application rationalization (AR)

Application rationalization is the practice of strategically identifying business applications across an organization to determine which applications should be kept, replaced, retired or consolidated. The goal is to achieve improvements in business operations.

Application rationalization -- which falls under the broader application transformation umbrella -- had wide appeal in the late 1990s prior to the year 2000 (Y2K) data change, sometimes referred to as "the Y2K problem" or "the millennium bug." At the time, organizations evaluated their applications and upgraded their systems as the Internet began to mature and chief information officers (CIO) were seeking innovative ways to drive efficiencies into their business processes.

Since then, application rationalization has become an important practice among CIOs and IT departments faced with an excess of legacy applications and the high cost that comes with maintaining these systems. Application growth has also occurred through mergers and acquisitions (M&A).

As organizations tackle regulatory and compliance requirements and migrate business applications to cloud computing models, CIOs and IT executives utilize application rationalization initiatives to align their application portfolios with business objectives.

Application rationalization projects lay the foundation for a scalable, nimble IT infrastructure that can handle business operations associated with mobile, social and big data initiatives. An application overhaul also helps companies take advantage of emerging technologies, platforms and changes in industry practices.

Among the organizational benefits that can be derived from application rationalization are:

  • Helping companies identify legacy applications that can be exposed to security risks. These applications can be replaced with new applications that come with enhanced security features.
  • By retiring redundant applications companies can control technology sprawl.
  • Application rationalization projects can provide CIOs and IT managers with the opportunity to drive standardization into their business operations, as well as introduce innovation, cutting edge technology and better business processes across an organization.
  • Conducting an application portfolio review empowers organizations to better understand their business needs, which helps broaden the conversation between the vendor and customer. IT executives can discuss with vendors not only the price of the product, but whether their applications meet the organization's business requirements.
  • Knowing what applications are required to improve business performance can help organizations evaluate vendor/service provider options, and negotiate better service-level agreements (SLA) and contracts.
This was last updated in March 2016

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