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Application Landscape Report 2011 Edition

Applications have fueled business growth and supported its key processes in the past. However, over time, many companies’ IT landscapes have become cluttered with obsolete IT systems and applications that no longer deliver full value to the business. In our survey of IT executives, 85% of respondents state that their application portfolios are in need of rationalization.

As budgets become more constricted, the focus of application strategy shifts from innovation to cost cutting, and application rationalization is not an easy task. Cost is a key barrier to all modernization initiatives, and it is often difficult to demonstrate fast Return on Investment (ROI) to get the business buy-in.

Despite these challenges, the CIO’s outlook on the application lifecycle is beginning to change. Instead of simply building custom IT solutions to solve today’s specific problems, IT management is committed to bringing in more standardized, scalable and maintainable offerings. A growing number of IT executives are treating application retirement as an essential step in the lifecycle, and they are adopting new practices for reviewing and modernizing their application landscapes.

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Application Landscape Report 2011 Edition

  1. 1. 2011EDITION Application Landscape R E P O RT
  2. 2. the way we do it contents preface 4 executive Summary 5 introduction 6 hypothesis for this Report: Building the New City in the Old City 7 the State of the Application Landscape 9 increasing IT Efficiency through Modernization 13companies’ Experiences with Retirement and Rationalization are Mixed 17 application Strategies that Work 19 conclusions 24 methodology 25 acknowledgements 26 3
  3. 3. prefaceRaf Howery Welcome to the inaugural 2011 edition of the Application Landscape Report.Vice President This report is designed to help companies understand the current state of ITGlobal Channels & Partners Executive applications and review emerging trends in application transformation andCapgemini modernization. Why do we need this report? We believe that at the heart of any transformation project, one must first have a clear picture of the present state.Murat Aksu This report is a reflection of the present state as indicated by CIOs and ITPrincipal Directors who struggle with transformation and IT budgetary challenges on aGlobal HP Software Alliance Lead daily basis. Without knowing the present state, we cannot accurately captureCapgemini the magnitude of achievement as we collectively modernize and transform our application landscapes and redefine the concept of a rationalized infrastructure. We hope you will use this report to benchmark where you are today compared with your peers and to devise intelligent, cost-saving, proven methods to modernize and evolve from the landscape of today to the landscape of tomorrow. Our findings are based on analysis, surveys and in-depth interviews with IT leaders in companies of various types and sizes across both Europe and North America. We use real-life examples to illustrate how IT executives perceive the current state of their application landscape, to explore the reasons why companies find themselves supporting many obsolete and redundant IT systems, and to discover what measures are being taken to optimize the application infrastructure. We want to express gratitude to our colleagues at HP for their continuing collaboration and support. The Application Landscape Report will be produced on an annual basis. Our goal is to provide ongoing guidance to our clients on a variety of essential IT topics for years to come.Paul Muller We’re delighted to have collaborated with Capgemini on this report, whichVice President provides a real-world perspective into the global applications landscape.Strategic Marketing, HP Software Application transformation is a critical enabler of HP’s Instant-On EnterpriseHP vision, helping bolster enterprise growth, agility and ability to innovate. The Application Landscape Report provides actionable comparisons to your industryErwin Anderson-Smith peers, information we hope will help you accelerate your own transformations.Global Alliance Director, HP SoftwareHP As we celebrate the release of the first edition of the Application Landscape Report, we would like to express our gratitude to those individuals and organizations that dedicated their time to enhancing the richness of this report and encourage you to share your thoughts and feedback as we prepare for next year’s installment.4
  4. 4. Application Landscape Reportexecutive summary IT has historically been in the forefront of innovation. Applications fueled business growth and supported its key processes and operations. However, over time, many companies’ IT landscapes have become cluttered with obsolete IT systems and applications that no longer deliver full value to the business. Most CIOs realize that large-scale rationalization projects are needed to simplify the functionality of existing applications; to reduce the amount of old technology; and to bring new, more effective applications into the business. In our survey of IT executives, 85% of respondents state that their application portfolios are in need of rationalization. This suggests that mission-critical applications implemented using outdated technology must be revised and updated to increase efficiency. As budgets become more constricted, the focus of application strategy shifts from innovation to cost cutting. If there was adequate funding before the economic downturn for both “keeping the lights on” and finding room for innovation, today’s economic climate clearly highlights new limitations in this area. The resources to support growth and new development, therefore, must now be found within the IT organization itself. By creatively modernizing and rationalizing the application portfolio, IT can derive the needed extra funds. But application rationalization is not an easy task. Cost is a key barrier to all modernization initiatives, and it is often difficult to demonstrate fast Return on Investment (ROI) to get the business buy-in. Despite the challenges, the CIO’s outlook on the application lifecycle is beginning to change. Instead of simply building custom IT solutions to solve today’s specific problems, IT management is committed to bringing in more standardized, scalable and maintainable offerings. A growing number of IT executives are treating application retirement as an essential step in the lifecycle, and they are adopting new practices for reviewing and modernizing their application landscapes. Only with such a true lifecycle approach can companies maintain a healthy portfolio and ensure application quality, productivity and optimal business alignment. 5
  5. 5. introductionApplication strategy is one of the main focus areas for CIOs in companies of all typesand sizes. It is driven in today’s environment by the need to cut costs and find thebalance between supporting daily business operations and making room for innovationand growth.Capgemini has set out to understand how different companies have more applications than the business needscompanies approach strategies around IT applications, and and are forced to spend valuable IT resources on supportingto gauge specific knowledge around how applications are obsolete systems from the past instead of focusing theirstructured, rationalized and retired across different assets on future growth. This report provides bothcompany sizes and various geographies. We surveyed nearly quantitative analysis of the current state of the applicationa hundred companies ranging from small (under 1,000 landscape and valuable insights from individual ITemployees) to enterprise (100,000 employees or more) in a executives on what is happening within their landscape andvariety of verticals across multiple European countries and how it can be altered. We hope that the data provided inNorth America. In addition, we conducted in-depth this report can help you gain better understanding of theinterviews with top IT executives of large corporations to current IT application landscape, the problems that ITget their unique perspective on application transformation, organizations are facing, and possible solutions to findingmodernization and retirement. the balance between keeping the lights on and investing in innovation. We are committed to refreshing this report onWhat we found confirms our initial hypothesis: today’s IT an annual basis to bring you the most up-to-dateorganizations are carrying a heavy burden of applications perspective, analysis and insights in the applicationthat are often not delivering full value to the business. Most modernization space.6
  6. 6. Application Landscape Reporthypothesis for this report:Building the New City in the Old CityFor decades, the business and IT departments have developed solutions without regardfor what will happen when these applications reach the end of their useful life. Engineersbuilt applications for specific business problems, patched broken functionality,periodically upgraded core systems, and managed the multitude of redundantapplications and large amounts of data that came with each merger or acquisition.Eventually, this chaotic growth began to cause serious alignment between development and maintenance.problems. Like an old city with narrow streets and outdated Developers need to create applications that can be easilyinfrastructure desperately trying to provide modern maintained, and maintenance personnel should focus onconveniences to its fast-growing population, IT now simplifying and rationalizing business applications – ratherstruggles to deliver value to the business while dealing with than simply stabilizing and maintaining the existing ITthe legacy of many years of unrestrained growth and portfolio. Application retirement and data managementburdening complexity. must be viewed as essential steps in the application lifecycle. All IT systems should be regularly examined andToday’s CIOs are spending too much valuable time, effort analyzed based on clearly defined criteria to determine ifand budget on their sprawling application landscape. They they still provide value to the business or are candidates forstruggle to find resources to support innovations and more decommissioning or other rationalization activities.opportunistic, value-driven business initiatives. The toppriority for the CIO in 2011 is to rationalize the applicationportfolio to increase productivity, improve flexibility andadaptability, and better align IT with the business.However, many CIOs find it difficult to get support andbusiness buy-in for their rationalization initiatives. Lack of CIO ty for theconvincing business cases and coherent strategies, poorly The top priori e thedefined architectural alignment, and inconsistent and rationaliz in 2 011 is to aseunreliable application intelligence can significantly hinder o to incre o n portfoliany effort to bring order to chaos within the IT landscape. applicati ve flexib ilityCIOs can apply multiple strategies to rationalize their v ity, impro producti betterapplications, including sustaining, extending, remediating, ility, and and adaptab, migrating, replacing, consolidating and the businretiring. The question is which strategy is the best for a alig n IT withgiven situation that results in timely, realized ROI tosupport the near-term business goals.CIOs also need to consider making a change in theapplication lifecycle. Today, the activities of “buildingapplications” and “maintaining applications” are oftentreated separately, assigned to different business units oreven outsourced to different providers. For a morestreamlined application landscape, there needs to be better 7
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  8. 8. Application Landscape Reportthe State of the Application LandscapeApplications are integral to all primary value chain activities. They enable companies tocollaborate, be more productive, and increase operational efficiency.The core function of IT applications is to support thebusiness. “In order to deliver the services that we provide to How would you rate theour customers, the applications are absolutely crucial,” says appropriateness of theGreg Branch, Chief Architect at Colt. “It would not be number of applicationspossible for us to operate without systems to automate across your company?provisioning and manage workflow and delivery of customerorders.” The scope of applications covers a wide range offunctions extending to all operations company-wide bothhorizontally and vertically. “The applications are vitalorgans of the business…the applications suite is thelifeblood of the organization,” agrees James de Watteville,CIO of RSA. 100%Applications comprise a core part of any IT strategy.However, a closer look reveals that the current state of 80%applications is far from perfect. All respondents agree thatapplication landscapes are generally very complex and poorlystructured. Outdated legacy technologies, lack of adequate 60%skills to support existing systems, duplicate applicationsresulting from acquisitions, and a mismatch between global 40%and local systems creates problems for corporate IT. En ter pr“Our IT landscape is like an Arctic ice field – with a lot of La ise 20% rg epeaks, hidden crevices and thin ice, which you can fall Methrough sometimes without realizing you are about to do diu 0% m Smso,” says Robert Borchelt, Manufacturing IT Director, allCummins. “The application landscape is like a big complex 1 - far more applications than 4 - fewer applications than themachine that constantly needs engineers to be hitting it the business requires business requireswith a hammer to keep it working right,” concurs Greg 2 - more applications than the 5 - severely lacking in the numberBranch, Chief Architect at Colt. business requires of applications that the 3 - just the right number of business requiresThere are several reasons why application landscapes have applicationsgrown so complex. Companies do not go overnight fromstreamlined, rationalized systems to a tangled landscape ofredundant and outdated systems. It happens over long FIGURE 1: Half of all large and enterprise company respondentsperiods of time, sometimes following large events like indicate that their IT organizations carry the burden of maintaining more applications than is necessary for the business.corporate mergers, other times just through organic growthand development. Many of our survey respondents agreethat their organizations have too many applications. 9
  9. 9. Not surprisingly, the perception of the appropriateness of 3. Companies continue to support applications that no the number of applications relative to the business needs longer deliver full business value and do not support changes significantly depending on company size. While current business processes. nearly 60% of enterprise respondents say that they support 4. Most organizations have a data-retention and archiving “more” or “far more” applications than is necessary to run policy, but in reality the majority of companies are not the business, nearly three-quarters of small business IT willing to archive application data for fear of violating executives say that they have just the right number of industry and government retention requirements. applications, with a further 23% suggesting that they do not have enough IT systems to support the business. Naturally, some redundancy is unavoidable as a result of mergers and acquisitions. When companies join together their This difference in data can be explained by the overall IT systems, a number of applications are inevitably going to number of applications supported by IT in companies of perform duplicate functions. Unfortunately, few companies varying sizes. In smaller companies, 84% of surveyed have a clear strategy for archiving the data from obsolete respondents indicate that they support less than 50 applications and decommissioning redundant systems over applications in their IT portfolio – compared to up to time. A much more typical outcome of a merger or acquisition 10,000 applications in the Enterprise category. However, is to have multiple systems running in parallel for years, this does not mean that smaller organizations are not often lacking a significant user base, not properly integrated affected by the issues related to application complexity and into the company’s reporting and other IT systems, and the need to rationalize the IT landscape. Small businesses causing a major strain on IT resources. “The applications have limited IT staff and fewer resources available for state is a mess,” says James de Watteville, CIO of RSA, application maintenance. Perhaps most importantly, small “because this 300-year-old organization has grown through companies are under greater pressure to be nimble and various mergers and acquisitions, each of which brings a react quickly to the changes in economic, business and new set of applications.” competitive climate. Having just a few applications that do not provide business value can significantly impact a small Pascal Bataille, Enterprise Architect at Alcatel-Lucent, company’s ability to adapt and innovate. France, concurs: “When Alcatel merged with Lucent, we inherited an IT landscape where most applications were Our research identified the following key reasons for IT duplicated or multiplied given the history of previous application landscape complexity: purchases. Yet we had to connect and maintain them to support all our customers and all business specificities from 1. Mergers and acquisitions result in many redundant sys- Day 1. It took some time to deal with the usual politics in tems with duplicate functionality. this situation and assess them technically and against the 2. Custom legacy applications are becoming obsolete and strategy of our new company, and come up with a strategic are difficult to maintain, support, and integrate into the landscape and validated decommissioning plan”. new, modern IT infrastructure. The other common cause for application complexity is custom applications. Traditionally, most companies chose to build their own custom systems to support their unique business processes and operations, and to gain fast competitive advantage. Our survey respondents indicate that nearly half of all the applications in their IT portfolios are custom-built. 1000 0
  10. 10. Application Landscape Report“Non-custom-developed applications are built for a widerange of audiences. They are not specific enough for our What percentage ofneeds,” says a senior IT executive of a global publishing your company’scompany. “I have seen a lot of solutions fail as they have applications isbeen too general and when we try and customize them, custom-developed?they become un-maintainable.”Naturally, the number of custom-built systems variesdepending on the company size – bigger companies withlarge IT teams traditionally develop more custom 35%applications than their small and medium counterparts. Onaverage, 56% of large and enterprise company respondents 30%indicate that half or more of their applications are custom-developed, while only a third of their small and medium- Percentage of respondents 25%size company colleagues say the same. 20%But as companies grow, develop new product offerings,merge and acquire new business units, they begin to lose 15% 10 0%control of the rapidly growing number of custom-built 81 -9 10% 51 9%applications and databases. Fast advances in technology -8 21 0%make it increasingly difficult to maintain outdated legacy 5% 11 -5 0%systems. “We use a lot of complex, slow technology which -2 ions 1- 0% licat 10 ed appcan be a nightmare,” says a business solutions professional 0% 0% % ev elop m-dfrom a large Spanish enterprise. fc usto tage o cen PerOne CIO offers an interesting example of a custom-built set Large Enterpriseof legacy applications and its rising maintenance costs:“Back in the ‘80s, we built a few very advanced applications. FIGURE 2: A full 56% of large and enterprise company respondentsUnfortunately, they are rather expensive to run and are not say that half or more of their applications are custom-developed.designed and built for speed and performance. Theseapplications are like bulletproof double-decker buses. Butsince we haven’t migrated off the legacy platforms, they are essentially bulletproof double-decker buses with about six passengers. They cost an absolute fortune to run and if you want to change anything, you basically have to take all the steel cladding off and take it to pieces. It costs a fortune to make what would seem to be a relatively straightforward change, and it takes many months.” tate is a ations s 00-year- Th e applic 3 ause this grown Of course, some of these legacy systems are still supporting m ess, bec has nization key business processes and cannot be easily decommissioned old orga rious mergers or replaced with more modern solutions. Most IT portfolios, va through each of isitions, however, contain dozens if not hundreds of outdated legacy a nd acqu s a new set of applications that are no longer considered business critical, ring which b le applica tions.” James de Wattevil A but continue to be maintained for governance, compliance, CIO of RS data retention and other reasons. Often companies lack clear guidelines for retiring obsolete applications and archiving their data. As a result, outdated systems continue to plague IT landscapes, diverting resources away from innovation and growth. Only 4% of all survey respondents say that every IT system that they support can be considered business-critical. Merely 41% indicate that half or more of their IT systems are vital to the business, and 17% think that 11
  11. 11. What percentage of your Which of the following company’s applications statements best fits your is considered company’s experience of mission-critical? data retirement or archiving? 70% 30% 60%Percentage of respondents 25% 50% 20% 40% 15% 30% 10 0% 10% 71 “We lose data -9 20% 51 9% frequently and it 31 -7 5% 0% seems like we -5 10% “We keep just 11 0% have a data -3 the right 1- 0% black hole in 0% 10 amount of data 0% % 0% “We keep all our company.” data beyond its to support both expiration date business and Percentage of applications that are perceived as or usefulness, regulatory mission-critical just in case.” requirements.”FIGURE 3: IT supports many systems that are not mission-critical. FIGURE 4: Most companies have inefficient practices for data retention.only a few applications (10% or less) in their entire portfolio only does this uncontrollable data growth increase storagecan be classified as mission-critical. requirements, it becomes increasingly difficult to manage, retrieve, search and report on. Most companies keep theirIn addition, companies have a problem with data retention. application data for compliance purposes, but in reality ITIT systems generate great quantities of data, which can grow organizations often lack clear guidelines for archiving andexponentially – up to 5% per month on a large system. Not retaining data, and as a result, companies tend to keep their data far beyond any required retention period. The survey shows that most companies do have formal procedures for data retention, but follow them less than 50% of the time.12
  12. 12. Application Landscape Reportincreasing IT Efficiency through ModernizationThe role of IT has shifted over the years. Instead of merely providing support for thebusiness and its priorities, IT has evolved into an equal partner, actively participating inthe decision-making process and developing initiatives together with the business.Predictably, most IT executives see the alignment with thebusiness and increased business value as their highestpriorities. In our survey, we asked IT executives to select What are the three mostthree top priorities for 2011. The answers are consistent important goals of theacross all company sizes, industries and geographic company CIO?locations: the number one priority for the CIOs in thecoming year is to bring more value to the business, followedclosely by improved efficiency and cutting costs.Making IT systems more cost efficient is not an easy task. Itrequires careful assessment, planning and phased 70%implementation. Any changes to production IT systems cancause disruption, require additional expenses and create 60%temporary inconveniences. Radical changes often faceresistance and difficulties getting the buy-in from all the 50%stakeholders in the organization. However, withoutfundamentally changing the way IT looks at its application 40%portfolio and application lifecycle, it is impossible to 30%increase agility and provide opportunities for innovation Cre inesand future business growth. “We need to make sure that bus Cre sines 20% ate s bu Imp T sysmoney doesn’t only go into continuity costs,” says an IT of I ate Inc pplic val of a rov temexecutive at a European airline. “We are trying to ensure bet lignm ue Inn licat rea atio 10% app sa efl s Incthat continuity spending is reduced each year and leaves ter ova ion for se exib Imp ugh rea thro qua ns te n senough money for innovation.” 0% Cu ility rov IT s se ent Cu busi lity ew t co the e e yste pro t ov nesOur survey respondents indicate several strategies that their sts ffici duc era s of I enc mscompanies use to rationalize their application portfolios and tivit ll co T yreduce “keep the lights on” spending. y sts forThe top rationalization approach involves standardizing theapplication portfolio by reducing the number of custom-built IT solutions and moving toward a more common set FIGURE 5: Delivering value to the business is the top priority for corporate IT leaders.of applications, technologies, and infrastructure throughoutthe company. 13
  13. 13. “Even before the recession, we started moving towards a Which strategies is your path of more centralization and standardization to reduce company most likely to IT costs,” says Robert Borchelt, Manufacturing IT Director, use when rationalizing Cummins. “The recession only helped highlight the applications? importance of these initiatives and reinforce the direction the CIO had already set.” “We used to have hundreds of applications from different banks in different countries,” says a senior IT executive at a pan-European banking company with operations in 2270% countries. “Now we have a platform strategy where we bring different banks onto two or three core banking60% platforms to harmonize systems and applications across countries.”50% The survey respondents also selected consolidation,40% migration, replacement and simplification as popular rationalization strategies. “Our biggest challenge is to get off30% the old, flaky, unsupported legacy applications and migrate the business onto a much smaller number of strategic Em Co20% be applications,” states one CIO from the UK. Clo nso d Sta ud lida Sim10% nd Co Re tion ard plifi Re mp ten iza De pla cat 0% tion utin Re tion com cem ion Mig g new mis ent rati al zation sio on rationali n The top es h involv on approac ing the applicatiFIGURE 6: Standardization, consolidation and migration are among stand ardiz ing th ethe most popular rationalization strategies. by reduc portfolio custom-built IT of toward number moving soluti ons and set of ommon , a more c s, technologies t appli cation thro ughou structure and infra ny. pa the com14
  14. 14. Application Landscape Report“Historically, our challenge has been the complexity of the Curiously, retirement – or decommissioning – of applicationsbusiness,” concurs Greg Branch, Chief Architect at Colt. did not make the list of top rationalization strategies, even“We had too many customer-specific options. Now the though nearly a third of our survey respondents agree thatfocus is on simplifying the product portfolio so that we only between 1% and 10% of their application portfolio needs toprovide the required functionality rather than many custom be retired, and another half of surveyed IT executives‘nice to have’ features, simplifying our IT applications and estimate the number of applications that are candidates formaking them more maintainable.” decommissioning to be between 11% and 50%.We believe that all of these strategies are closely related and There seem to be several reasons why application retirementshould be implemented in conjunction with one another. is not yet top of mind for most CIOs. Perhaps the mostFor example, in order to standardize on a few selected significant one is that IT professionals typically view theapplications and platforms, IT may choose to retire several application lifecycle as a three-step approach: build, deployduplicate systems, consolidate redundant functionality into and maintain, ignoring the fourth step – retirement or end-one common solution, migrate old legacy applications onto of-life. Our survey respondents indicate that it is still oftenmodern platforms, and potentially even implement some of easier to make a business case for acquiring or building antheir applications in the cloud to save on infrastructure costs. application – than for retiring it. What percentage of your company’s applications do you believe could be retired? 60% 50% 40% 51 30% -1 00 % 21 -5 20% 0% 11 -2 0% 10% 6- 10% 0% 0- 5% Small Medium Large EnterpriseFIGURE 7: Companies have many applications that need to be retired. 15
  15. 15. There are several key barriers to application retirement:n Cost of retirement projects. IT budgets are typically What are the key barriers allocated based on the costs of maintaining existing to retire your company’s applications or continuity costs and new projects. Finding redundant applications? additional funding for application retirement can be challenging – especially in difficult economic times.n Lack of immediate ROI. It is often difficult to get buy-in for application initiatives because time horizons for investment decisions tend to be short term and rarely 70% over one year. Many businesses expect to see ROI on projects in six months or less. With rationalization 60% initiatives, it is not easy to show quick ROI – especially if rationalization projects involve different types of 50% applications. “In the last two years, we have reduced the number of data centers from 20 to five,” says an IT 40% executive from a global French telecom company. “Data center rationalization takes much longer than changing 30% small applications.” Co ser 20% st o Inc vice app ons tion f ren Company culture and behavior. Employees are often s lica Mis nmen 10% alig tire iste s in resistant to change. People become comfortable using certain sing t Inco iness me bus nt o tellig technology and processes, and as a result, become reluctant 0% nt Lac iness b arc mp case r un enc bus to any changes to the familiar and consistent environment. hi lete k of reli e tec abl turan Differences between regions. Different regions, e s l uy-i subsidiaries and even groups within an organization may n have different opinions regarding application retirement. Without their buy-in, any retirement initiative is likely to FIGURE 8: The key barrier to application retirement is cost. fall short, as IT would still have to support redundant and de-centralized applications. in building them are no longer with the company, andn Lack of qualified developers to migrate retired nobody fully understands the underlying processes and application data and functions. This is especially true for complex relationships between application components to custom-designed systems. The people who were involved successfully migrate the data and safely decommission an application. n Some companies do not consider retirement a priority. As we mentioned earlier, some IT leaders simply do not see the value in application retirement and therefore choose to focus efforts on other areas.16
  16. 16. Application Landscape Reportcompanies’ Experiences withRetirement and Rationalization are MixedMost of our survey respondents agree that application modernization is the best way todivert IT resources from supporting the old, outdated systems and making room forinnovation.The surveyed companies have mixed experiences with n Just before the millennium, a national European airlineapplication rationalization. Some have had success and had a big project to ensure that its applications wereachieved significant improvements, while others failed due millennium-proof. While taking the inventory of itsto lack of alignment with the business, poor planning or applications, the airline’s IT discovered that half of allhigher-than-expected project costs. Below are some applications in its portfolio were obsolete. “We got rid ofexamples of both successful and failed rationalization half the applications we had running,” says the airline’s ITattempts described by surveyed executives. executive. “We found that once we had a system created, we never threw it away. In some cases things wereRationalization Successes replaced with new systems but we still had the old one running.” Shortly after the millennium project wasn In July of 2010, an Italy-based, large pan-European completed, IT instituted a new policy that requires banking organization rationalized and substituted all core periodic inventory and screening of the entire application banking applications (over 100 total applications) over portfolio to avoid duplicates. just one weekend. The key to success was extensive preparation: the project was planned for over two and a Rationalization Failures half years, and as a result, the old applications could be turned off and the new ones were ready to take over their n In 2003, a 5,000-employee US-based company launched functionality. Best of all, the new application portfolio the initiative to retire one of its core systems and replace was consistent with applications that were already in use it with a new, modern application. Seven years later, the in other countries where the bank operates. “It helps to system is still there. The sheer size of the application and harmonize various systems such as account management, the amount of data stored in it, combined with the lack of data management or payment systems,” says the CIO of clear archiving and retiring strategy, caused IT to the bank. “We used to have hundreds of applications abandon the project. “With no real strategy on how to from different banks in different countries and many retire all the pieces and migrate the data to the new redundant systems. It is IT’s role to harmonize these.” system, it just did not get done,” says the company’s director of creative systems. Similarly, the company stilln Five years ago, Cummins, a US corporation that designs, has a lot of outdated technology such as Lotus Notes that manufactures and distributes engines and related technologies, it would like to retire or rationalize. However, the project had unique legacy systems running at every plant. Cummins is so large and complex with different instances of Lotus launched an initiative to develop a common solution. As a Notes running on different servers, that IT is uncertain if pilot, Cummins IT implemented the new standardized they can take it on. solution in China and immediately saw significant quality improvements. “The new solution was implemented with n One company faced major resistance when IT decided to relatively low pain,” says Robert Borchelt, Manufacturing switch from an assortment of existing configuration IT Director. “Our past approach was decentralized. People management tools to a standard open source solution. at each plant thought that their situations were unique. “Some groups were not open to it,” says Mark Bohlman, They assumed that the standard solution would not meet IT Director, large American aerospace and defense their needs and went looking for something else, thinking technology company. “They were not willing to disrupt that a non-standard solution would be a better fit. Things their programs. People get comfortable with their ways of have changed now. Today, the only drivers are to bring cost doing things. Our biggest challenge is a cultural one, not down for the implementation and roll out new systems around the applications themselves.” cheaper and faster.” 17
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  18. 18. Application Landscape Reportapplication Strategies that workIn our interviews and surveys, we have identified several application strategies that haveproven successful in building a solid foundation for maintaining a healthy, continuouslyrationalized application portfolio.Build Maintainable Applications functional excellence team. This group develops the tools needed to run Application Development and SupportToday’s CIOs are looking to create better alignment Centers. The next level of IT supports and maintains thebetween application development and maintenance activi- application infrastructure and backs up application data.ties. Only 13% of all survey respondents indicate that there There are clear responsibilities and roles and a structuredis close synergy between their application development and stage gate process to guide through application implemen-maintenance teams, while nearly half (48%) say that the tation and maintenance.”teams that build applications and the ones who keep themrunning are in synch 50% of the time or less. “We typicallyhave alignment problems with applications that are brought How would you describein-house from mergers and acquisitions,” says the Director your organization in terms ofof Web Services at a US educational and trade publishing alignment between Applicationcompany. “Development teams may not have a full handle Development and Application Maintenance teams?on those systems. As a result, whenever there are issueswith the application delivery or performance, the applica-tion management team and the development team pointfingers at each other.” 40%By emphasizing the synergy between the different groupswho are involved in application design, development and 35%maintenance and building solutions that are easy to main- 30%tain, IT can streamline its operations, reduce costs andachieve greater agility. 25%Robert Borchelt, Manufacturing IT Director, Cummins, 20%offers an example of a well-structured collaboration thathelps Cummins create applications that are maintainable 15%and supportable. “IT has divided up responsibilities into 5– 10% alwspecific layers,” says Borchelt. “The first level (level 1) is 4– aysthe business users who are paired with business analysts gen 3– 5% un eraand functional architects on the IT side who understand onl alig 2– lly u y althe requirements and structure of applications. They then 0% ned gen 1– nal ignhand off the application design to the hardware architec- e ign alw rally edture team (level 2) to make sure that we have the enter- ed a in 5 ys a aligprise infrastructure to support those applications. The next 0% ned lignstep is to hand the design off to the Application of c edDevelopment and Support Centers (level 3) for each major aseapplication area. They have full responsibility for develop- sment and support of those systems. The supplier for thatlayer is the Standards and Processes Group who controls FIGURE 9: Development/maintenance teams are not always aligned.ways to manage development and deployment and act as a 19
  19. 19. Implement Portfolio Governance Strategies Achieve Greater Alignment with the Business“There is a limited budget and restricted resources, and The majority of application development projects are initiat-therefore developers are not always able to fulfill the ed by the business. Our survey shows that while IT doesrequirements of the business,” says the VP of Strategy and launch a portion of new application initiatives, the majorityGovernance at a large European telecommunications compa- of IT systems are commissioned by the line of business.ny. Without clear governance strategy, it is next to impossi- Nearly a quarter of respondents say that none of their newble to accurately prioritize the IT demand and find the right application building projects come directly from IT, with anfocus that’s in alignment with the business priorities. “For additional 50% stating that under a third of their IT systems2011, we have 150 application requests,” says the Director are being initiated outside of the line of business. With theof Creative Systems at a small US company. “Some are business driving the IT portfolio, it is essential to achieveenhancements for existing systems, while others are greater alignment between the business users and the teamsrequests for new system designs and new applications. It is that develop and support the applications.difficult to understand which ones are more critical andwhich requests we should devote our resources to first.” However, better alignment is just the first step towards a true “fusion” of business and IT, in which IT is not only aSolid IT portfolio governance practices and tools help busi- quick responder to emerging business needs but also acts asnesses focus on core activities while staying informed about a catalyst and driver for innovation. Business transformationall aspects of project and application health. It allows IT and IT thus become inseparable, and the role of IT in creat-teams to manage their entire portfolio of projects and oper- ing new value is implicit to the business innovation process,ational demands while keeping their focus on strategic rather than something that has to be argued and demon-opportunities that are vital to the business. Robert Borchelt, strated repeatedly. This true synthesis is not easy to achieveManufacturing IT Director, Cummins, explains the organi- and no shortcuts seem to be available. IT must rationalizezational structure that helps manage application rationaliza- its own portfolio first, and then become more responsive totion initiatives: “Cummins’ architectural department is an the needs of the business before being able to act as the nat-integral part of managing and rationalizing the application ural partner for business in innovation and change.landscape. We have Architecture and Security reviews priorto each major overview in the IT projects. Anything that’s Overcome Resistance to Changenot part of the enterprise architecture has to be explained,and the requestor must apply for an exception. These The key to success is to involve business stakeholders whenreviews are part of our rollout process, and we have the designing the application strategy and ensure that the entireauthority to block the projects if they are not complying or rationalization process – from development of new applica-are an exception to the roadmap.” tions to phased implementation, introduction and learning – is closely monitored and aligned.20
  20. 20. Application Landscape Report employees. The world is changing, and our customers What percentage of new expect innovative solutions from us. Bringing new application development is technology along with new blood and social networking, initiated by IT as opposed and using it is seen as the ‘leadership of people.’ Now to the business? people tend to use new technologies very quickly because they want to play their part in the transformation. They do not want to be left behind, so they are trying to embrace the new applications and technologies very quickly. Of course being a leading innovative high tech company probably helps us!“30% Trust but Verify:25% No Improvement without Deep Insight20% Simply knowing how many production systems exist in a company’s application portfolio is not enough. Before mak-15% ing any changes, IT managers need to use analysis and met- rics to understand the inter-relationships between applica-10% 10 0% tions and their dependencies. Today’s IT professionals have 81 at their disposal a wide array of automated discovery and 51 -9 9% 31 -8 dependency mapping tools that help identify and map the 5% 0% 11 -5 -3 0% relationships between applications and the underlying infra- 6- 0% 10 structure. There are many subjective and objective criteria 0% 1- % 5% 0% that can be applied to identify which applications should be kept in their current state, which ones should be changed, and which are deemed obsolete and are candidates forFIGURE 10: Most new application development projects are initiated retirement. These criteria are often referred to as “situationalby the business. lenses” and involve many different aspects of functional, structural, financial and business relevance. For example, it is not important to know how many users the application“One year ago, culture and fear of new things would have has. It is much more significant to understand the businesscaused a good deal of resistance within the company,” says criticality of each specific system and to what extent thePascal Bataille, Enterprise Architect at Alcatel-Lucent, application impacts the company’s revenue.France. “But today, the company is empowering its 21
  21. 21. “Our rationalization process is to assess the existing serviceportfolio to determine how it supports the customers and Does your companyhow it is supported by the underlying infrastructure. Then outsource any of thebased on this assessment, we can simplify the infrastructure hosting or maintenance ofto implement the services that meet most of our customer applications?needs and will result in the greatest revenue increase for thecompany,” says Greg Branch, Chief Architect at Colt. “Wecan deliver a tailored service for those customers who havespecial requirements, as long as the additional cost is fac-tored in. For the majority of customers, we can deliver bet-ter service and increased value through a simplified portfolio.”Outsource the Solution, Not the Problem 100%Almost three quarters (74%) of all application portfolios arepartially or fully outsourced. Of those that outsource a 80%function of their application landscape, 53% of outsourcingis offshore, and 67% of outsourced applications are mis- 60%sion-critical. The drivers behind this increase in outsourcingare the rise of application volume, coupled with a restric-tion on internal capacity. Not unexpectedly, the level of 40%outsourcing is lower in Enterprise-sized companies – per- En ter prhaps as a result of increased rationalization behavior and 20% La ise rggreater internal capacity. “We outsource because application e Memaintenance is expensive if done in-house,” says the direc- diu 0% mtor of web services at a US publishing company. “We are Sm allbecoming more of a global company and need to provideoperation services around the clock. We cannot provide No Yessupport to our customers from one single US location.”However, outsourcing the maintenance of a tangled, con- FIGURE 11: The majority of companies prefer to outsource theirgested application landscape is more likely to create addi- application maintenance.tional problems than provide a cost-saving solution. In theshort term, it may lower IT costs, but inevitably problemswill continue to mount. Maintaining today’s complex IT2222