Application Portfolio Optimization (APO) is a strategic approach that starts with application portfolio rationalization, aiming to streamline and modernize an organization’s technology applications. It is a powerful method for IT organizations to address issues related to bloated overhead and run costs. APO involves a thorough review and alignment of applications with business objectives, ensuring they provide necessary functionality at the lowest possible cost while maintaining flexibility.
Key Components of Application Portfolio Optimization:
- Review and Alignment:
- Evaluate applications in the portfolio to ensure they align with business goals.
- Identify redundant or underutilized applications that contribute to unnecessary costs.
- Modernization:
- Move existing applications toward more modern, flexible, and cost-effective solutions.
- Introduce new technologies and approaches to improve efficiency and effectiveness.
- Cost Reduction:
- Focus on achieving significant cost savings by optimizing the portfolio.
- Drive down future costs exponentially by eliminating or upgrading outdated applications.
- Flexibility:
- Ensure that applications are not only cost-effective but also flexible to adapt to changing business needs.
- Transformation Impact:
- Enable substantial organizational transformation within a short time frame.
Challenges Addressed by APO:
- Legacy System Issues:
- Legacy systems often face dwindling support and lack an active transformation roadmap.
- Operational Inefficiencies:
- Unused applications contribute to increased maintenance and run costs, impacting overall IT spend.
- Agility and Productivity:
- Legacy processes can hinder agility, diverting time and resources from innovation and revenue-impacting technologies.
- Application development teams may become reactive due to overwhelming service demands, affecting productivity.
Benefits of APO:
- Cost Savings:
- Achieve significant savings in IT and application spend.
- Future Cost Reduction:
- Drive down future costs exponentially through portfolio optimization.
- Skill Enhancement:
- Improve staff skills and capabilities through the adoption of modern technologies.
- Increased Productivity:
- Enhance the productivity of tools and processes by eliminating redundancies and outdated systems.
- Transformation as Business as Usual:
- With the right assessment methods, sourcing strategies, and supplier partnerships, APO can be integrated into regular business operations.
While APO might be perceived as a major transformation project with potential high costs, successful implementation can result in significant benefits for IT organizations. Wavestone US, for example, has a track record of helping clients save millions of dollars in IT and application spend through effective APO. The impact of APO on an organization can be substantial, improving efficiency, reducing costs, and positioning the IT landscape for future success.