M&A Application Retirement – Part 1 – The Case for Retirement
It Starts with an Aquisition
I recently came to the end of the long tail of retiring applications that came into the IT landscape through an acquisition. It occurred to me that others might benefit from the experience the team gained during this process.
When a company is acquired, it is likely the IT systems they used to run their business are no longer needed. At a set point in time operations are cut-over to the new systems and the old systems go idle; this was our situation.
Let’s Just Shut Them Off
The straight forward thing to do would be to shut them off and dispose of the gear, but it is not that simple. The old systems might be subject to tax, SOX, or other audits. They may contain company confidential information. Worse, they may contain personally identifiable information about customers, partners, and employees that is subject to various regulations.
If We Cannot Shut Them Off, Let’s Keep it Simple
So much for a simple shutdown. One alternative is to keep the systems in their idle state. Set the data to be read-only, maintain the servers, applications, and knowledge necessary to run them. This option is relatively simple and low cost to execute, but there is a long term cost.
These costs include the is a carbon footprint associated with running the equipment, power costs, under utilized data center space, staff costs, and many issues retaining skilled staff. The staff are needed to maintain the basic infrastructure, continue patching the servers and applications to maintain a secure environment, and to respond to user issues when data access is necessary. There may also be on going license and maintenance costs to the application and server providers.
Whoever pays these costs is likely to want to dramatically reduce them as soon as possible. Typically this will fall to the IT organization. Unfortunately the users of the applications may not share the desire to shut them down. There may be a real business need for historical data that was not migrated to the new systems. Some systems may still provide an important function that was not transitioned during the cut-over. In some cases IT may have servers in its data center whose function is unknown to them.
Someone Will Have to Pay
Justifying the cost of retiring applications can be a challenge. You may not have costs calculated on a per application basis. One of the best techniques is to look at the staff costs. Administrators that patch servers are needed based on the volume of servers, not on the value the servers provide, so that cost is present regardless of whether or not the applications are mostly idle. There will also be a small staff contingent needed to administer the old applications and provide user support.
Less tangible savings come from reduction in risk. As the ability for the organization to maintain the old applications is reduced, the risk of data loss, breach of security, failure to meet statutory regulations, and failing audits increases. Also, recently there is increasing scrutiny on the cost of carbon footprint. Based on staff alone, we were able to show an ROI of 3 to 1 by retiring applications. The excess staff were moved to meet demand in other areas.