Application Rationalization Best Practices To Follow in 2025

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On average, an organization uses more than 300 SaaS applications. Managing your vast portfolio can be complex. And if you overlook SaaS management, it will increase the number of redundant, free, and duplicate apps in your system.

These redundancies will clutter your SaaS stack, resulting in increased spending, missed renewals, and challenging cost optimization.

So, how do you eliminate the redundancies in your SaaS stack? That is where application portfolio rationalization comes in.

Successful application rationalization efforts eliminate duplicate and unused SaaS tools and streamline your SaaS stack, making application portfolio management easier. It will also help you optimize your spend and increase ROI.

To optimize your SaaS portfolio effectively, you must follow these application rationalization best practices discussed in this article.

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TL;DR

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What Is Application Portfolio Rationalization?

Application rationalization is the process of reviewing all your SaaS apps to determine which to keep, replace, retire, or consolidate. The goal is to eliminate redundant or underused tools and streamline your application portfolio to reduce costs and boost efficiency.

The goal is to eliminate redundant, free apps from your SaaS portfolio and organize everything.

Application portfolio rationalization will enable you to make informed decisions on which applications to:

• Keep: Retain and continue using, potentially with some updates.
• Replace: Swap out for a better-suited alternative.
• Retire: Eliminate the application.
• Consolidate: Merge functionalities from multiple applications into one.

What Drives the Need for Application Rationalization?

Application rationalization, the process of streamlining an organization's software portfolio, is driven by the need to reduce costs, improve efficiency, and enhance overall IT agility. Organizations often undertake this process due to factors like cloud migration, mergers and acquisitions, and the need to modernize legacy systems. 

Application Rationalization Benefits

Application portfolio rationalization is crucial for cost optimization, improved security, and strategic alignment of business resources. By eliminating redundant applications, organizations can reduce costs associated with licensing, maintenance, and support, while also enhancing the overall security posture of their IT landscape. 

1. Cost Optimization and Efficiency

By rationalizing your IT landscape, you will likely optimize your SaaS costs and enhance operational efficiency.

By reducing the number of redundant apps, you will save on those app’s licensing fees, maintenance costs, and support services. This will help free up the budget for other business needs and reduce overall IT costs.

It will also help you make the best possible decisions about which apps to keep or replace. This will help reduce IT complexity and optimize resources.

2. Keep Your Portfolio Secure

You might be aware of the popular phrase, ‘One bad apple spoils the bunch.' This is true when it comes to SaaS applications.

One non-compliant free app from a third-party vendor, purchased without IT approval (shadow IT), can put your entire portfolio at risk.

You can keep your SaaS stack secure by getting rid of redundant or unused SaaS applications purchased through shadow IT. This is why you must apply SaaS application rationalization every quarter.

3. Strategic Alignment of Business Resources

Effective portfolio assessment and rationalizing your portfolio are crucial for strategically aligning business resources and preventing application sprawl. This means that the process ensures that your IT investments align with your business objectives.

By eliminating redundancies, your stack will only consist of valuable applications that better align with your financial and operational goals. No more spend escalations or missed renewals, leading to budget overruns.

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Application Rationalization Challenges

While application rationalization offers clear benefits like cost savings and improved efficiency, organizations often encounter several roadblocks during implementation. These challenges can stall progress if not proactively addressed:

Incomplete or Inaccurate Application Inventory

One of the most common challenges is the lack of a centralized, up-to-date application inventory. Without full visibility into all active software, especially shadow IT and unsanctioned tools, it's difficult to identify redundancies or underused apps.

Stakeholder Resistance to Change

Business units may resist retiring familiar tools or migrating to alternatives, fearing disruption or productivity loss. Overcoming this requires clear communication, usage-based data, and executive alignment.

Complex Application Interdependencies

Many apps are integrated with other systems. Retiring or replacing one may impact workflows, data flows, or compliance processes. Mapping these dependencies is essential to avoid operational risks.

Difficulty Assessing Application Value

Measuring an app’s ROI isn’t always straightforward. Some tools may be infrequently used but business-critical, while others may have hidden costs. Without usage analytics, making data-driven decisions is difficult.

Security and Compliance Risks

Retiring applications without proper data migration or deprovisioning can expose organizations to compliance violations and security risks. Rationalization efforts must include checks for regulatory and security requirements.

Lack of Ongoing Optimization Strategy

Application rationalization isn’t a one-time task. Without a continuous monitoring and governance plan, redundancy can creep back in. Many organizations struggle to make rationalization a sustainable, ongoing process.

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4 Application Rationalization Best Practices To Follow

1. Get Complete App Visibility and a Centralized App Management Approach

If your team uses spreadsheets to keep track of the number of applications you purchase, then it is time to eliminate those outdated methods.

To apply SaaS application rationalization, you must have a complete view of your application portfolio and IT assets. Start by getting a bird’s-eye view of your SaaS stack. This will make it easier to identify redundancies and redundant or unused SaaS applications.

You need an automated tool that can integrate with your internal systems and see the sanctioned and unsanctioned applications being used by your teams.

However, to identify redundant apps, you need usage data. So, the automated application must also be able to integrate directly with your existing applications to analyze the application data.

With the combined insights from your internal systems and direct integrations, you’ll be able to easily identify redundancies and rationalize them.

2. Application Rationalization Tools

Now that you know what to do, here’s how you do it:

Application portfolio rationalization is impossible without a SaaS management platform. You can use a solution like CloudEagle to get complete visibility of your SaaS applications.

CloudEagle can integrate with your internal systems and organize all the applications under one roof. And the best thing is you don’t have to look for redundant or redundant or unused SaaS applications.

By integrating with your SSO, finance, and HRIS systems, CloudEagle will automatically identify apps within your system. Through direct integrations, it’ll analyze the usage and pinpoint redundant and redundant or unused SaaS applications existing in your portfolio.

It’ll notify you about the redundancies and organize them in one dashboard. There you go. Not only did you get complete visibility, but you now have a list of redundant and free applications.

3. Optimize Your Portfolio Based on App Usage

Understanding how different applications are used allows you to prioritize and allocate resources more effectively. This helps ensure that the most significant investments and resources are concentrated on the essential apps for your business.

This practice also involves consolidating, eliminating redundant and unused apps, and retiring outdated and costly-to-maintain apps to streamline your portfolio and drive innovation.

By focusing on the most critical apps for your business and eliminating redundancies, you’ll rationalize your portfolio. It’ll also ensure your IT infrastructure is optimized and aligned with your business goals.

Also, by regularly reviewing and optimizing your app portfolio based on usage, you can keep your stack rationalized and free from redundancies, duplicate apps, or redundant or unused SaaS applications. This will reflect positively on your expense and increase your ROI.

4. Collaborate Together With Finance and Procurement Teams

Collaborating with finance and procurement teams involves working closely with these departments. This is to align your organization's financial and procurement goals with the objectives of your app portfolio.

Typically, IT teams lead this process. However, partnering with finance and procurement offers insights into the initial reasons for acquiring certain apps.

By working with finance, you can pinpoint the ROI of redundant applications. Simultaneously, collaboration with procurement ensures that future app purchases align with actual business needs.

This alignment is crucial for a comprehensive rationalization of the SaaS stack.

When these teams work together, they can effectively assess the necessity of each app. From there, you can avoid unnecessary purchases and optimize the software portfolio for enhanced efficiency and cost-effectiveness.

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Optimize Your SaaS Portfolio with CloudEagle.ai

Application portfolio rationalization is a crucial initiative if you are looking to streamline your IT portfolios, reduce operational costs, improve resiliency, and enhance agility.

Some of the application rationalization best practices include adopting practices such as getting complete app stack visibility and centralizing app management.

You must use a SaaS management platform like CloudEagle to optimize your application portfolio based on usage insights and keep your stack rationalized.

Considering application rationalization initiatives as a vital strategic initiative for improved IT management is crucial. This will help you achieve significant cost savings, improved efficiency, enhanced security, and strategic alignment of business resources.

Ready to rationalize your apps? Look no further than CloudEagle for a comprehensive solution. Book a demo here.

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Frequently asked questions

1. What is application portfolio rationalization?
Application portfolio rationalization is the process of reviewing your SaaS apps, identifying redundancies, and eliminating unnecessary tools to streamline your software stack and reduce costs.

2. What is the goal of application rationalization?
The main goal is to eliminate redundant SaaS apps, reduce spending, and align the tech stack with business needs, boosting ROI, security, and efficiency.

3. What are the biggest challenges of app rationalization?
Common hurdles include identifying redundancies, handling user pushback, ensuring data continuity, and aligning stakeholders on what to retire or keep.

4. How does app rationalization improve security?
By removing shadow IT and unsanctioned apps, rationalization reduces security risks and ensures compliance across your SaaS environment.

5. Why is it important to involve finance and procurement?
Finance and procurement teams bring insights into app ROI and spend history, ensuring new purchases and renewals align with real business needs.