There is a common misconception that savings from an application retirement are realized at the time of retirement. In reality a large portion of the savings can be realized at the time of decommissioning, and with good planning savings can be realized earlier in the retirement lifecycle.
Identifying the Cost Elements
The operating costs for an application includes:
- Hardware operation
- Application maintenance
- Application support labor
- Annual licenses (application, databases, OS, etc.)
- Application support service
- Critical patch installation
- Application, database, hardware, OS upgrades
- Number of environments (production, development, QA, prod-fix, volume test, training, etc.)
Of course every application is different – deployment model, technology, age, size, usage, compliance regulations – each of these will factor into the costs and the opportunities available to run these costs down. However the concepts of advanced planning are common as will be many of the opportunities.
Planning the Retirement
Once the decision is taken to retire an application the planning should not only begin for the successor application but for the run-down of the existing application.
And … planning for the data of the existing application!!!
The cost containment plan should consider all aspects of the applications operating costs and should be conducted by the Product Owner and Application Owners in conjunction with their business, IT and Finance stakeholders. The plan should address each element of the application’s operating cost, and define what savings can be achieved and when. For some cost elements there might be multiple savings events that will incrementally reduce the operating cost.
Some savings opportunities are clear and simple to implement:
- Retire interfaces into and out of the application once it has been decommissioned
- Reduce the application support model once it has been decommissioned (number of resources, support hours, etc.)
- Stop applying non-critical patches after the application is decommissioned
Other opportunities require a trade off between available functionality, cost and risk and so need discussions with stakeholders or research:
- At what point will the business stop training new users which would allow a training environment to be shut off?
- With the reduction of application enhancements and patches can the application support be reduced?
- After the application is decommissioned can the maintenance contract with the vendor be terminated, with all vendor support going forward being on a time and material basis as needed?
- When can the installation of all non-critical patches and enhancements be halted?
- What are the parameters of the application license and are there opportunities to lower the ongoing license cost (e.g. number of environments, number of concurrent users, etc.)?
- Once the application has been decommissioned are there financial opportunities to write-off some or all of any remaining original implentation costs?
Conclusion
With the correct planning in advance there are many opportunities to drive the application operating costs down during the retirement phase and accelerate the savings.
