatio portfolio ratioalizatio iitiative to succeed ad show measurable beefits, it eeds top maagemet madate for improved processes, as well as a accurate, data-drive uderstadig of the applicatio ad data ladscape. Applicatio portfolio ratioalizatio takes the bottom-up approach to improve IT effectiveess ad achieve the desired operatioal efficiecy by streamliig the applicatio capability to meet the preset gaps ad future busiess ad IT strategies. As i the case of ay strategic trasformatioal iitiative, it is extremely importat to uderstad ad adopt the critical factors that would esure the ultimate success of a APR exercise. Some of the importat factors are highlighted i Figure 4. Capability Assurace Portfolio ratioalizatio is a ogoig iitiative ad should be executed at itervals to alig the IT outliers with orgaizatioal priorities Availability of skills, budgets ad resources to implemet the ratioalizatio recommedatios Eterprise-wide Acceptace ad Adoptio Strog commitmet from key sposor stakeholders ad top busiess ad IT maagemet Active participatio of operatioal stakeholders to elucidate the correct profile of the applicatio ladscape Strategic ad maagerial level leadership to be icetivized to drive capability adoptio i their orgaizatio followig the ratioalizatio recommedatios Commuicatio Clear ad timely commuicatio of the portfolio ratioalizatio exercise to the cocered orgaizatioal stakeholders Clear commuicatio o how ew capabilities will support ad impact existig Lies of Busiess (LOB) priorities ad iflight iitiatives Trasformatio Maagemet - Accoutability ad Goverace Applicatio portfolio maagemet framework ad model eed to be established ad practised to esure maximum beefits from ay ratioalizatio Clear metrics ad guidelies to help maagemet ad leadership measure, track ad leverage ratioalizatio beefits Figure 4: Critical success factors for Applicatio Portfolio Ratioalizatio 12

13 Case Studies Oe of the leadig Eergy ad Utilities compaies i the USA, our cliet's busiess had grow expoetially i the last five years. As a result, the cliet had developed a federated IT maagemet style, while maitaiig a cetralized busiess model. This created discrepacies i busiess services across the globe, impactig growth. The compay was forced to look ito its global applicatio portfolio to idetify opportuities for improvemets, especially cloud solutios, as part of their IT trasformatio pla. The APR framework ot oly provided recommedatios o retirig or migratig applicatios but also delved ito the optios of SaaS solutios for CRM ad Busiess Itelligece. Further, a cost beefit aalysis showed quatified savigs i adoptig SaaS solutios for applicatios such as CRM. Oe of the world's largest tobacco brads was faced with the dautig task of trasformig itself from beig a globally spread federated eterprise to oe adoptig a globally cetralized operatig model. However, i its 100 years of existece the cliet had ever udertake a portfolio ratioalizatio exercise which had resulted i a portfolio of more tha 5000 applicatios. The egagemet aalyzed the global, regioal as well as local level applicatio portfolios spread across 180 locatios across the globe. The egagemet aided the cliet i cosolidatig 63 differet ERP systems spread across the globe to oe global SAP istace. The cost savigs from this cetralizatio ra ito millios. I the telecom domai where iovatios are the key to market leadership, our cliet was facig serious issues i freeig cash from large CAPEX ivestmets i order to icubate iovatio. A systematic APR recommeded that they move from a CAPEX ivestmet model to oe focusig o OPEX through the adoptio of shared services as well as SaaS ad PaaS solutios. The result was a cost savig of $ 6.57 millio over a period of two years, spread across seve lies of busiess. Coclusio It is always a CIO's top priority to operate with stadardized ad simplified applicatio architecture, with the optimized agility, robustess ad flexibility to support ot oly preset busiess operatios ad demads but also future growth plas. I order to reach that optimized state, however, oe eeds to take a systematic ad iformed path through applicatio portfolio ratioalizatio. This process is required to simplify the existig applicatio ladscape, ad create a moderized state of IT that ca be used as the bechmark to support future busiess ad IT demads. TCS, Next Geeratio Applicatio Portfolio Ratioalizatio (2011), accessed September 27, 2013, Applicatio-Portfolio-Ratioalizatio.aspx 13

14 About TCS' Global Cosultig Practice TCS' Global Cosultig Practice (GCP) is a key compoet i how TCS delivers additioal value to cliets. Usig our collective idustry isight, techology expertise, ad cosultig kow-how, we parter with eterprises worldwide to deliver itegrated ed-to-ed IT eabled busiess trasformatio services. By tappig our worldwide pool of resources - osite, offshore ad ear-shore, our high caliber cosultats leverage solutio accelerators ad practice capabilities, balaced with our kowledge of local market demads, to eable eterprises to effectively meet their busiess goals. GCP spearheads TCS' cosultig capacity with cosultats located i North America, UK, Europe, Asia Pacific, Idia, Ibero-America ad Australia. Cotact For more iformatio about TCS' cosultig services, us at global.cosultig@tcs.com Subscribe to TCS White Papers TCS.com RSS: Feedburer: About Tata Cosultacy Services (TCS) Tata Cosultacy Services is a IT services, cosultig ad busiess solutios orgaizatio that delivers real results to global busiess, esurig a level of certaity o other firm ca match. TCS offers a cosultig-led, itegrated portfolio of IT ad IT-eabled ifrastructure, egieerig ad TM assurace services. This is delivered through its uique Global Network Delivery Model, recogized as the bechmark of excellece i software developmet. A part of the Tata Group, Idia s largest idustrial coglomerate, TCS has a global footprit ad is listed o the Natioal Stock Exchage ad Bombay Stock Exchage i Idia. For more iformatio, visit us at IT Services Busiess Solutios Cosultig All cotet / iformatio preset here is the exclusive property of Tata Cosultacy Services Limited (TCS). The cotet / iformatio cotaied here is correct at the time of publishig. No material from here may be copied, modified, reproduced, republished, uploaded, trasmitted, posted or distributed i ay form without prior writte permissio from TCS. Uauthorized use of the cotet / iformatio appearig here may violate copyright, trademark ad other applicable laws, ad could result i crimial or civil pealties. Copyright 2013 Tata Cosultacy Services Limited TCS Desig Services I M I10 I 13