Any organization that is sufficiently large and complex will naturally struggle with how best to manage all of the applications that they use, across all of their business units. Yet the precise challenges that they face with their applications (and which application portfolio management can help solve) will vary from organization to organization, depending on their environment. A key factor here will be the operating model of the organization. In this article, the third in a series of four, I'm going to examine how this applies to an organization that has a unification operating model, as defined by Ross, Weill and Robertson in their book “Enterprise Architecture as Strategy”.
An organization that has a Unification type operating model is an organization where the different business units in that organization engage in the same kinds of operations, servicing the same set of customers. One example given in the analysis is Dow Chemicals, where the different units that produce different chemical products still operate in essentially the same way, and service the same sets of customers. Another example is United Parcel Service (UPS), where the different regions will operate in the same way – and in this global economy, will often service the same customers.
So what implications does the unification operating model have for the application portfolio efforts of the organization concerned? It seems intuitive that the unification model is probably the best candidate to benefit from an application portfolio management exercise out of all of the four types of operating model under consideration – since both processes and customers are duplicated, it seems natural that the most opportunities for rationalization would exist here. Ross, Weill and Robertson seem to agree - “In a Unification operating model, companies leverage standardized IT infrastructure, standardized business processes, and shared data. As a company matures its enterprise architecture, the foundation gets thicker— more of its repetitive processes are digitized end-to-end.”
So an organization with a Unification operating model will be the most likely to profit from consolidation and rationalization opportunities, but the important point in the above is the question of prioritization. This is to say, the application portfolio will enable the organization not just to identify opportunities for rationalization, but also to prioritize them to iteratively develop their foundation for execution.
Given that this is the case, how can we use the application portfolio to enable this prioritization? In practice, the standard techniques of rating on business fit and technical fit, risk and cost apply here. An important point to consider will be to assess in each case whether the costs of rationalization outweigh the potential savings -faced with so much opportunity for rationalization, it may become too tempting to 'rationalize everything'.
The Unification operating model is fairly obviously the situation generally envisaged when we consider the traditional case for application portfolio management initiatives. That is to say, it is most likely that there will be multiple applications that perform the same function in different areas of the business and which can, consequently, be rationalized. The chief challenge is going to come in prioritizing efforts, and ensuring that the financial basis for rationalization is solid for each case.