If you’re under pressure to reduce budget, a smart step is to prioritize investments in your application portfolio to help reduce ongoing application expenses.

Assessing and rationalizing your application portfolio can pay off in real cost reduction, focused spending, and an improved IT alignment with the business strategy.

The initial step in an application portfolio assessment is a detailed inventory to establish a baseline for cost reduction, project alignment activities, and investment decisions.  These attributes are often collected in the form of questionnaires, with input provided by both business and technical owners of each application. 

Critical attributes collected during the inventory detail specific aspects of each application such as:

• Business value
• Functional utility
• Data
• Technical characteristics
• Total cost of ownership

Once the inventory is completed, the applications can then be categorized according to their importance and business value. One suggestion is to segment applications according to the following quadrants: Not Business Critical, Business Critical, Strategic, and Not Strategic. 

After completing the categorization, you may find that 15 percent of your applications are Not Business Critical and Not Strategic and you're spending 17 percent of your IT budget on those applications, while your targeted budget is 5 percent.

The 4 R’s: Re-prioritize, Retire, Restructure, Relocate
Now it’s time to re-prioritize your portfolio and determine if applications with low business and strategic value should be considered for retirement.

If you have critical applications that are lacking  in functionality or technical quality, you should consider replacing them with existing or new applications that meet your needs. Other cost reduction initiatives for applications with high business value include restructuring (re-architect, code cleansing, re-platform to improve overall maintainability) and relocating  (leveraging lower labor costs, shared resources, mature processes, etc.)

Be Proactive
Business today values leaders who are pro-active rather than reactive.  Application portfolio management delivers ongoing returns and becomes part of your regular planning and review cycle. When portfolio activities are carried out continually and in parallel with other IT processes, you are better guided by and aligned to clearly established business targets.