Deciphering application rationalization: Why it's essential for SaaS businesses today

Managing many different apps, tools, and software can get tricky. How do you make sure your software lineup stays efficient, cost-effective, and in line with your business goals? That's where application rationalization comes in.

In this blog post, we'll talk about:

• Why you need to rationalize applications
• The biggest challenges of app rationalization businesses face
• The benefits of application portfolio rationalization 
• How to build a successful application rationalization framework

What is application rationalization?

Application rationalization, also known as application portfolio management, involves reducing the number of computer programs a company uses. In simple terms, it means using fewer applications than before, usually to save money and work more efficiently.

When discussing saving money, we use the term "total cost of ownership" or TCO. TCO is a way of figuring out all the costs related to your computer equipment over time. It includes buying and managing the hardware and software, communication expenses, what it costs when employees can't work because of computer problems, and more.

Usually, the CIO leads the effort to execute application rationalization. This is super important for people who plan how a big company's computer systems should work. In fact, our research shows that this is the main reason why big companies use something called "enterprise architecture."

The way companies do application rationalization can be different. Some really advanced companies do it slowly and carefully to avoid big changes. Others might need to do huge projects affecting the entire company, which can take a lot of time and money.

Why do you need to rationalize applications? 

Reducing the number of applications you use isn't just about saving money; it's about improving your business. 

Here's why it's important:

1. Data quality and integration

Too many applications can result in data silos, where information is trapped in different systems and cannot be easily shared or analyzed. Rationalizing applications can help you integrate data more effectively, leading to better insights and decision-making.

2. Compliance and risk mitigation

In industries with strict regulations, maintaining compliance is crucial. Simplifying your application portfolio can make it easier to ensure that your software aligns with regulatory requirements. This reduces the risk of costly non-compliance issues.

3. Resource allocation

By optimizing your application portfolio, you can allocate your resources more efficiently. This includes human and financial resources, ensuring that they focus on projects and tasks that directly contribute to your business objectives.

4. Sustainable growth

Rationalizing applications sets the stage for sustainable SaaS growth and profitability. You can invest in innovations and technologies directly contributing to your long-term success rather than spreading resources thin across many tools.

5. Data security

Making your software setup simpler can help keep your important information safe. When there are fewer ways for people to get into your system and fewer things to protect, it's easier to make sure your data doesn't get into the wrong hands.

The biggest challenges of app rationalization

Even when SaaS companies try their hardest to save money and secure the network, they still face one or the other problems with application rationalization. 

Here are a few of those biggest challenges:

1. Bloated application portfolios

SaaS companies often end up with too many software tools over time, often without a clear plan. This can lead to a software collection that's too big, causing more complexity, higher costs to keep everything running, and even potential security problems. 

When you reduce the number of apps, it becomes easier to see which ones are used often and which are not. This helps in figuring out which new apps will be valuable for the business.

2. Redundant platform changes

Constantly changing and updating software platforms can confuse work and use valuable resources. Moving to cloud-based services (SaaS) instead of keeping everything on your own servers is a good idea. 

But you're missing an opportunity if you move all your apps without considering their value. With fewer apps to move, you'll save time and focus on the ones that really help the business.

3. Under-utilized applications

Buying new things is tempting, but that's not always the best way. Sometimes, you might have software you're not using effectively, which wastes your resources. 

Companies that do application rationalization make sure they're using their current apps to their full potential before adding new ones. This makes things more efficient and ensures that any new apps fit well with the company's goals, hence putting your resources where they can make the biggest difference.

What are the benefits of application portfolio rationalization?

Application portfolio rationalization offers insights into application performance and usage trends, helping organizations understand how their technology investments are doing over time. 

Apart from that, there are a few more benefits it offers, such as:

1. Clearer view and control of your IT systems

Application portfolio rationalization helps you see all your software clearly. This is important because, over the years, many companies have added more and more software for various reasons. 

Application portfolio rationalization helps IT teams understand their software better by organizing it and showing how it's connected to what the business does. This clarity makes it easier to plan new projects.

2. Insight into performance

Application rationalization provides insights into how well applications perform and are used over time. This helps organizations understand how their technology investments are doing and if they need any adjustments or improvements.

3. Savings, better planning, and flexibility

Application portfolio rationalization offers dashboards that show when software needs to be replaced or retired. It also helps you understand how software connects with your business. 

By knowing which software is most important, you can make smart decisions that save money and make your IT system more flexible.

4. Reducing risks and simplifying technology

IT departments often use many different kinds of technology, which can be risky and expensive. 

Application portfolio rationalization can tell you when a technology is getting old and needs to be replaced. By setting technology standards, you can save money and make your projects run smoother.

5. Smarter IT planning

With application portfolio rationalization, you can plan your IT projects better. You can simulate different scenarios to see what might happen if you change or remove some software. This helps you make better decisions about where to invest your resources.

6. Enhanced employee productivity

When you rationalize your application portfolio, employees have access to a more focused set of tools. This means they spend less time dealing with software issues and more time on productive tasks, ultimately improving their efficiency and job satisfaction.

7. Reduced downtime

Application portfolio rationalization minimizes software-related problems, leading to less downtime for your business. 

When you have fewer applications and a better-organized IT landscape, there are fewer opportunities for technical glitches or software failures. This translates to increased business continuity, reduced disruptions, and enhanced operational efficiency.

8. Streamlined training

Rationalizing your application portfolio simplifies training for your employees. With a more focused set of applications, your workforce can become proficient in using the tools they need more quickly and effectively. This not only saves time and resources but also results in smoother onboarding processes for new hires and easier cross-training for existing staff.

9. Easier compliance and audits

Compliance with industry regulations and audits is crucial for many organizations. Application portfolio rationalization helps maintain proper records of your SaaS assets, making compliance efforts more straightforward and ensuring that you can easily demonstrate adherence to rules and regulations.

How to build a successful application rationalization framework

The six-step process outlined below is a structured, iterative approach to application assessment and rationalization.

1. Conduct a readiness assessment and identify needs

Evaluate whether you have the right skills and tools. Figure out what you need, like experts and data, to perform your job well. This step helps you get ready for the process.

2. Create an application inventory

Start by listing all the computer applications and tools your company uses. Create a list of the names of the software, their purpose, which teams or departments use them, and how much they cost. This list gives you overall visibility.

3. Analyze business value and technical fit

Now, analyze each application to understand if it is required for your business. Examine whether it works well with your other applications.

4. Calculate the total cost of ownership

Calculate how much money you spend on each application. Include everything like purchasing, maintenance, and integrating it with your other work process. Also, consider how much it costs when the application doesn't work and your employees can't do their jobs.

5. Score each application

Rate each program by giving it a score. Some applications are vital, while others might not be as useful and get a lower score.

6. Set actionable for each tool

After you've checked all your applications, it's time to decide what to do with each one. You might keep using it, change it for something better, or stop using it altogether. 

Do more with less via Spendflo

Software rationalization is a data-driven, adaptable, ongoing process that your organization can easily implement. The idea is to make your IT setup less confusing. This way, your organization can save money and stay up-to-date with the latest technology trends.

However, it will only work well with support from senior management and a clear plan to make sure your software lineup matches your big goals.

This process happens in stages, with regular check-ins and conversations with affected people. You must also stay committed to keeping your software under control.

Get a free saving analysis today to learn more about how Spendflo can help with application rationalization.

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