TCO of applications during Portfolio Rationalization

In my previous blog post , I had narrated the process of portfolio rationalization. During the fact finding process, we need to calculate the TCO of  an application. It’s a good idea to have a predefined template for entering all the parameters that add to the total cost of the application, i.e. hardware costs, software license costs, maintenance costs, data center costs, etc.

We should also try to collect the TCO statistics over a time period; i.e. over the last 3-5 years. This data when plotted on a graph would help us in identifying patterns and spotting trends. For e.g. if the TCO of an application is showing steep increase with every passing year, then we need to be wary of the “cost of inactivity”. Cost of inactivity means what will happen if no action is taken?

The TCO of applications should also be compared against the business value that the applications are providing. It may be that 70% of the TCO could be consumed by applications having 30% business value.
Another important dimension to capture would be the usage statistics and performance SLAs over the last few years. If the number of uses are increasing and the SLAs are not been met, then it’s time for some proactive action.