//Help wanted: who pays to simplify your IT portfolio?

Help wanted: who pays to simplify your IT portfolio?

Entropy creates IT portfolios.  As time goes on, business needs change.  Mergers happen.  Tool strategies change.  It is inevitable that every IT department will find itself (rather frequently) facing the situation where there are two or three or four apps that perform ‘important task fourty-three’ when the enterprise needs exactly one.

So let’s say that important task fourty-three is to “track the number of widgets in the supply chain from distributor to retailer.”  Let’s say that the Contoso company has two divisions.  One makes toys.  The other makes fruit snacks (a mildly perishable snack).  These two divisions have different needs, and the were built at different times.  Contoso purchased a supply chain application for the toy division, and built their own for the food division. 

So, along comes an architect and he says ‘you only need one.’  After the business stops laughing, they ask if he’s serious.  When he says that he is, they argue that he’s wrong.

Let’s assume he wins the argument.

Who pays to combine them?

The needs are different.  The application that manages the toys is not able to handle perishable items and the interesting stock manipulations that go on.  It is not able to track batches, and their due dates.  It is not able to calculate the incentive rebates that Contoso offers to retailers to refresh their stock when they flush aging inventory.

Combining the two may very well mean purchasing a third application and migrating both of the two older systems’ data into it.  Or it may mean expensive modifications to the commercial package, or the addition of custom code to the in-house tool.

That costs money.  We want to spend money to save money.  Fine. So who takes it on the chin?  Who extends the credit?  The food division or the toy division?

These decisions are not rare enough to run it up to the CIO at every turn.  There has to be a rational way to fund the decommission of an application, move and archive data, validate functionality, update process flows, re-attach broken integration pathways, etc.  It can cost as much to turn an application off as it did to install it in the first place.

What have you seen work in your organizations? What process do you use?

By |2006-04-28T02:01:00+00:00April 28th, 2006|Enterprise Architecture|6 Comments

About the Author:

President of Vanguard EA, an Enterprise Architecture consulting firm in Seattle focused on the Pacific coast of the US. Nick has over 30 years of professional experience in management, systems, and technology. He is the co-author of the influential paper "Perspectives on Enterprise Architecture" with Dr. Brian Cameron that effectively defined modern Enterprise Architecture practices, and he is frequent speaker at public gatherings on Enterprise Architecture and related topics. He coauthored a book on Visual Storytelling with Martin Sykes and Mark West titled "Stories That Move Mountains".

6 Comments

  1. Dave Nicolette April 28, 2006 at 9:38 am - Reply

    How to decommission redundant applications and merge their functionality into a single solution is a very valid question, but it occurs to me there may be a more fundamental question to answer first, from a strategic point of view.

    In this case, it strikes me that Contoso’s two divisions are engaged in very different businesses. It is possible that executive management will want to spin off one of those businesses independently of the other. If that is in the strategic plan, or even if that sort of action is consistent with the company’s strategic planning in principle, then there may be a business reason not to merge the two applications that trumps the "obvious" technical reason to merge them. I think this sort of question must be considered in the context of any such situation.

  2. NickMalik April 28, 2006 at 11:53 am - Reply

    Good point, Dave.  However, the company that purchases the division will need to merge any IT infrastructure with their systems as well.  

    Would you really gain much by keeping the systems seperate?  The company that owns an asset needs to perform activity that keeps that asset valuable.  That valuation is determined lots of ways, but ultimately by the sale price when it comes time to sell it.  

    Is the valuation of an acquisition changed radically by the integration of a supply chain management application?  I would say that integration of the application would have a neutral effect on the value of the division.  

    On the other hand, it would have a positive effect on the cost structure for the company as a whole, which has a ‘rosy effect’ on the division’s bottom line.

    Therefore, I’d challenge, strongly, anyone who says that we should keep the division’s IT systems seperate soley because we MIGHT sell the division.  Either we have announced the desire to sell it, or we haven’t.  IT people are not included in the ‘inside group’ who knows things in advance.  

    (Obviously, my argument doesn’t apply if the company has already announced that it is seeking a buyer for a division.  That would be totally outside my topic.)

    So while your argument is interesting, I reject it.

  3. johnwood April 28, 2006 at 11:37 pm - Reply

    You make a very valid point. There are several dimensions to this, though. Often it’s not even about application 43 it’s more often ‘spreadsheet 43’ that solves some small requirement that probably should have been a feature of the application #1 but schedules, resources and costs prohibited it from being integrated from the outset – so the user who wanted the feature did a DIY. When it finally does need to get integrated, it’s so engrained in the spreadsheet model and the users are so used to the way they interact with the spreadsheet, that integrating it becomes even more expensive and time consuming and it just never gets done.

    I just commented on a related topic on Jeremy Miller’s blog which may interest you:

    http://codebetter.com/blogs/jeremy.miller/archive/2006/04/28/143649.aspx

  4. JT April 30, 2006 at 10:01 pm - Reply

    A very interesting challenge Nick…sunsetting apps is no small matter…here is my two-cents:

    (1) Who stands to gain the most out of the IT savings?

    (2) Which company can suffer the financial strain and risk?

    (3) Who performs the assessment to make the call on which app goes/stays?

    (4) can each be leveraged in a reduced capacity?

    I’d bet that that companies have more than one app…can a smaller effort to graveyard utility components and redundant services  deliver tactical gains to prove the value of going all in?  Even collapsing an anlaytics dashboard for an Exec who wants to see both company’s numbers.  In the end its getting the best powerpoint together than shows what the cost of not doing the work is more expensive…

  5. NickMalik May 1, 2006 at 10:16 am - Reply

    Interesting, JT.  Your questions lead me to believe that you would frame the question on a case-by-case basis.  Perhaps.  On the other hand, that requires senior executive approval even for small things.  What if the number of overlapping apps is large?  What if the total count of applications in the portfolio is over 2000 and it should be about 500?  Should the CIO or Senior Exec review each one?  Should someone have to come up with a PPT for each tradeoff?  

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