Increasing deal value: Application rationalization

This whitepaper is part of a series focused on how IT can increase deal value and minimize business risks during a transaction. The series will highlight principles that the Technology M&A team in KPMG in Canada leverages to help maximize value and minimize risks for clients across industries.

In many instances, large, multi-national companies can have sizable application portfolios (collection of software and software-based services) to serve the functional requirements of multiple business units. However, the applications may not necessarily be required for individual business entities on a standalone basis after a transaction, leaving buyers and sellers with additional costs to maintain the applications.

One of the primary challenges in a post-deal environment is to lower operating costs while continuing to support business functions. Application rationalization can help companies meet this challenge head on by reducing the number of applications to a more manageable subset.

Subsequently, the application rationalization process replaces some of the remaining applications with Software as a Service (SaaS) solutions (cloud-based software hosted by third-party providers) in order to optimize the subset of applications.

Application rationalization is a reliable means of reducing costs and streamlining operations by consolidating a large portfolio of applications into a smaller subset of lean, vital, necessary and cost efficient software resources. The application rationalization process can prove critical in reducing operating costs following a transaction, thereby enhancing the deal value for all of the involved parties.