Software Portfolio Rationalization

Software Portfolio Rationalization (SPR), sometimes simply called Software Rationalization or Application Rationalization, is a corporate Information Technology (IT) discipline, aimed at reducing the ongoing costs of maintaining software packages in use on corporate workstations. Software Portfolio Rationalization employs methods drawn from Software Asset Management (SAM), Software Metering and Application Portfolio Management (APM). Several large IT suppliers including CA and Apptio offer services to assist companies rationalize their software portfolios. The discipline was first defined in the book Closed Loop Lifecycle Planning (Michelson 2007).
Evolution of Software Portfolio Rationalization
Since the start of the 2007-2012 global financial crisis, and the widespread denunciation of Windows Vista as a failure, two key trends have been behind the evolution of Software Portfolio Rationalization.
Software Licensing Audits
The first trend is the significant increase in the number of software licensing audits being conducted by software vendors. In July 2011 ITAM Review, a web portal for IT Asset Management professionals, reported that 61% of respondents, in a Gartner Group survey conducted a year earlier, had been audited by at least one software vendor in the prior year. The vendors most commonly cited were: IBM (41%), Adobe (40%), Microsoft (35%) and Oracle (19%). This number increased from 54% in the survey conducted in 2009. The rise in audits is seen as way for software vendors to replace deficiencies in traditional licensing.
Windows 7 Migration
Secondly, Microsoft released Windows 7 in July 2009 and as at August 2012 it has exceeded 50% penetration, mostly at the expense of Windows XP . Windows XP was released in October 2001, and was not displaced in any material sense by the arrival of Windows Vista. One of the consequences of this extended lifecycle for Windows XP is that workstations have amassed a portfolio of software packages as many as 2 or 3 times expectations. These software packages represent a liability to organizations considering a migration to Windows 7. Michael Silver, a Gartner Group VP, estimated the cost of migrating applications to Windows 7 to be of the order of $550 per PC.
In order to minimize the risk of significant un-budgeted expense associated with these two items, organizations have begun to look at the extent to which their portfolio of workstation accessible applications are licensed and/or used in order to eliminate software packages that may create a cost exposure during a migration or audit.
In July 2008 Gartner published a report suggesting such exercises could reduce software expenditure by 25% in the first year
Comparisons with Related Disciplines
Software Portfolio Rationalization is a top-down model for rationalization based on identifiable software packages. Software packages in the context of Software Portfolio Rationalization means Application Software available as a Commercial off-the-shelf product or a turnkey packaged application, for which there is an explicit maintenance, migration or upgrade cost. The explicit costs are either expressed in the form of software license terms and conditions, maintenance and support agreements or migration service charges; where each individual software package has a direct, precise and easily identifiable cost.
Application Portfolio Management
The definition above contrasts with Application Portfolio Management, which is typically implemented in a bottom-up fashion by looking at application components using a technical taxonomy. Application Portfolio Management projects will use return on investment metrics and risk assessment to validate a business case for Application Portfolio Management. These return on investment metrics can include internal labor costs associated with application maintenance and support, mean-time-between failure relationships to function points and the impact to the business of application failure. Unlike Software Portfolio Rationalization, in Application Portfolio Management the calculation of return on investment is complex, as it focuses mostly on internal custom applications.
Software Asset Management
Software Portfolio Rationalization must also understand the extent to which the identifiable software packages are used by employees of the organization. This requirement separates Software Portfolio Rationalization from the static software inventory picture typically associated with Software Asset Management projects. Whereas Software Asset Management concerns itself with the same kinds of software packages and measures of expense as Software Portfolio Rationalization, it focuses only on licensed software and considers software usage measurement only in the context of license agreements based on usage metrics. For this reason many organizations are looking at Software Portfolio Rationalization as a way to achieve their Software Asset Management goals (Michelson 2007). Indeed Forrester Research observed in September 2011 that Software Asset Management, as defined by ISO and ITIL is obsolete.
Anatomy of a Software Portfolio Rationalization Project
Scope
Given the motivating forces of Software Audits and Migration, Software Portfolio Rationalization has been applied most commonly to software packages installed on workstations; or packages where the financial impact is objectively and measurably linked to either the user of the software package or the configuration of a workstation; these may include situations where the software package is made available to a user by some form of Virtual Desktop Infrastructure or as a Web Application.
Software Portfolio Rationalization projects unfold with some combination of the following steps:
Discovery
Discovery is an initial step used to create the superset of software packages under consideration for rationalization. Discovery is usually an automated procedure using a network discovery tool. Numerous network and software discovery tools exist, and the accurate understanding of hardware and software within an organization is considered foundational to this and many other IT disciplines.
Recognition & Categorization
To be of value the discovered software packages must be accurately recognized and normalized in order to eliminate idiosyncrasies in naming conventions. Only by normalizing data can an accurate picture be developed across large-scale enterprises with potentially thousands of installed software packages. Software categorization assists in the rationalization process. Well-established Software Categories exist which, when combined with normalized software package names, enable software packages, with similar business purposes to be identified.
Usage Measurement & Alignment
Usage Measurement of the software packages, sometimes called Software Usage Metering proceeds in parallel with Recognition & Categorization, since software usage measurement becomes more accurate over time. Measuring the use of a software package by a human to determine whether the package is needed is a complex and wide ranging task and is only possible through automation. Usage Measurement will also enable business alignment to be established by linking software packages to actual users. This important data point enriches usage information with organizational structure to enable low-use, but strategically important software packages to be identified.
Reconciliation & Rationalization
Understanding the financial impact of maintaining a discovered software package through its migration or upgrade cycle, or simply to remain in compliance with license obligations, provides the commercial context for rationalization steps. The decision on what to rationalize is at the intersection of the cost to maintain, upgrade or migrate the software package versus its value to the organization expressed in terms of its frequently and nature of use, and relevance to its user community.

Main Menu

See Also

Main Menu