Application Portfolio Rationalization: Why Does it Matter?


Application portfolio rationalization is the process of systematically evaluating the entire existing application portfolio of an organization with the aim of eliminating redundancies / unnecessary expenditures, reducing complexity, increasing efficiency, and lowering total cost of ownership.  Some of the challenges in achieving sound portfolio management are disengaged stakeholders, too many applications, no clear priorities, lack of specific benchmarks and criteria for application selection and retention and the absence of a continuous monitoring strategy of the portfolio.

During the rationalization process, each application in the portfolio is analyzed, its value calculated and a decision is made as to whether to retire, replace, retain or re-architect that application.

Following is a 6-step framework for Application Rationalization

  1. Compile a list of all applications currently deployed. This involves working with the IT group to develop a list of all applications (past, present and new) in all business areas and geographical locations within the organization.
  2. Gather information about each application through interviews with business and IT stakeholders across the following dimensions.

Application Information

  • Description/Functionality
  • Type – commercial off-the-shelf (COTS), customized commercial off the shelf, software as a service (SaaS), Bespoke
  • Version, Vendor, Update Frequency
  • Sunset Planned (Yes/No)


  • Business Processes covered
  • Number of Functional Change Requests; ease of implementing changes

Business Importance

  • Criticality of the application (Mission Critical, Business Critical, Not Critical)
  • No of users, Trends (Increasing/Decreasing)
  • Busines User Satisfaction (High, Medium, Low)
  • Application Responsiveness (Unacceptable, Acceptable, Good, Excellent)


  • Application Server/Middleware
  • Database/Operating System/Hardware Platform


  • Architecture Style (Client Server, Mainframe, Monolithic, Service Oriented, Multi-tier Non-Web, SaaS Cloud based)
  • Complexity (High, Medium, Low)
  • Integration Architecture (point-to-point, MQ, SOA, Standalone (No Integration), File Transfer, Shared DB)
  • Number of Interfaces


  • Application Age
  • Source Code Availability
  • Quality of Documentation
  • Stability Performance Issues


  • Vendor Support


  • # Support FTE/Skill level needed
  • Downtime
  • Availability of DR Plan
  • Number of support tickets in last 6 months


  1. Build the Analysis Framework

Two areas (Functional and Risk) drive the analysis.

Functional Assessment

Functional Assessment analyzes the core functionality of each application and compares it across multiple dimensions (fit-for-purpose, redundancy, superior COTS/SaaS available) to drive recommendations that streamline functionality across the portfolio.

Risk Assessment

Risk Assessment positions each application on several risk factors (End of Lifecycle, infrastructure obsolescence, disaster recovery, security/regulatory compliance, support contracts, downtime, internal support resources) in order to determine the overall risk level and drive recommendations.


  1. Develop the Recommendations

Develop the application disposition matrix viz retire, replace, retain, re-architect decision for each application based on the results from the Analysis Framework.


  1. Create the Roadmap

Review the recommendations associated with each application with relevant stakeholders and develop a time-phased (short term, medium term and long term) implementation roadmap. Develop an infrastructure, with business closely involved to maintain alignment.


  1. Ensure Application Portfolio Rationalization is a continuous process. This enables the IT landscape to be actively aligned to business goals and objectives while maintaining the efficiencies generated.


Most businesses spend significant portions of their IT budgets on supporting aging under-utilized legacy applications. Application Rationalization efforts will help organizations optimize their technology stack, establish communication between stakeholders, deliver business value, reduce cost, and have money to invest in the latest cutting-edge technologies.