Retire Legacy Applications and invest in Digital Technologies

Legacy-Systems-RetirementAlmost all big firms continue to accumulate systems after systems over decades. Once the systems goes live, there is never a word of retiring and whether the user use the application or not, it continues to run with nobody paying attention to it. Retiring any legacy application is last in priority on any CIOs agenda. Why is it so hard to kill off old systems?

One word: Metrics. Older systems lack measurements and KPIs. Given that there is no quantifiable measure to review the data, it’s hard to kill. Often times it becomes and matter of opinion vs. matter of fact.

I once had made a suggestion to turn off 10 year old Powerbuilder reporting system after initial tech assessment. But several client stakeholders objected saying they use that systems to generate reports on regular basis. With no metrics to prove, I decided to test this. I  asked the developer to include line of code to track who logged when. So, we watched for 2 weeks. Result: Zero logins. Then we turned off the reporting system completely without letting the user know. What was the result after 2 months? Zero logins again! Nobody ever knew it was turned off because they had not used it. So, when we reviewed the findings and results, CIO agreed to decommission the application. What we all learnt is this – users are notoriously inaccurate in deciding these things; perception and reality is different.

Most organizations spend 80% of their IT budgets on “keeping the lights on” (Source: Gartner)

Only 20% for new business and innovation (Source: Gartner)

Cycle needs to be reversed. Don’t you think?

Why is this important?

Three words: Free up $$ for investments in Digital, Innovation and New Business Development.

There are other reasons to move away from legacy – lack of available legacy skills, closed architecture hindering integration and experimentation, old infrastructure risks, high maintenance costs (hardware, software, storage costs +labor+vendor), not useful for customers, and so on.

Companies have to invest in digital to get ahead – and they need dollars for digital investments. So, instead of maintaining old legacy apps that may not provide any business value, CIOs must retire them and free up the budget for digital investments.

Planning and Rationalization should follow a continuous cycle… applications must be evaluated every quarter

Any investment that is approved needs to be planned through end of life cycle. In other words, any product/service that you put out has to provide immense value to customers relative to cost incurred, minimize risk for companies, and has to make financial and technical sense – all the time. When this criteria is not met, it’s time to pull the plug.

Application Rationalization

All applications should measure key KPIs and report these to line managers on regular basis for evaluation. For in-depth approach on how to run Application rationalization efforts for your organization, please see my earlier post.

Conclusion

In this customer-centric age where agility and fast-paced innovation rules coupled with moving to digital, it is very important for CIOs to pay attention on application rationalization strategies and focus investments on flexible, agile disruptive technologies which can advance organizations strategies. Today’s competitive marketplace requires that enterprises modernize their application portfolios – its a business imperative.

What other measures can CIOs take to gain advantage in this digital age? Share your thoughts down below.

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Framework for managing portfolio of projects to create business value

Business today remain under tremendous pressure to innovate, improve top line growth, reduce bottom-line costs, and grow by successfully executing their business strategies. As businesses gear up for growth, many find they are hobbled by inadequate portfolio management practices and resources.

So, what are the typical portfolio challenges?

  • Business continue to maintain old legacy systems with maintenance costs super-ceding benefits with little to no agility
  • Business continue to invest in year long projects that do not align well with overall business or corporate objectives.
  • Many organizations require lot of upfront effort to justify business need for project (which is good) but once the project takes off, they are unable to assess their overall portfolio (benefits measurement is lacking after projects go-live).
  • Lack of common framework to prioritize portfolio of projects, especially for organizations spread across geographies and executing projects across geographies

Enter “Portfolio Management”…..

It is much more than managing programs or projects, rather it is management of entire project portfolio to maximize the business value to organization.

Portfolio Management is a strategic framework and dynamic decision-making process to assess value, prioritize projects and allocate resources to meet key business objectives.

project outcomes by overall portfolio mgmt maturityOrganizations with strong portfolio management capability tend to achieve greater project success (per PMI).

Please note that portfolio management does not involve executing projects, rather choosing which projects to funds, best ways to execute and continuous evaluation of projects that are live to determine if they are still adding value and taking appropriate measures.

 

Framework for Portfolio Management

Although there is no set framework for portfolio management, many large organizations follow a high-level 3 step process as below.

  • 1: Investment Management– Strategic visioning, planning and identifying where to invest be evaluating several factors like risks, benefits achieved, alignment with business objectives, competitors offerings, etc. (Doing Right Things). This is basically selections of projects/initiatives.
  • 2: Project Portfolio Management – Build and implement identified portfolio of projects using well-defined program/project best practices, rigorous planning and following standard development methodologies, etc. (Doing Things Right). Constitutes Program Management and Project Management — focused on delivery of business benefits.
  • 3: Application Portfolio Management – Maintenance of projects after go-live. Inventory applications, analyze along business, tech, financial, operational and risk perspectives, conduct cost-benefit analysis, evaluate tech risks and develop a management strategy for continued investments to maximize value over applications lifetime (Application Rationalization)
portfolio management
Lifecycle of project investment

 

Although I have indicated a few sub-processes within each step, note that these may vary depending on organization standards.

This framework is not just for IT projects, it is equally applicable for projects across marketing, creative, branding and such.

It is not just enough to have Portfolio Management process in place, organizations need strong sponsorship, leadership, support and a good governance model for success. The portfolio management process is typically executed every quarter.

How does Portfolio Management help Executives?

  1. Provides better visibility on project portfolio
  2. Align investments with business objectives
  3. Help prioritize which projects to execute first over another
  4. Helps optimize application portfolio (e.g. eliminate applications or systems that are no longer adding value to business)

At the end of the day, a well managed portfolio helps organizations successful execute it’s strategy and deliver shareholder value.

Execute “Application Rationalization” to manage and optimise your Application Portfolio (suggest this to your CIO and get some brownie points!)

All the organizations, especially CIO office, face the imperative to reduce IT costs, improve operations, reduce risks and improve customer service – all the time (more so in this economy). When efforts to do so are not aligned with business objectives, organizations end up spending millions of dollars on initiatives with only short-term benefits. One way to address is this issue is with “Application Rationalization”. If Application Rationalization is coupled with right Enterprise Architecture, IT Strategy, sound Project Management principles, organizations can improve bottom-line benefits and strive for top-line growth.

What is Application Rationalization?
Application Rationalization is a process of analyzing the applications in the enterprise to determine overlapping functionalities, unused applications, bottlenecks in systems – with a goal of improved efficiency, cost reduction and effective Business-IT alignment.

Most of the enterprises have proliferation of applications across departments with no control. Research shows that as much as 80% of IT budgets go in just maintaining the current systems. So, over time, there are several duplicated efforts, resulting in increased costs, increased time to market and thereby defeating business agility. So how does an organization understand what applications are worthy of additional investment, replacement or retirement? Answer: Application Rationalization.

The biggest benefit, in my experience, is that Application Rationalization helps CIO’s and IT Managers, understand their current environment better (what services are provided and associated costs to develop/operate them) and provides starting point for improvising IT. There are several other benefits as well –

  • Helps enterprise get lean and more efficient
  • Helps enterprise focus on high business value projects
  • Reduced IT costs and in particular, Operational costs with significant service improvement
  • Helps eliminate software/hardware maintenance costs
  • Helps organization invariably think about emerging technologies like Web 2.0, Virtualization, Cloud computing etc, while crafting future roadmap
  • Eliminates duplicate functionality, aids in building centralized enterprise services
  • Reduce points of failure
  • Clear SLAs
  • Predict performance and scalability more accurately, and many more

In fact, Application Rationalization could aid in building a sound Enterprise Architecture, thereby supporting Enterprise Business Strategy.

What factors should be considered while analyzing applications:
Applications have to be analyzed from 4 perspectives – Business, Technology, Operational, and Financial

  • What is the business value of these applications?
  • Development, Training cost spent already and ongoing Operational costs (includes hardware, software maintenance and licensing costs)
  • Business processes these applications support
  • Total users (types, geography)
  • Performance and scalability of these application
  • Usability and User Experience of these application
  • Dependency amongst applications

These perspectives are combined to determine the posture of the application, and thereby determine the appropriate remediation strategy, and to provide recommendations for managing the application portfolio over time.

Methodology/Approach for Application Rationalization
Organizations can use a simple 3-step methodology to strengthen and optimize their application portfolio.

Step 1: Collect, validate the application data (Build Application Inventory)
This step entails collecting and building the application inventory, which should include major data elements like –

  • Name and description of application
  • Business and IT owners
  • Application type
  • Business processes enabled
  • Business value/criticality
  • User information
  • Costs (Internal Personnel, External Personnel, Hardware, Software, Other External Costs)
  • Application architecture and Design
  • Tools and technologies
  • Data quality
  • Application business quality
  • Security
  • Regulatory compliance
  • Risk profile etc

Step 2: Perform application assessments along 4 perspectives (Analyze Portfolio)
Each application in the portfolio is analyzed along 4 perspectives as stated above, to determine the business, technology and enterprise fit. This is done with stakeholder interviews, workshops, research and analysis activities. Analysis should include identifying the KPIs and metrics to measure the ROI on these applications.

Step 3: Determine Transition Roadmap
Identify the Problems/opportunities, Alternative approaches and best actions for managing applications over expected life spans. For each application, determine whether to –

  • Remediate
  • Technical renovation/enhancement
  • Functional enhancement
  • Replace (COTS or custom)
  • Sunset/eliminate/decommission
  • Consolidate
  • Continue maintenance

With this, a final set of applications and business functionalities are well-defined, in alignment with Business Strategy and goals. This is the first strategic level where business strategy stating the target application portfolio is defined. A clear application transition road-map (implementation, timeframe) should be developed at the end of this step. This strategy should be rehashed several times to drive the organization closer to its target application portfolio and thereby business goals.

In order to demonstrate early benefits, identify “low hanging fruits” (alternatively said, decommissioning of the unused/deprecated applications should be the first activity).

What next?
The output of Application Rationalization activity is the “Application Transition Roadmap” -> which should feed into Investment Portfolio Management to fund these new Application initiatives. The funded projects are then fed to Project Portfolio Management process for execution.

Application Rationalization should be part of continuous rolling wave IT Project and a part of framework for management of IT Investments. As with any initiative, it is important to understand the big picture first, and then take a phased approach with industry leading practices in Project and Quality management while executing the Application Rationalization initiative.

There are several challenges that have to be overcome during Application Rationalization effort – 1) Managing all the stakeholders or business owners of application (remember legacy/old applications have multiple owners) (2) Management committment and buy-in for this initiative throughout the process (3) Not treating this as one time effort, rather use this framework as part of continuous IT Investment Portfolio Management process.

All the IT Managers are constantly thinking about this, are you?