Thought Leadership

How To Approach Application Maintenance & Development Outsourcing----By Venu Vaishya

While savvy executives have always sought to control costs while improving service levels, intensifying economic pressures are causing companies to stringently re-evaluate their IT strategies and become even more conservative about IT investment, dynamics that are key drivers behind a decision to consider outsourcing.

Whether your company is considering outsourcing its entire IT department, or only discrete projects, the experience of one major American company demonstrates why application maintenance & development outsourcing (AMD/O) is rapidly becoming a viable and strategic IT option for an increasing number of Fortune 1000 companies.

The company has billions in sales and is one of North America’s leading providers of business supplies. Not long ago, its IT staff spent 75 percent of its time just maintaining applications, essentially treading water under a burden that threatened to hamstring the company’s ability to develop the online supply chain it needed to maintain its competitive advantage in the marketplace.

Faced with a make-it or break-it business challenge, the company made a crucial strategic decision: complex and highly strategic technology development work would be done in house, while larger, application maintenance would be outsourced.

Today, instead of spending the majority of its time and budget on maintenance, the technology staff at this innovative company is able to focus 75 percent of its resources on the development of strategic, customer-focused initiatives, such as pioneering its new, business critical, e-commerce channel for customers and supply chain partners. A long-term partnership with a top quality technology services provider, meanwhile, keeps this company’s key applications well maintained and running smoothly, at a lower cost.

It’s clear why industry analysts such as The Gartner Group see application integration as one of the most important IT challenges facing enterprises over the next five years.

Contrary to prevailing opinion, however, the AMD/O market isn’t driven solely by the need for cost savings, although that tends to be a happy byproduct. An enterprise usually moves to outsource its application maintenance and development work when it understands the power of “focus” in assessing and executing against its business technology priorities.

In fact, understanding your short and long-term business priorities, and how your IT resources can best support those priorities, are the first and most important steps in deciding to outsource.

Before an organization commits to outsourcing, it’s prudent to conduct a needs assessment to serve as the framework for deciding what to outsource, how and to whom.

There are four key questions that should be considered when evaluating the potential benefits of AMD/O:

• What are the business drivers behind my decision to seek an external application outsourcing partnership?
  
• How do these business drivers impact which applications in my portfolio I will outsource first, second and third?
  
• Once I determine the priority in which I will outsource my application portfolio, how will I determine the ROI from outsourcing?
  
• How will the management of these applications be transferred to an outsourcing partner in a fashion that it causes limited turbulence to my organization?
  
• How do I effectively utilize my own resources to work on critical assignments for the company?

Because you are entrusting another organization to provide services that are vital to your enterprise’s operational success, it is also critically important to assess the potential of maintaining a long-term relationship with your provider. You want a partner, not just a vendor, who can work with you in establishing risk mitigation strategies.

In order to avoid disconnects, and to ensure a smooth outsourcing transition, enterprises need to have a clear definition of what they are expecting and vendors should be clear on what they are providing. The definition of that exact partnership has to be very inclusive in order to steer clear of dissatisfaction.

Technical expertise and mature processes are key considerations, as well. A reliable offshore outsourcing vendor should have achieved either ISO9001 or CMM Level 5 (the highest Capability Maturity Model rating) certification, both of which certify high work quality thanks to the adoption and consistent execution of rigorous software processes based on accepted industry standards.

Another key factor is experience. Ask for client references and consider a vendor’s staffing quality, operational model and corporate credentials before making a decision.

AMD/O partnerships between companies and vendors are becoming the norm, rather than the exception. Budgets are tighter than ever, and competition is stiffer. Through AMD/O, an enterprise can fully leverage its internal IT staff to achieve focus on more strategic initiatives, while saving money and maintaining quality.

Venu Vaishya heads the AMD/O effort for Covansys Corporation (a CSC company), a global consulting and technology services company specializing in industry-specific solutions, strategic outsourcing and integration services.