use strict;
use warnings;
use XML::Twig;

my $x = <<EOF;
<?xml version="1.0" encoding="UTF-8" standalone="no" ?>

<Profile xmlns="xxxxxxxxx" name="" version="1.1" xmlns:xsi="http://
www.w3.org/2001/XMLSchema-instance">

        <Application Name="App1" Id="/Local/App/App1" Services="1" policy=""
StartApp="" Bal="5" sessInt="500" WaterMark="1.0"/>

<AppProfileGuid>586e3456dt</AppProfileGuid>

</Profile> 
EOF

my $t = XML::Twig->new(twig_handlers => {Application => \&app});
$t->parse($x);
$t->print();

sub app {
    my ($twig, $app) = @_;
    my $id = $app->att('Id');
    $id =~ s{^/Local/App}{};
    $app->set_att('Id', $id);
}