Well, that’s exactly what’s happening with applications outsourcing. While it’s true, there are some wide-eyed newbies still enamored by the efficiencies the traditional model brings, more experienced clients are getting the outsourcing equivalent of the proverbial seven-year itch.
“There are so many 1st-, 2nd-, 3rd- and 4th-generation outsourcing clients who originally got into outsourcing to get a higher quality delivery at a lower cost—and they’ve done that. Although they’re already lean, operating in certified, high-efficiency centers, these clients are still challenged to do more with less,” explained Michael Marzullo, worldwide applications management offering manager for HP. “We’re at the apex of applications outsourcing; we’ve delivered all of the traditional efficiencies. Now, we have to do something different to continue to meet these clients’ needs.”
According to Marzullo, step one is creating an environment of perpetual application optimization, to systematically balance the client’s portfolio and put the cash cows out to pasture. That’s a smart strategy but not a particularly new one.
What is new is this: the company is now offering different levels of service at the app level.
“In the traditional model, service is a fixed price. Changing that price meant going back to the negotiating table,” Marzullo explained. “Today, we’re offering a tiered support structure, so our clients can change the support level associated with their applications, based on that application’s value to the organization.”
For example, if a company’s getting ready to sunset an app, that app no longer requires premium service. So, why pay for it?
“With a tiered service level structure, the client can move the support level down to break/fix and then decommission service when the app is no longer used,” Marzullo said. “In other words, we’ve made service levels more fluid and flexible, so our clients can pay for only the level of support each specific application needs.”
Knowing the “Score”
Another part of this new support dynamic involves application “scoring.”
“We’ve actually created a classification methodology that scores applications based on how easy or difficult they are to support,” Marzullo said. “That way, clients can get a clear picture of how their applications are behaving to better understand the associated support costs.”
Part two of this process is illustrating how the rating (and associated support costs) would change if the company invested funds in making the app easier to maintain.
“We can create a business case with “what if” scenarios that compare the current price of support with the support price of the remediated or optimized app, so the client can make an informed business decision,” Marzullo said. “If I spent this money on optimization, I’ll save this much on support.”
It’s like saying, I’ll save this much in gas and extend the life of my vehicle if I simply performed the regular scheduled maintenance, versus not making the investment and eventually hiring a full-time mechanic as things begin to break.
The Unraveling of the Integrated Application Suite
In many ways, the rise of cloud has ushered in the age of simplification—namely, a movement away from complexity. In some cases, this trend is motivating companies to take a long, hard look at their large, integrated application suites.
“In the past, the large ERP providers built a great story around the integrated suite. But today, these integrated options are so expensive that cost-conscious companies are pulling off the apps they don’t need—unraveling the integrated application suite to save money,” said Ed Anderson, chief strategy officer at CompuCom.
According to Anderson, the rapid rise of Software as a Service (SaaS) has fueled this trend.
“Today, it’s not unusual to see companies of any decent size running 10 to 15 SaaS apps,” he said. “They’ve already achieved velocity through this cloud-based model; now they’re focusing on how to use SaaS to meet the needs of specific lines of business. The future challenge will be managing access to these increasing numbers of SaaS applications.”
Some IT departments are now “bucketing” these individual applications by user type—setting up model personas matched to position or use of technology.
“Think of a persona as a personality type who may want to work in a different way than the current apps allow them do,” Anderson said. “For instance, retailers are moving away from traditional Point-of-Sale to mobile transactions via scanner and tablet that create a different type of user experience and provide the opportunity to mine data.”
The applications available today and the way they’re used are changing rapidly – furthering this trend.
“For example, there was a time when a wealth manager maintained client relationships via phone or face-to-face contact. Now, that face-to-face contact can happen through an iPad or smartphone screen,” Anderson said. “That persona is matched to an applications roadmap, so that user type has access to different collaboration applications than someone in product development who might need more transaction-based options for collaborative document creation.”
As a new generation of upper management takes the reins, the era of heavily-customized applications is heading toward the history books.
“The younger the CEO, the less he or she cares about customization, and the less fearful he or she is of cloud. These individuals grew up in a connected world and have no problem running their business from their cellphones,” Marzullo said. “They’re most focused on tying everything back to the business and key performance indicators. They’re fine with using standardized solutions to get there.”
No question, the world of application outsourcing is changing, with clients seeking more agility, greater value and less complexity from their providers—as well as new ways to take out costs— even in an optimized environment.
In response, providers are getting creative—finding innovative ways to respond to changing market demands beyond the traditional model.