Application Rationalization: What’s In Your Portfolio?

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Jul 22, 2021

Application Rationalization: What’s In Your Portfolio?

Matt Duncan

Written by Matt Duncan

Category: IT Strategy & Implementation - M&A

As a result of significant and rapid acquisition activity, or in some cases simple organic growth without strong governance, many healthcare organizations remain highly siloed, with a correspondingly redundant and inefficient application portfolio. The resultant lack of integration negatively impacts these organizations’ ability to execute strategy or respond quickly to new demands.

Many of our Impact Advisors clients have identified a population of hundreds or even thousands of applications being utilized within their operating environments. These applications are functioning, in one form or another, within a complex mix of technologies, environments, and versions, and represent a significant and costly impediment to a high-performing IT function. A portion of these applications may be redundant in nature, potentially operating at different version levels, or operating on the same or different platforms.

Conducting a formal Application Rationalization assessment can identify opportunities to streamline redundancies, reduce applications and costs, and leverage existing assets. First among the activities to achieve these goals is the formation or refinement of an enterprise-wide governance structure, including formally defined and vetted evaluation processes and guiding principles, that will enable the health system to make coordinated, informed decisions to drive toward a common technology foundation.

Under this framework, rationalization will produce a fully vetted enterprise-wide application inventory that includes detailed information about each application’s scope of use, IT and operational owners, recurring costs, relevant contract information, user satisfaction/political viability, potential duplicate applications also in use, and the degree of potential savings/benefits that could be realized via consolidation.

This enterprise-wide application inventory will, in turn, position a health system to strategically focus on and drive rationalization within the areas with the greatest opportunity, and ultimately define a single/consolidated set of approved enterprise-wide applications for each application area (e.g., laboratory, radiology, physician billing, etc.).

Once an organization is confident that it has captured a reasonably comprehensive and accurate inventory of its applications, it can begin the methodical process of categorizing and assessing every system against several key criteria or questions, including:

  • Is there potential application redundancy? If so, to what degree?
  • How critical is the application to our business?
  • What degree of disruption would consolidation create?
  • Is there a business case for change? How politically tolerable/viable is it?
  • What are the financial commitments and support requirements for this application?

As candidates for rationalization and decommissioning are identified and prioritized, other factors should be considered and weighed in making potentially controversial decisions, including:

  • What functionality must be recreated in other systems?
  • What are the interfaces into and out of the system?
  • What are the reports and analytics generated by the system?
  • Is the system used to support participation in incentive-based programs, such as Meaningful Use, Pay-for-Performance, PCMH, ACO/Shared Savings Programs, etc.?
  • How many users are actively or occasionally using the system?
  • Will staff need to be retrained, reassigned or let go when the systems are decommissioned?
  • What are the legal requirements for the information and functionality of the system?
  • Are there any organizational obstacles that prevent us from decommissioning the system?

Key Benefits to Rationalization

Identifying applications as candidates for rationalization offers many technical, financial and operational advantages. When redundant applications are consolidated to a single vendor and contract, the need to maintain and pay for multiple systems is eliminated. This saves time through fewer interfaces, upgrades and maintenance. Vendors are more likely to offer favorable contracting prices when implementing an enterprise solution, which invites enhanced integration and the ability to rely on fewer “sources of truth.” From an end-user perspective, this offers an enhanced user experience, ultimately supporting a better patient experience. Day-to-day operations now require fewer applications and provide greater data integration and sharing for users with less effort than before.

Lessons Learned

Defining clear roles and responsibilities with IT and operational stakeholders is key to delivering a thorough application assessment and prioritization. During project discovery, engage clinical and operational leadership to initiate change management planning. Collectively, these groups can define a clear future-state vision, benefits and success criteria. An effective change management plan promotes strategic efforts to support application rationalization, such as readiness activities, communication, and performance measurement.

Furthermore, IT leaders must then direct post-assessment activities such as budget development and vendor selection to continue to move applications into the archiving and/or data migration phase. Moving forward, the health system should have an effective Architecture/Technical Review Board for consideration of new applications. Once a comprehensive inventory and rationalization is completed, maintaining it will be key to continued success in portfolio management.

In Summary

Performing an application rationalization is a wise investment for any organization seeking to realign its IT portfolio with strategic business objectives. In return, an optimized application portfolio reduces cost, drives simplification, eliminates redundancy, and improves the organization’s overall IT effectiveness.