Wednesday, September 22, 2010

The case for IT Portfolio Rationalization

Un-rationalized IT portfolio is a critical issue facing many organizations. There are a plethora of reasons why an IT portfolio becomes ‘bloated’ with an ever increasing inventory of applications running of multiple platforms. It could be because of mergers and acquisitions, lack of enterprise architecture standards and IT governance, legacy applications that need to undergo a technology refresh cycle, etc. As a result of this, a majority of the IT budget is spent on “keeping the lights on”, rather than investing on new strategic initiatives. This in turn results in poor business-IT alignment.

Continuous Portfolio Assessment and periodic Rationalization of IT assets is needed to lower the TCO of the IT portfolio and enable business agility. Portfolio assessment and optimization should be an integral part of the organizations EA group.

Any portfolio rationalization exercise would start with an assessment of the current state. Here pre-defined templates to capture the high level IT landscape would be beneficial. More comprehensive templates would be required to capture the details of each application. Information parameters such as application infrastructure, business process supported, TCO, pain areas, etc. would be captured.

The second step would be group applications into clusters. A ‘cluster’ is nothing but a group of applications that are similar in semantics - from a business perspective or a technology architecture perspective. For e.g. applications collaborating or orchestrated to fulfill a business process, a cluster of web applications running of the same technology stack - Websphere App Server on Solaris.

Each application cluster is then evaluated across various dimensions – such as Business value, Business functionality adherence, Current or Future Technology standards adherence, EA standards conformance, SLA conformance, TCO, etc. Based on the rating and the weightage given to each parameter, we would arrive at final scores. Based on the scoring, application clusters would be segmented into 4 categories – retain, enhance, replace, retire/sunset.

The final step is to define roadmaps for the transformation – a set of project streams/initiatives that would be required. A project prioritization framework would help in sequencing the selected initiatives. Pre-defined templates for project prioritization would come in handy here. Here again a metrics driven approach would work; wherein we evaluate the priority of the selected work streams based on parameters such as business impact, risk, technology skills, cost/investment required.

It is also very important to define a governance body to manage the rationalization program and sustain it. The governance body would have participation from both business and IT stakeholders.

The end deliverables of the rationalization exercise would be:
1. Matrix of applications segmented into 4 categories – retain, enhance, replace, retire/sunset
2. Define project streams (rationalization roadmaps) and project sequencing (prioritization) to meet the future state E A vision
3. Define opportunities/initiatives for business process optimization and reduction of TCO

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