Application Rationalisation Techniques (Part 3 of 4)

  • Application Rationalisation Techniques (Part 3 of 4)

    5. Prioritising Applications for Rationalisation

    In principle this stage is easy because you need to rank the applications according to the size of the benefit you can realise from their rationalisation. However this may be a manual process and can take some time to achieve.

    At this stage of the process for each software application, you will need to multiply the cost per license (or ongoing cost) by the unused variance as described above, e.g. 1,000 unused licenses at £1 each give a costed variance of £1,000 whereas 100 unused licenses at £100 gives a costed variance of £100,000. Clearly the 100 unused expensive licenses are more interesting than the cheaper 1,000 licenses.

    When you have created costed variances for your applications you will end up with a graph similar to the one below:

    Cost of Overlicensing

    Cost of Overlicensing

    It is obvious from this graph which applications will deliver the best cost saving opportunities. These are the ones with the tall blue cost columns and are your “vital few”. You also have a number of red negative columns which show you do not have enough licenses for what you are using, these are also important because you do not want to be non-compliant with your supplier agreements. The applications in the middle with little opportunity for cost saving can be left for a while as these are part of your “insignificant many”.

    6. Validation of the Vital View and the need for Qualitative research

    By now you have your list of vital few applications for rationalisation, however you cannot just start eradicating applications without doing research into user requirements and other key factors.

    With reference to your vital few list, you need to ask the users about their usage of these applications. Key information to find out:

    • Are the software products really being used? If not you can get rid of them. In some cases the users will claim to use them intensively but you already have the quantitative data to show users the real situation.
    • What is the business impact of getting rid of these applications? If they are not essentials then again you can replace or eradicate them.
    • If they are essential are the users prepared to use an alternative that can be sourced at a lower cost? If so replace the application.
    • If the application cannot be replaced what better deal is available from the software publisher? You have already seen you have excess licenses so you need to seek more cost efficient alternative options from the software supplier.

    User input is key for effective application rationalisation. You do not want to adversely affect business process productivity by preventing people from doing their daily work. However you have ranked the vital few applications and you have validated the user requirements so you can start on managing the rationalisation.

    There is another key factor in prioritising which applications you will rationalise. This is when the supplier contracts are due for renewal. If you have just sign an agreement for another three years there is not much point in spending much time on this, however the agreement that is due to be renewed in six month time is a prime candidate for rationalisation.

    (Continue)

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