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Why won't organisations rationalise their CRM applications landscape?

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30th Mar 2011
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You've got 19 CRM systems when you only need one – and you know it! Why won't organisations rationalise their applications landscape?

CIOs waste too much valuable time, effort and budget on sprawling application landscapes that don't support innovation or value-based initiatives, warns a new study by Capgemini conducted in collaboration with Hewlett Packard.

The report reaches the none-too remarkable conclusion that the typical organisation needs to rationalise its application portfolio in order to increase productivity, improve flexibility and adaptability, and better align IT with the business.

The report – The Application Landscape – notes: "As budgets become more constricted, the focus of application strategy shifts from innovation to cost cutting. If there was adequate funding before the economic downturn for both “keeping the lights on” and finding room for innovation, today’s economic climate clearly highlights new limitations in this area.
The resources to support growth and new development, therefore, must now be found within the IT organisation itself. By creatively modernising and rationalising the application portfolio, IT can derive the needed extra funds. But application rationalisation is not an easy task. Cost is a key barrier to all modernisation initiatives, and it is often difficult to demonstrate fast Return on Investment (ROI) to get the business buy-in."
The research identified a number of key reasons for continuing application landscape complexity:
  • Mergers and acquisitions result in many redundant systems with duplicate functionality.
  • Custom legacy applications are becoming obsolete and are difficult to maintain, support, and integrate into the new, modern IT infrastructure.
  • Companies continue to support applications that no longer deliver full business value and do not support current business processes.
  • Most organisations have a data-retention and archiving policy, but in reality the majority of companies are not willing to archive application data for fear of violating industry and government retention requirements.
The end result of these factors is alarming:
  • Only 4% of all survey respondents say that every IT system that they support can be considered mission-critical.
  • Only 41% indicate that half or more of their IT systems are vital to the business.
  • Only 17% think that only a few applications (10% or less) in their entire portfolio can be classified as mission-critical.
  • Some 85% say their application portfolios are in need of rationalization.
  • Almost 60% of enterprise companies say they currently support ‘more’ or ‘far more’ applications than are necessary to run their business.
  • Half agree that up to 50% of their application portfolio needs to be retired.
  • Some 56% of large companies and enterprises say that half or more of their applications are custom-built, increasing the technical complexity of required platforms and technologies.
  • Only 13% say their application development and maintenance teams are aligned.
  • Half (48%) say their teams are only in synch for 50% of the time or even less.
But there are several key barriers to application retirement:
  • Cost of retirement projects. IT budgets are typically allocated based on the costs of maintaining existing applications or continuity costs and new projects. Finding additional funding for application retirement can be challenging – especially in difficult economic times.
  • Lack of immediate ROI. It is often difficult to get buy-in for application initiatives because time horizons for investment decisions tend to be short term and rarely over one year. Many businesses expect to see ROI on projects in six months or less. With rationalization initiatives, it is not easy to show quick ROI.
  • Differences between regions. Different regions, subsidiaries and even groups within an organization may have different opinions regarding application retirement. Without their buy-in, any retirement initiative is likely to fall short, as IT would still have to support redundant and de-centralised applications
  • Some companies do not consider retirement a priority. Some IT leaders simply do not see the value in application retirement and therefore choose to focus efforts on other area.
  • Company culture and behaviour. Employees are often resistant to change. People become comfortable using certain technology and processes, and as a result, become reluctant to any changes to the familiar and consistent environment.
This last point is perhaps the biggest inhibitor, suggests Ron Tolido, Capgemini EMEA chief technology officer. "Organisations do have a pretty good idea of which applications are redundant," he argues. "We've been working with a big medicine company which has 19 different CRM systems – but effectively only one customers. So why do you need 19 different CRM systems. Everyone can see the problem, but no-one changes it.
"Now they had it all worked out how to bring it down from 19 to one CRM system, but at every point along the business side where they had the power to do this, they all said 'We don't care about the business case, we don't want to standardise, we're not interested'. If there is not a will to rationalise on the business side, then that will be the biggest inhibitor."
So what's the solution to all this? Capgemini/HP have produced a check list of actionable points for organisations to consider:
  • Build maintainable applications: CIOs are looking to create better alignment between application development and maintenance activities. Only 13% of all survey respondents indicate that there is close synergy between their application development and maintenance teams, while nearly half (48%) say that the teams that build applications and the ones who keep them running are in synch 50% of the time or less.
  • Implement portfolio governance strategies: Solid IT portfolio governance practices and tools help businesses focus on core activities while staying informed about all aspects of project and application health. It allows IT teams to manage their entire portfolio of projects and operational demands while keeping their focus on strategic opportunities that are vital to the business.
  • Achieve greater alignment with the business: The majority of application development projects are initiated by the business. While IT does launch a portion of new application initiatives, the majority of IT systems are commissioned by the line of business. Nearly a quarter of respondents say that none of their new application building projects come directly from IT, with an additional 50% stating that under a third of their IT systems are being initiated outside of the line of business.
  • Overcome resistance to change: Involve business stakeholders when designing the application strategy and ensure that the entire rationalisation process – from development of new applications to phased implementation, introduction and learning - is closely monitored and aligne
  • Trust but verify: Before making any changes, IT managers need to use analysis and metrics to understand the inter-relationships between applications and their dependencies.
  • Outsource the solution, not the problem: Almost three quarters (74%) of all applicatio portfolios are partially or fully outsourced. Of those that outsource a function of their application landscape, 53% of outsourcing is offshore, and 67% of outsourced applications are mission-critical.
  • Apply true lifecycle approach to applications and data: If the application is outdated – not being used to support a current business process – and its data is not growing significantly, it should be retired and its data archived.
 
Cloud Computing will also play a part in alleviating some, but not all of the problems. Making the move to the Cloud is a same good excuse to do some pruning, notes Tolido. "You're not going to migrate applications that should be terminated to the Cloud so it's a good catalyst to rationalise. If you want to migrate to the Cloud you have to have some hard insight into your inventory. You'd be astonished how few organisations do have that basic insight," he adds.
But Cloud Computing is pretty much an unstoppable force, reckons Tolido, and CIOs and their organisations need to get used to that idea. "Some CIOs will do with Cloud what they did with client server. IT was was in denial for years about who needs a PC. The business side got tired of this and simply started to experiment with PCs, but there were some devastating results and a new legacy was created as a result," he suggests. "With the Cloud, we could end up with the old islands of automation, but in the Cloud. IT needs to be foundational with Cloud take-up otherwise the scandals could be all over the place."
It might be thought that given the 'ever updated, always on the most recent version' nature of Cloud applications that the old legacy problems will go away, but Tolido cautions against this mindset: "You will still be able to develop your own applications in the Cloud even though there will be standardised apps through the Cloud from the likes of Salesforce.com. But there will still be custom software and organisations will still need to align their stacks against their current and future business needs. Your applications stack will still need to evolve."
So just as outsourcing a problem doesn't mean something ceases to be a problem, it just becomes someone else's problem to manage on your behalf, so too moving to the Cloud won't remove the redundant apps issue, unless you're able as an organisation to exist and operate in a 'vanilla' world where you never need to customise a single application. But it will help make the problem a little less onerous for many organisations undoubtedly.
The full report – The Application Landscape - can be downloaded from http://www.capgemini.com/insights-and-resources/by-publication/application-landscape-report-2011-edition/
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