Without true innovation, companies can’t survive. That’s why, it is critical that IT systems become agile to support new business activities. For example, in the financial industry, most sales orders and contract renewals now happen online, and insurance agents and bankers will certainly be replaced by artificial intelligence one day.
However, most of the IT budget goes into the maintenance of legacy systems instead of innovation. In a 2018 IDC survey on U.S. federal civilian agencies, it was indeed found out that only 21.1% of funds go into new systems development, while 78.9% go toward improving and maintaining legacy systems (Maintenance and Operations).
Rationalize IT Costs to foster business innovation
IT is the new hub and the engine that drives business innovation. That’s why IT systems need to be rationalized and modernized to easily integrate new developments faster.
But IT rationalization is often a challenge for many organizations: They lack visibility into their applications that have been accumulated over time, either through organic growth or mergers & acquisitions. Organizations are overflowing with duplicate, redundant, obsolete and irrelevant applications, resulting in a highly complex IT landscape, and increasing maintenance costs.
How IT portfolio management can help rationalize IT and cut costs
To streamline and simplify the IT portfolio, two key elements are required:
A review and analysis of the IT portfolio on a regular basis to inventory, evaluate and plan the transformation of the IT landscape
A strong IT portfolio management governance that ties IT strategy to transformation projects
IT portfolio management helps rationalize the existing application portfolio to reduce complexity, enhance efficiency and lower the overall cost of IT assets.
Main steps for efficient IT portfolio management
1. Inventory: Get full visibility into IT assets
The inventory of applications and the underlying technologies that support them, can be made under multiple perspectives: lifecycles, costs, deployments and the business capabilities they support.
In this process, the use of an enterprise architecture approach allows IT leaders to tie together business capabilities, applications and technologies.
It will help to:
Precisely understand the business value and IT performance of each application to improve decision-making and streamline the IT portfolio.
Track technology obsolescence and understand when software components are no longer supported, and therefore better plan technology change.
2. Evaluation: Assess each asset from a business and IT perspective
The assessment of IT assets provides a better decision-making basis for IT rationalization, leading to a reduction in complexity and IT costs.
During this phase, IT assets can be assessed through various perspectives such as business value and technical efficiency to decide which assets to invest in, tolerate, migrate or retire.
Based on a clear understanding of the value of the organization’s IT assets, IT managers will be able to identify the assets to be removed or modernized, thus driving down costs.
3. Transformation: Reinvest the IT budget on innovation
The corresponding IT rationalization projects are created based on the identified assets to be retired or modernized. Projects can then be prioritized based on various factors such as costs, risks, benefits and strategic alignment.
However, before applications are retired or changed, key questions need to be answered :
What would the impact be if the application were retired?
Which functionalities would no longer be available?
What impact would these changes have on your IT roadmap?
All of these questions should be answered before final decisions are made in order to assess the full impact of IT rationalization projects.
By consolidating their IT assets, IT departments can reduce costs and, thus, use an increasing portion of their budget for innovation.
IT governance principles will be strengthened leading to an improved convergence with the business.