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By Phil Murphy with Alex Cullen, Tim DeGennaro—Forrester Research
EXECUTIVE SUMMARY:
The impetus for streamlining application portfolios can originate from many different directions and catalysts. In this case it was simple: The bank's board of directors mandated that IT management cut IT costs by 10% and stipulated a five-year period by which time the target must be reached. As a mature, global-sized bank, where to find fertile ground wasn't the issue so much as where it could achieve the biggest bang for the buck. The CIO turned to application portfolio management (APM) for answer. (This is the first document in Forrester's "Trends In APM deployment" series.)
DYNAMIC CHANGES TO BANKING INDUSTRY FORCE INCREASED EFFICIENCY
The bank faced issues common to most global banks - global competition threatening market share, multiple currencies and mergers and acquisitions that complicate technical environments and application strategies, rising demand for customer-based views of the information and customer self-service functions, and modern day crises like the current sub-prime lending and real estate bust in various regions of the world. Since IT plays such a central role in the bank's core processes, the board looked to IT as the most likely group to be able to create broad-based efficiencies.
However, the mandate to cut IT costs by 10% is misleading—to achieve the mandated results, IT will have to cut costs deeply enough to sustain zero budget growth over five years and still yield a flat 10% cut. The CIO had already enacted traditional cost-cutting measures and needed a different approach to reach the board's mandate.
IT management targeted the existing application portfolio—as the lion's share of the untracked expense, it held the most promise for cost reduction. To succeed, IT management needed to develop metrics on the application portfolio such as application size, complexity, cost, and contribution to the business—information it had not collected in the past—and use that information to drive new efficiencies.
The bank investigated the available technology and settled on a vendor that matched its predominantly COBOL and Java environment to create a central repository of application knowledge.(see endnote 1) With this repository in place, it:
Institutionalized application knowledge, freeing subject matter experts (SMEs). As a matter of policy, as new projects were ending, the bank transferred SMEs from the development teams to the maintenance staff to infuse application knowledge into the support team. While the technique was necessary, the SME wasn't thrilled about the transfer, and the bank lost the key business knowledge and development resource to maintenance.
Benefit: Using the APM as a knowledge repository, the bank is able to transfer the SME's application knowledge much more quickly, and then release the SME back to the next project development effort. This enables more of a pooled approach to maintenance as assignments are now more easily shifted among staff.
Centralized application maintenance. The bank had application support functions spread over several data centers—resulting in waste and underutilized people. With the institutionalized application knowledge, the bank was able to move support to a centralized group.
Benefit: The bank estimates that centralizing the support into one 24x7 support group allows it to reduce the total resources required for the same level of maintenance by 30 staff members, freeing them for other work.
Moved application maintenance responsibilities to less expensive resources. With a centralized maintenance function and a newly gained ability to transfer knowledge between resources readily, the bank was able to shift approximately half of its application maintenance to less expensive resources offshore and redeploy staff resources to other work.
Benefit: Forrester estimates that the bank reduced its total costs for application maintenance labor by 20% to 25%.
IMPACT ANALYSIS ENABLED PROCESS EFFICIENCIES AND ELIMINATED REDUNDANCY
The sheer scale of the bank's IT drives opportunities for efficiency—with a portfolio that approaches 100 million lines of code, 100 Java applications, and hundreds of exceedingly large COBOL applications—saving time on repetitive tasks can lead to remarkable savings.
Next: Some of the more tactical uses that support the savings estimates
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