By Howard Baldwin, CIO Leadership Forum
Don't Waste Money Buying Software You Already Own
Back when IT spent more of its money on custom software development than on software licenses, there was the evocative phrase 'spaghetti code.' It referred to the frustrating situation that the custom code had been updated so many times that it resembled a platter of spaghettind separating the strands to gain some clarity was a task only fools and madmen would tackle.
It may be that Y2K remediation and service-oriented architecture have relegated such confusion to the ash heap of the 20th century. Unfortunately, it also possible that your spaghetti code has been replaced by something just as bad. Call them paghetti applications,for lack of a better term. These applications are so tangled up inside your enterprise that you may not know you own them. If you do, you may not know who using them.
It an appropriate topic, as we turn this month to the subject of total cost of ownership. There really only thing worse than continually paying for software (and the associated servers and support) that you don use. That buying more software (and the associated servers and support) when you already own somethingithout realizing ithat will do the job.
It entirely possible that you have hidden assetsoftware that you already own that can fix the problem you needed to solve yesterday. e see this over and over at clients,says Martin Hanlon, senior manager for strategy, architecture, and integration at Capgemini. here is no effective check to see whether, when someone proposes a new application, the company already has something it can use for that purpose.
Adds Nathan Ramsey, a director in the technology advisory services group of PricewaterhouseCoopers (PwC), t like a game of Whack-a-Mole. Youe constantly going after the mole that pops.Unfortunately, there so consistent governance for the problem. But to resolve the situation, you have to know how the problem evolved.
How Did We Get Here?
How does an enterprise end up with applications it doesn know it has? It actually astonishingly easy, according to experts. Sometimes people don pay attention; sometimes theye just lazy. Examples aboundven embarrassing ones. John Stefanchik, global lead for Accenture application renewal practice, once conducted a portfolio assessment at a client and discovered two things about an application: IT had been religiously backing up the data and monitoring CPU utilization on the server, and no business user had touched it in 18 months. Capgemini Hanlon once consulted with a bank on the replacement for a human resources (HR) application, only to discover that the bank was still using two previous HR applications in addition to the one the staff wanted to update. For reasons unknown (except, perhaps, in someone logic), no one had bothered to migrate the old applications when the new ones were installed.
Some of these examples may be anomalies, but recent macroeconomic trends contribute to this problem on a large scale:
- Boom times: Not too long ago, a lot of reasonable executives feared that e-commerce pirates were going to board their ship and take over. In their haste to stay competitive among a shifting landscape, many companies purchased applications without much thought or care as to how they fit into a corporate infrastructure.
- Acquisitions: In the middle of an acquisitions binge, few companies take the time to catalog the software theye buying. That how companies end up with six different e-mail systems. At the same time, vendors have been on their own binge of mergers and acquisitions. Your enterprise resource planning (ERP) vendor may have bought a module that your license covers.
- Globalization: In the days of global subsidiaries, consistency of applications across divisions wasn so important. Now, with manufacturing and customers spread around the globe, consistency counts.
- Knowing how your assets became mismanaged, however, is really just the first step to managing them effectively.
How Do We Get Out of Here?
If youe a newly appointed chief information officer (CIO) or a company veteran who has just acquired another company, your first step is to draw a map of what you have. It a little like cleaning out your atticr worse, your parentsattic. Capgemini Hanlon recommends creating a simple model of the business and classifying your applications according to the model and the associated infrastructure, frequently known generically as applications portfolio management.
Start with your most important applications. If youe in retailing, for example, start with procurement, marketing, and sales. Do the support functions like finance and HR later. his way, you can create a picture of costs associated with business functions,Hanlon says. ou can also see where there might be overlap of multiple applications supporting similar functions.
Hanlon has two warnings: First, don get sucked into creating the perfect model. It better to take six to ten weeks (for a few hundred applications) than six months. Second, do take the time to validate how the applications are being used, so that you can avoid supporting an abandoned application.
ometimes, just going through the mechanical process of mapping what you have can be enlightening,says Peter Balnaves, managing director of Boston Consulting Group IT practice. You can see where you have 10 solutions doing the same thing, and you can see where there are gaps.The process also helps you identify software youe using that may have functionality in new modules, as opposed to adding a new standalone piece of software. oing this gets you a clear view of whether you are supporting your needs and how much it costing you,Balnaves says. t helps you answer the question Are you getting the value from what youe spending?
he trick,says Accenture Stefanchik, s to understand all the capabilities within your portfolio [and the costs involved]. It should help you make intelligent decisions.He cites the example of a meeting he had with one CIO. Because of a series of acquisitions, the company found itself with five billing systems. The CIO wanted to shut down the application running on the mainframe, but Stefanchik walked him through an exercise that tallied the percentage of revenue each billing system contributed, along with how many employees were supporting the system. It turned out that the mainframe application not only contributed 65 percent of the company revenues, but also had the smallest number of employees supporting it.
How Do We Stay on Course?
Once youe conducted your portfolio assessment, the next important step is to set up a governance framework so that you can avoid getting into the same mess again. Accenture Stefanchik says, oo often, people view applications on a one-by-one basis and don take a holistic view. You have to be able to talk about your applications and plan accordingly.
Easier said than done. Many obstacles get in the way of governance. ortune 200 companies tend to lack the governance to control software and equipment purchases, even if they have processes in place,notes Boston Consulting Group Balnaves. t still too easy for business units to buy whatever they want in whatever volume they want.
That can represent a lot of unnecessary money spent. As PwC Ramsey notes, most companies use less than 15 percent of any server capacity; if you have 30,000 servers, that a lot of unused cycles. He cites typical storage area network use as less than 30 percent. f that were a factory running at minimum capacity,says Balnaves, o board of directors would keep it open.
Problems also occur when there a power imbalance between IT and the business. Hanlon laments, f IT struggles so much to have a dialogue with the business, it may eventually give up and cede control of the IT budget process to the business. IT is reduced to being an order-taker.
Instead, IT should have a clear map of its systems and their costs. f you map application coverage to functions and subfunctions, you can see the duplication,Stefanchik says. f you have applications covering the same function, it means youe not only paying more maintenance fees than you need, but youe also facing high costs of integration.IT must be able to show that it can modify another application it has to fill a particular need. ou may have installed your ERP application to do one thing, but now it has other functions.You need to know theye there so you can use them.
This is an important aspect of avoiding unnecessary costs, says Hanlon: pplication portfolio management and governance give you the reference points to evaluate an IT investment proposal.It may be easier to avoid calling attention to an existing budget item, especially when submitting a proposal to spend three times the maintenance amount to decommission it. But you have to be able to show the tradeoffs. ou can explain the value of that investment compared to the value of moving the application portfolio forward,Hanlon says. ou can show a clear direction with technology and integration. You can show how youe ultimately reducing cost, risk, and enabling greater flexibility.
Dealing with Exceptions
Not surprisingly, discussions of portfolio management and governance inevitably lead to the question of whether centralized or federated IT works best topic CIOs have been tackling for years. Should a centralized IT organization dictate what being purchased or should certain divisions or geographies have a level of autonomy, similar to how U.S. states have both governors and congressional representatives? he pendulum swings back and forth,says PwC Ramsey. his year, it swinging toward centralization, because people are focusing on simplification and standardization.
The problem with centralization, he notes, is that the people from whom the control is being removed are always skeptical about cost and services, particularly in the international arena. hen we do maintenance on applications in the U.S., it in the middle of the business day in China,says Ramsey.
The advantage to centralization is the power it brings. Ramsey cites a five-year project at a major oil company, in which it standardized on a single ERP application. It now gives them the flexibility that the use of IP and HTML gave the rest of the world. hey now have a consistent platform on which they can re-engineer whatever they want to do. They had to put up with a lot of heat from people who said it didn work as well for their needs, but they eventually convinced the company that the centralized platform is better for the enterprise as a whole. Given the tension between these two options, there is a middle course of actionhich is, of course, extremely difficult. That course is exception management: identifying those places where it warranted to deploy a local or customized application. here are incremental costs associated with exception,admits Hanlon, ut if youe managing your IT investments intelligentlyith a strong knowledge of your application portfolioou can handle the exceptions in an informed and insightful way, just as you would with any other investment.
