What Is Application Rationalization?

Most companies juggle hundreds of applications – an average of 269! If you feel like you’re drowning in applications and software licenses, you’re not alone. Many CIOs and CTOs also experience the stress of being pulled in a million directions in a rapidly changing SaaS landscape.

When the number of SaaS tools runs amok, it’s not just stressful to manage – it’s also needlessly costly. Having redundant tools means paying for the same thing twice…or thrice. 

You might be subscribed to three different software that do the same thing, or a single user may have access to multiple applications they don’t use. Paying for more users than you need on a necessary program can be almost as costly as paying for one you don’t need at all. 

Worse yet, this confusion and redundancy may impede inter-departmental communication and make project collaboration less efficient. One department starts a project in one application and tries to hand it to another department whose users can’t access it. Then you have to hurriedly add (and buy) more licenses and bring employees up to speed on new software, all while the project languishes in limbo. 

Many businesses need to streamline their applications to manage their SaaS stack more efficiently.

How Application Rationalization Can Help

The first step: determining which applications should remain in use, and which need replacement, retirement, or consolidation. This is application rationalization, a vital process that helps companies get a handle on their tech spend. 

Application rationalization is much more than a quick audit of your software. When we talk about rationalizing, we mean requiring logic and reasoning behind each tool in your SaaS stack. It doesn’t matter if it sounds cool – does anyone actually need it?

It’s no secret that unproductive and outdated tools linger in every company’s portfolio. You can identify obsolete tools through application rationalization and determine which software investments are most valuable based on your business’ goals. It’s not just about what tools you use, but why you’re using them. 

Why complete more than a mere audit of your SaaS applications? Below are some of the specific and big-picture benefits of application rationalization.

Cost Savings: Eliminate Bloat and Legacy Systems

A staggering 51% of SaaS licenses go unused or are underutilized, according to Zylo’s SaaS Management Index report. Identifying these tools and systems is crucial to avoid hemorrhaging money. Application rationalization helps you pinpoint what systems are gathering cobwebs, making your spring cleaning more effective. 

Why aren’t you using all the systems you pay for? The reason can be multi-faceted. Maybe you’ve moved on from your initial system but neglected to cancel your subscription, or you haven’t migrated all your data yet. To prevent this, all companies should regularly assess their portfolios and identify legacy systems that they should retire.

Maybe you’re sentimental about software that got your business off the ground in 2010. But the upsides of replacing outdated software, including tighter security and better usability, far outweigh the “what-ifs” of holding onto a system because of familiarity.

Replace Sunsetting Tools and Applications Losing Support

Remember what we said earlier about the evolving nature of SaaS?

Applications come and go faster than many businesses can accommodate. If you’re holding onto older software, you’ll soon run into situations where tools either lose support and integrations or die outright.

Look no further than Google’s graveyard for evidence of applications that go out of style – and out of service. Whether it’s due to companies going belly-up or getting acquired by a bigger vendor, sunsetting tools happen no matter how meticulously you plan your tech stack.

Application rationalization allows you to spot these situations promptly and pivot before the lack of support becomes too costly.

Avoid Nagging Security and Compliance Issues

Application rationalization includes more than assessing usage data. A thorough assessment of your Saas stack should consist of an examination of your security risks to protect against breaches and data loss. 

Using outdated or non-compliant tools can result in major headaches when complying with privacy regulations. If you scrambled to wrap your head around the 2018 roll-out of GDPR compliance, you know this firsthand.

Zylo’s Security Detail, powered by Netskope, tracks the compliance status of your SaaS applications to help you identify risks. Updating your applications and pivoting toward more secure software with better support and more frequent updates can help you avoid security risk liabilities. 

With Zylo, you can identify applications that need improved security. Quickly see which tools hold sensitive customer information, such as PII or financial data. Then, you can take the necessary steps to secure that information and avoid future compliance issues and data breaches. 

Empower Employees to Be More Effective

Freeing up productivity for your employees helps reduce costs. Application rationalization enables you to achieve this goal by giving you a leaner SaaS stack. This result means you can empower your employees to focus on using only the applications that offer the most benefits. 

The result? Less energy and time wasted on a day-to-day basis. 

As different departments request access to more and more software tools, efficiency can get lost in the shuffle. Your employees may have access to multiple tools that perform the same function, wasting resources you could allocate elsewhere. 

Zylo’s User Overlap feature lets you see user overlap on redundant applications. Easily manage your licenses and uncover where users have access to multiple tools serving the same purpose. Rationalization can stop you from sinking your employees’ time into learning systems that they won’t use very often, if at all. 

This process opens the door to analyzing which programs best fit your needs – so you can eliminate what didn’t make the cut. Streamlining your stack this way is particularly useful for driving software standardization across your organization. 

Identify and Eliminate Shadow IT Forever

Removing shadow IT (tools within an organization purchased without approval) should be a priority for any business with a sizable SaaS application stack. Doing so helps you identify redundant tools and waste, plus the potential security issues that come with systems that fly under the radar. 

Did you know that one in six employees purchases SaaS unbeknownst to IT? On average, they are responsible for 3% of an organization’s SaaS by spend and 35% by application quantity, according to the 2024 SaaS Management Index. 

Managing these potential risks is as simple as reviewing the apps purchased against policy and eliminating any that don’t conform to your company’s standards. If you’re unsure what those standards are, implementing a governance policy to enforce them is the first step. Zylo’s AI-powered Discovery Engine can detect shadow IT in your organization and help you keep out shadow IT for good.

Step-by-Step Application Rationalization

There is no single “correct” approach to application rationalization. But there ARE five critical steps in successful application rationalization – whether you’re managing SaaS for a mid-sized business or a global enterprise.

Below is an application rationalization framework you can adapt based on your company’s size and scope. You can also use this quick-start Rationalization Checklist to ensure you don’t miss a step.

1. Identify Your Current SaaS Inventory

The SaaS rationalization process should help you define the following:

• How many applications you’re using
• How much each app’s subscription costs
• The lifecycle of each app (start date, contract length)
• Who owns each app

This information is garnered by following a SaaS inventory management process, providing you with a baseline to assess your app inventory. This base-level organization can highlight your staple SaaS tools and what’s first on the chopping block.

Rather than fumbling with spreadsheets and crunching the numbers by hand, consider how a SaaS management platform like Zylo quickly creates a comprehensive inventory of your application portfolio.

Detailed breakdowns in Zylo — such as number of licenses, active users, and application categorizations — give you the extra detail to determine which applications should stay and what you can jettison.

2. Define the ROI of Applications

Every company’s ROI evaluation process may differ. Still, determining which applications produce positive returns on investment is essential to managing a modern software portfolio.

This process translates to looking at application spending, utilization, and which ones produce the desired business outcomes for your company.

Couple each SaaS application with a justification statement. Examples: 

• “We use tool X to save our employees Y% of time on Z task.” 
• “Since adopting tool A, we’ve seen a B% increase in C metric YOY.”

In other words, applications should correlate to cost and a specific business outcome or metric. Examples include increased website traffic, higher rates of e-commerce conversions, revenue, or time saved. Any ROI statement should have hard numbers baking it up, including usage data and how much you spend on your applications. 

3. Talk to Users About Every Application’s Value

Consider talking to your team as part of your software rationalization process. After all, qualitative data matters. Just because you can analyze your portfolio’s usage data and cost doesn’t mean you have the whole story of your stack.

Your teams and departments might have some must-have tools that aren’t reflected in your usage numbers. Simply because someone accesses a tool less frequently, that doesn’t make that tool less valuable.

When you consider cutting or upgrading a tool, it’s important to survey, poll, or interview your employees and end-users. This will help you gain insights about what they believe are their most valuable tools. You can guide this discussion with the following series of questions for your internal users:

• Are users utilizing the applications you’ve provided them?
• If not, what’s blocking them?
• If not, what tool are they using to complete this work?

Your users’ answers will give you a more comprehensive view of your portfolio and what your usage data means.

With Zylo, you can also identify “power users” who would be most knowledgeable about a particular tool. These people can provide further insights into the value of each tool that may not be apparent from usage data.

4. Identify What You Can Eliminate, Consolidate, or Replace

Based on the data points and the conversations above, you should have a good idea of what needs to stay and what you can slash (think: no logins, no mentions from your team). You can outright eliminate overlapping or repeating licenses, for example.

Below is an additional series of questions to ask as you comb through your applications:

• Do we have multiple instances of the same program?
• Do we have multiple versions of the same application function? (Project management, video conferencing, collaboration tools, or messaging platforms)
• Do applications or application suites (such as G-suite and MS 365), have functions that overlap with other applications? 

There’s a good chance you can eliminate tools that get no usage or have overlapping or repeating licenses. Spotting such instances is a cinch in Zylo, which can highlight redundant functions based on your portfolio analysis.

For example, having dozens of storage or project management applications is inefficient when one can do the trick. Likewise, holding on to an ABM tool doesn’t make sense if you stopped focusing on ABM campaigns three years ago.

5. Review and Reflect on the Future of Application Rationalization

No matter your application rationalization methodology, here are the keys to making sure it’s complete:

• Identify costs and sources (including AP and Expense).
• Measure the utilization of applications.
• Develop an ROI statement for each application.
• Examine how you’ll govern or architect your application ecosystem in the future.

Wrapping up your process means reviewing and reflecting to ensure that you’ve fully assessed your portfolio and know what redundancies to look for in the future.

What Does Your Application Rationalization Process Look Like?

Application rationalization is necessary for businesses wanting to wrangle their tech tools and save time and money. These tips, plus tools like Zylo, can help you get started ASAP on tightening up your SaaS portfolio and building a more efficient business.

Want to understand what successful rationalization and software standardization look like? Take a look at how Adobe reduced 2,500 software titles to 400 standard tools, saving millions in the process.