Hcl Alt Asm Issue1

8/10/2019 Hcl Alt Asm Issue1

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5 Alternative Ideas for the Future

of Application Management

Featuring research from

Executive Summary

Alternative IT

ALT ASM™ – Proactively reducing ASM and impacting businessperformance

From the Gartner Files:Predicts 2013: Business Impact of Technology Drives theFuture Application Services Market

About HCL Technologies

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Executive Summary

With the continual media focus on Social,Mobile, Analytics and Cloud services (SMAC), IT

Executives can be forgiven for forgetting that a

high percentage of existing IT spends remains

locked in the management of the existing IT

estate. If current approaches to managing IT are

not transformed, they will continue to remain

locked. The only successful strategy deployed by

many organizations is to squeeze their IT service

providers for incremental discounts.

A recent Gartner report report stated that, “On

Average in 2012, 35% of IT spending was on

applications, 55% was on infrastructure, and theremaining 10% was on IT management, finance

and administration activities.”1 We’ve found that

on average, 50 per cent of an application’s cost

across its life cycle is support and maintenance.

Worse, a recent client survey by HCL highlighted

that little has changed over the past 10 years

when it comes to the philosophy and approach to

managing this significant portion of the budget.

Our study “300 Global Organisations reveal the

future of Application Support and Maintenance”

conducted in 2013, across 300 large enterprises

in the US and the UK showed that 83 per cent ofthose surveyed expected ASM costs to continue

increasing each year.

IT leaders are faced with the paradox of

shrinking budgets but a business imperative to

grow. How can they continue to support such

disproportionately large spends for very little

value in return? Given that fewer than 20 per cent

of organizations have an application services

strategy, ASM suddenly becomes a big budgetary

blind spot. It can almost be guaranteed that

under-management of ASM is leading to either

overspending or unmonitored spending.

Offshore providers have delivered a `veneer

of transformation’ by lowering labour costs.

In truth, the promise of transformation in

operational performance continues to be elusive.

This is evident from the fact that application

counts remain stubbornly high and productivity

is seldom understood, let alone measured. Some

organizations are still paying their IT service

provider per incident, which shows why the

number of incidents in those organizations has

only gone up and never come down. This notonly causes the cost to go up, but also infuriates

business end-users as most incidents result in

some form of business disruption.

Such stagnation might have been annoying but

tolerable when IT was merely focused on the

cost, but its remit has changed. IT’s new focus is

on innovation and business transformation.

It is imperative that IT must positively impact

business performance.

For CIOs, this is a significant gear change.

Business transformation is now a key part of their

role alongside cost reduction. To meet these

new expectations, they have to find money to

fund transformative projects. This puts IT spend

under even more scrutiny. So when it comes to

ASM, CIOs are starting to ask five very important

questions:

1. Why am I paying the same for application

support each year?

2. Why are the incidents growing each year with

increasing complexity of the IT environment?

3. Why are IT vendors not innovating in my

biggest spending area?

4. Why can’t this spending create new value for

my business users?

5. In the age of Software-as-a-Service (SaaS),

why do I even need application support?

Traditional ASM cannot answer these questions.

Neither can it provide the high levels of visibility

and control that CIOs need in their new role. ASMhas arrived at crossroads. It is time to create

a new model where incidents are eliminated,

costs are reduced and incremental value for the

business is generated every day.

HCL has created a radical new approach. It

has combined various industry-leading best

practices, including LEAN Process Management

Principles with focused automation and

sustained knowledge reuse for the support and

maintenance of applications while creating

1Gartner Inc., IT Metrics: IT Spending and Staffing Report, 2013, G00248502 , 1 February 2013



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incremental value for the business every day with

guaranteed cost reductions: Alternate Application

Support and Maintenance or ALT ASM™

The concept of ALT ASM™ is far-reaching, but in

truth the basic concepts behind it are tried andtested in other functional areas and industries. In

summary, ALT ASM™ seeks to:

• Understand the cause of ‘work’ in Application

Support.

• Stop the ‘work’ arising in the first instance.

• Manage the ‘work’ more effectively when it

has arisen.

ALT ASM™ engagements are substantially

forward-looking. They continuously monitorapplications to identify functional and technical

re-engineering requirements. Dynamic

business demand for enhanced functionality

of legacy applications is met through staffing

flexibility. Additionally, we reduce IT complexity

by identifying redundant applications for

decommissioning. The application portfolio is

kept lean and total cost of ownership (TCO) is

kept low.

More importantly, ALT ASM™ includes themonitoring of both IT key performance indicators

(KPI) and business process KPIs. Using business

process and application visibility tools and

process watch dashboards, ALT ASM™ is able to

align IT systems to business processes. For ASM,

this is a first.

Translated, this means priorities can be set on

stabilizing activities; change can be managed more

effectively; and productivity can be enabled through

automation. The impact on operational and business

performance is measurable. When adopting

ALT ASM™ services, organizations can expect to

achieve upwards of 30 per cent operational gains

irrespective of their current application support

model – be it in-house or outsourced.

Source: HCL Technologies



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Alternative IT

It is time to re-examine and re-boot the current

IT outsourcing (ITO) services proposition to one

that provides greater visibility, faster velocity and

tangible business value.

For several years, HCL has been paving the way

with its “alternative” thinking – be it:

• Alternative management approach of

“Employee First Customer Second”

(http://www.hcltech.com/EmployeesFirst), an

‘alternative delivery framework’ of creating

value through everyday ideas or

• Alternative business IT framework where we

link the business process with the underlying

IT stack or

• Alternative engagement models like

Enterprise Function as a Service (EFaaS) or

• Alternative commercial pricing models or

• Alternative IT outsourcing propositions’ like

ALT ASM™

ALT ASM™ propagates alternative thinkingof proactively reducing incidents and putting

Business Processes First. Our service is about

delivering simple yet powerful Application

Support and Maintenance. It is about changing

the mind-set about the mundane, ‘ticket-in-

ticket-out’ services to one which delivers IT

metrics and business value, and constantly

focuses on ticket elimination.

Irrespective of whether we are supporting ERP

applications, custom applications, emerging

technology applications, front- or back-officeapplications, locally or globally, we have the

same set of processes governed by our Managed

Services framework MaSCoT™ to deliver IT

Service-Level Agreement (SLA) and Business

KPI alignment. We target a zero end-user

downtime with visibility beyond service metrics

and generate guaranteed operational efficiencies

using LEAN principles and other innovative

delivery principles.

5 Alternative Ideas for the Future ofApplication Management

1. Zero application incident enterprise

“Gartner Prediction: By 2016, 25% of external

application implementation spending will be on

mobility, cloud, analytics and social computing

services.” 1

It is evident that IT organizations are moving

from being a cost centre to impacting revenue.

Still, there has to be a radical shift in IT spending

to enable this transformation.

These are challenging times for CIOs; the Nexus

of Forces mandate “non-linear” operating cost

vs growth. The fall out of which is an innovative,

yet risk-minimized approach for transferring IT

operations budgets to new projects spend.

On one hand, IT is being driven by market

forces which have increased budgetary pressure

combined with demands from IT to impact

business performance. On the other hand, there

are now practical ways to reduce IT operations

spend through cloud and virtualization, which canthen be used for new project initiatives. These

initiatives are now able to impact the business

due to the technological evolution achieved by

Big Data, analytics, mobility and other disruptive

technology trends. CIOs have an opportunity

to reduce IT spending mix and establish IT as a

business partner function.

However, application management is one area

where CIOs are finding it elusive to manage

IT spends; the only efficiency that has been

derived so far is through off-shoring (a Gen1 phenomenon). This happens due to various

reasons. IT vendors have not been motivated

to radically impact this cost because it is a

recurring and near permanent revenue. CIOs

so far have been only satisfied with the cost

savings achieved through off-shoring and

headcount reduction/productivity improvements

as part of the defined contract. They never had

an alternative!

http://www.hcltech.com/EmployeesFirst

http://www.hcltech.com/EmployeesFirst



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HCL has created a paradigm shift in application

outsourcing through its ALT ASM™ proposition

which basically questions why should there be

tickets at all. It is derived from our strategy shift

from ticket resolution to ticket removal. Through a

combination of initiatives like proactive landscapemonitoring, an intelligent alert mechanism and

an Integrated Applications and Operations support

layer, there have been both financial gains to the

customer as well as a more agile support team

which focuses on zero down-time.

2. Traditional Application Landscape

performance equivalent to SaaS

“Gartner Prediction: By 2016, the disruptive

impact of SaaS deployment on application services

providers’ traditional revenue streams will be less

than 4%.” 2

While the impact of SaaS on the revenues of

traditional IT outsourcing vendors may not be large,

it will have a significant impact on the buying

behaviour of the CIO. With SaaS implementations,

CIOs would expect improved performance, agility

and reliability from the existing application

environment at a significantly lower TCO.

With the pace of business changing rapidly and the

“ease” of adapting to those changes within SaaS

models, there is going to be a significantly different

expectation from the application support provider.In addition, majority of the resources are used for

dealing with incidents and service requests which do

not add much value. This can restrict a company’s

budget for change-the-business initiatives. As part

of HCL’s ALT ASM™ methodology, we focus on

ruthlessly eliminating waste to:

1. Unlock capital, which can fuel activities that

impact business objectives of firms

2. Improve IT agility to stay flexible for business

demands of firms

3. Free up the bandwidth of subject matter

experts of firms from non-strategic

applications

Our approach to reducing costs on the ASM side

is to look at ways to free up capacity of the level

2/level 3 resources by decreasing the ticket

volume and increasing the velocity of resolution

using LEAN processes, automated resolution and

other innovative principles.

3. Internal crowdsourcing

“Gartner Prediction: By 2016 application services

providers will have replaced 20% of internal staff

with crowdsourcing and community sourcing.” 3

There is a high demand for cost reduction, driving

offshoring but still, expansion in global delivery

does not match the global demand in expertise.

Moreover, a demand for resources in new

technology continues to grow while capabilities

are being added through crowd and communitysourcing. This is sustainable because of the

abundant growth in supply and very granular

comparability of resources and global access

For Application Development, creating a

controlled environment with gamification as the

reward and recognition model is happening at a

rapid pace. For ASM, communities are possible,

but are not getting driven at a rapid pace. This

is due to the need for retaining the knowledge

on the application environment and business

processes, which is essential to maintaining the

security of production data, driving efficiencies

and reducing cost.

We have tried to bring in the benefits from

community sourcing in ASM by creating a

community within the engagement and within a

set of engagements in an industry.

An ASM engagement, which is not adaptable

enough to provide additional trained resources

as required, puts the client at risk rising from

changing business needs. Understanding this

challenge, HCL offers its customers a flexiblestaffing model in which ASM resources can also

be utilized for change-the-business activities.

This completely shifts the risk and associated

costs from the customer to HCL. Internally,

this opportunity is not only used as a career

path for its resources, but it also ensures

better governance and creates a transparent

and efficient handshake between support and

development teams.

Our business-aligned target operating model

results in a highly cross-skilled workforce

because of which, we are able to provide

resources that are completely aware of the

company’s business process and are able to

impact new project activities with a quicker

turnaround time.

HCL promotes internal crowdsourcing at an

organization level through its crowning event

called MAD Jam or Make a Difference Jamboree

that celebrates the most outstanding ideas from

90,000 ideapreneurs. Crowdsourcing is promoted

at an engagement level through Value Portal,

where ideapreneurs log in value-creating ideas.



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4. Ready-made Solutions for Application

Management

“Gartner Prediction: By 2016, the most profitable

application services providers will replace at least

20% of their labor-driven effort with solutions

architected from IP assets.” 4

Increased focus on developing ready-made

solutions for application maintenance from

providers’ reusable IP assets is evidence of

a future in which there is a convergence of

software and services. The benefits of this

pre-built solutions-approach include faster

time to market, cost effectiveness and greater

efficiencies for buyers.

Providers should focus on innovation and

software asset strategies. Providers who have adetailed vision on re-usable solutions to reduce

the application maintenance effort should take

preference. The solutions should be industry-

specific, uniquely addressing clients’ pain points.

HCL has extensive experience in supporting

the front-, middle- and back office application

portfolio of clients across different industries.

We have thoroughly analysed the incident

and service request volumes, mapping them

to the corresponding business functions

and sub functions. This has enabled us to

identify top focus areas and pain points in theclient’s existing ASM function. HCL has built

an exhaustive array of domain specific tools,

dashboards, mobility solutions, plugins and

solution accelerators to reduce the labour-driven

effort which are leveraged in ASM engagements.

HCL is supporting 2000+ applications across

the pharmaceutical value chain i.e. R&D,

manufacturing and supply chain, sales and

marketing for top pharmaceutical companies in

the world. Our domain-driven analysis and insights

have identified that maximum incidents andservice tickets are contributed by certain sub-

business processes, for which we have created

reusable assets and point solutions. HCL has built

similar solutions in other industries as well.

Ready-made solutions are complemented by

Knowledge Databases (KeDB) to resolve incidents

and Standard Operating Principals (SOP) for

service requests. This has reduced the customers’

dependence on personnel. It is evident from our

non-linear growth; we have grown our revenue

per employee by 50% in a period of six years.

5. Business Alignment in Application

Management

“Gartner Prediction: By 2016, more than 50% of

application modernization efforts will address

business demand for enhanced functionality to

legacy applications - not cost reduction.” 5

While cost reduction remains a critical primary

focus area for CIOs, HCL is asking, why can’t

a run-the-business service like ASM impact

business performance?

ALT ASM™ is HCL’s alternative in managing

applications. ALT ASM™ engagements are

fundamentally designed to be business-aligned,

committed to aligning the business process KPIs

with IT SLAs.

As part of ALT ASM™, HCL would not only focus

on facilitating 99.95% up time, but also on

business KPIs like on-time delivery and yield

to solve IT and business disconnect. HCL is

a business process-led organization, which

believes that technology is a means to drive a

business outcome.

ALT ASM™ leverages the power of

ProcessWatch™, HCL’s tool included in ALT

ASM™ and other native embedded functionality

of ERPs to create visibility into business process

metrics as well as to proactively address issues.

ALT ASM™ engagements also bring HCL application

modernization tools PRIZM™ and ASSESS SMART™

for application assessment of quality, size, security,

vulnerability, maintainability, reliability and

performance. Continuous application monitoring

is done to identify applications for functional and

technical re-engineering. Redundant applications are

identified for decommissioning. This ensures that the

application portfolio is business aligned for maximum

business impact and leaner for reduced TCO.


1-5Gartner Inc., Predicts 2013: Business Impact of Technology Drives the Future Application Services Market , G00230299, 26 November 2012



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FIGURE 1 Alternative Solutions to Five Problems CIO’s face in Application Outsourcing


ALT ASM™–Proactively reducing ASM and impactingbusiness performance

Recognizing that support, maintenance and

business value are not mutually exclusive, marks a

new start for IT sourcing models. Unlike traditional

ASM, ALT ASM™ seeks to drive efficiencies

at a fundamental level using proactive ticket

resolution, LEAN principles, pre-built self-healing

solutions, self-funded application portfolio

optimization and a business-aligned target

operating model. The goal of ALT ASM™ is to

create a zero ticket application landscape.

It is also focused on impacting businessperformance by linking business processes to

the IT landscape, while also targeting to achieve

business process KPIs. This is a game changing

and bold approach for a function or sector of

the IT industry that has not evolved for the last

decade. ALT ASM™ aims to create alternative

solutions to five problems that CIOs face in

applications outsourcing:

Proactive Workload Reduction:

CIOs so far have only been presented with

the cost savings achieved through offshoring

and savings delivered as part of the defined

contract. To help CIOs see other alternatives,

HCL has created a paradigm shift in applications

outsourcing through its ALT ASM™ proposition.

It is derived from our strategy of shifting from

ticket resolution to ticket removal. ALT ASM™

aims to deliver unprecedented visibility, velocity

and value, by bringing together a host of its IP

and processes and fundamentally approaching IT

with Business Process first, Technology second

mind-set. By understanding the business process,

we understand the impact of an upstream failure

on a downstream process. This knowledge

helps anticipate and focus on resolution efforts

irrespective of the “priority” assigned to a ticket.

Focus on Business Advantage:There is a need to change how we deliver

and what we target as part of our SLAs. An

ASM engagement in technology-led silos is

inefficient in terms of its resource use and is akin

to a “horse with blinders”. HCL has designed

a business function-aligned target operating

model in which the engagement units headed

by client service managers are aligned to the

various functions of the client. This creates

an organization that is focused on achieving

business objectives. Along with this, ALT ASM™

uses HCL’s proprietary tool Prizm™ to map the

business process to the IT landscape. This enables

the ASM engagement to generate ideas that

can impact the business. Another tool used is

ProVantage™, which monitors the business KPIs

and their linkage with IT KPIs. The final step is



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taking business KPIs as SLAs. This aligns the

goals of the business and IT, thereby creating

business advantage.

Proactively Impacting Agility:

The transformation of the IT landscape starts atthe time of transition, with the mapping of IT

Landscape to business processes using HCL’s

Application Analysis and Optimization tool,

Prizm™. This creates a culture of continuous

improvement from the word “go”. With that, we

reinvest 3% of the total contract value in the

form of transformation consulting assignments,

which result in identifying transformation

opportunities . These opportunities can be

realized with the unlocked capital resulting

from optimization derived from ALT ASM™

and are in the form of Application PortfolioOptimization, Application Modernization and

Cloud Enablement.

Flexibility in service delivery and resourcing:

An ASM engagement, which is not flexible

enough to provide for additional trained resources

in case of an urgent need, puts the client at risk

rising from business fluctuations. Understanding

this challenge, HCL offers clients a flexible

staffing model which provides run-the-business

(RTB)-trained resources whenever there is a

need, as part of ALT ASM™. Inversely resources

required for change-the-business (CTB) activities

can be sourced from ASM. Our business-aligned

target operating model results in a highly

cross-skilled workforce and thus we are able toprovide resources that are completely aware of

the company’s business process and are able to

impact CTB activities in the right way. Flexible

delivery is achieved through the modularized

business-aligned target operating model, where

in case of a business expansion; a new business-

aligned track is easily created.

Transparent Engagement:

When it comes to creating visibility for the

customer through strong collaboration models,

advanced reporting tools with frequentupdates and clear role articulation for greater

accountability, we look at Managed Services. ALT

ASM™ creates a transparent engagement through

a 24X7 visibility dashboard, a multi-vendor

governance framework, business process to IT

landscape visibility, and business process KPI

monitoring. It creates visibility at all three levels

of business, IT and governance.




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Predicts 2013: Business Impact of Technology Drivesthe Future Application Services Market

From the Gartner Files:

Underlying themes framing our 2013 predictions

focus on the changing application services

models driven by business outcomes such as

IT enablement for the business innovation, the

business buyer as influencer, business need

for speed, agility, flexibility and, always, cost-

efficiencies.

Key Findings

• Accelerated spending on new technologies

– mobility, cloud, analytics and social

computing services – will be driven by the

segment of buyers that seek untapped value

from these technologies.

• Buyers will increasingly focus on speed to

market, business impact of their enterprise

applications and efficiency of their application

portfolios; these choices guide and underlie

new preferences for applications, application

services and provider selection.

• Application services providers will use crowdand community sourcing to create distinct

“application management communities,”

broken down into development and

maintenance communities.

• The increased focus of providers in

developing/maintaining reusable intellectual

property (IP) assets is evidence of a future in

which cloud-based platform development,

assembly-based software strategies, IP

leverage, and configurable solutions will be

an option – if not the norm – for some buyersolutions.

• The intentions of legacy application

modernization efforts will shift conclusively

from an IT-centric cost view to business

enablement through new technologies (such

as analytics, mobility, and software as a

service [SaaS]).

Recommendations

• Business buyers must plan for and shift the

mix of external application services budget

to support nexus solutions and business

enablement. Use vendor evaluation models

to select consultants/system integrators

(SIs) based on the type of capabilities needed

to tackle these types of IT and business

initiatives.

• Application services providers must

evolve their strategy to enable the nexus

technologies: Those able to help evaluate,

design and implement these solutions

individually, as well as synergistically, will befavored by client decision makers.

• Application services providers must invest

and expand the ability to sell directly to

the business and bring solutions directly

to business buyers. Develop solutions and

delivery models to support business buyers to

drive and participate in SaaS deployments and

focus on relationships with business buyers as

a means to differentiate using business value

propositions to drive business development.

Strategic Planning Assumptions

• By 2016, 25% of external application

implementation spending will be on mobility,

cloud, analytics and social computing

services.

• By 2016, the disruptive impact of SaaS

deployment on application services providers’

traditional revenue streams will be less than

4%.

• By 2016, application services providers

will have replaced 20% of their internal

application management staff with crowd and

community sourcing.

• By 2016, the most profitable application

services providers will replace at least 20%

of their labor-driven effort with solutions

architected from IP assets.

• By 2016, more than 50% of application

modernization efforts will address business

demand for enhanced functionality to legacy

applications – not cost reduction.



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Analysis

What You Need to KnowAs we have explored in the published research of

the Application Services agenda throughout the

year, this is a dynamic market with aggressive

competition, quickly evolving buyer demandsfor more business impact from enterprise

applications, and a confluence of IT forces that

are essentially leading to a new – or at least,

bifurcated – application services market. The old

(labor-based services) and the new (industrialized,

cloud-based options) will coexist, but the leading

driver of change will be business impact.

This is the first-ever annual Gartner Predictions

report for the application services agenda. As

the predictions reveal, the visible concepts

highlighted this year include:

• The Nexus of Forces (cloud, social, mobile and

information)

• Crowdsourcing

• Modernization

• Nonlinear growth

Yet, the underlying theme implicit across all

the predictions is the strong emergence of the

business – the business goals, IT enablement forthe business, the business buyer as influencer,

the business need for speed, agility, flexibility

– and always, cost-efficiencies. This Predicts

report complements other publications from

this agenda. The following Strategic Planning

Assumptions capture some of the changing

dynamics we anticipate will influence the

application services market in the coming five

years.

Strategic Planning Assumptions

Strategic Planning Assumption: By 2016, 25%of external application implementation spending

will be on mobility, cloud, analytics and social

computing services.

Analysis by : Susan Tan

Key Findings:

• Powerful technological forces are reshaping

how employees work and how businesses

engage with their partners, suppliers and

customers. Social, cloud, analytics and mobility

technologies are innovative and disruptiveon their own but together represent a new

computing paradigm.

• Gartner calls the convergence of these four

technologies the Nexus of Forces and each of

these technologies a nexus technology.

• Mobility, for example, is being used for

increasing productivity by equippingemployees to do their jobs better “on the

go,” for enhancing revenue by offering

an alternative channel for customers that

include new features such as location

and presence; and, in certain cases,

for transforming business models by

fundamentally changing work processes

and leveraging functionalities in smart

devices and sensors.

• Predictive analytics are enabling

enterprises to better understand their

businesses and make better decisions.

• Cloud solutions, including SaaS, not only

reduce IT costs and increase an enterprise

agility but can also be used by enterprises

to create cloud services such as Apple’s

iCloud.

• Enterprises are tapping social networks

to help with product design, improve

customer satisfaction, solicit feedback and

stimulate demand.

• In Gartner’s 2012 CIO survey, CIOs rank

analytics, mobile technologies and cloud

computing as the top three priority

technologies (see the Executive Summary

in “Amplifying the Enterprise: The 2012

CIO Agenda”). Today, external application

implementation spending on social, cloud,

analytics and mobility services is estimated

at about 13% of the total IT consulting and

application implementation market.

• As more enterprises recognize the value

of these technologies in transforming

their businesses, and as such solutions

penetrate more business functions within

each enterprise, enterprises will increase

their spending on service providers to help

them evaluate, design and implement

such solutions individually as well as

synergistically. By 2016, solutions that

leverage mobility, social, analytics and cloud

technologies will make up more than 25% of

external application implementation spending.



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Market Implications:

Forward-thinking enterprises will not only

harness the power of each force but will also

increasingly combine these technologies

synergistically to change the way enterprisesconduct business, interact with customers and

revolutionize their business models. For example,

a mobile app for the sales force can be hosted

in the cloud, and integrated with back-end

ERP systems for real-time inventory checking

and ordering, as well as third-party databases

and social websites, with access to analytics

presented as mobile dashboards.

As customers demand enterprises do business

the way they want to, enterprises that do not

embrace these nexus technologies will be at a

competitive disadvantage. Nexus technologies

are new, and many enterprises don’t understand

the possibilities they can bring about and the

governance needed to make that work. They will

look to external service providers (ESPs) to help

them envision the art of the possible, prioritize

nexus initiatives as well as implement the

solutions.

Spending for services to support nexus

technologies will come from multiple business

units in addition to the official IT budget.

Many consultants and SIs, including Accenture,

Deloitte, Ernst & Young, IBM, Infosys and PwC,

are offering digital transformation services to

help clients leverage the confluence of nexus

technologies to create competitive advantages.

In addition, numerous boutiques have sprung up

to assist enterprises in implementing solutions

using one or several of the nexus technologies.

Recommendations:

For enterprise buyers of application

implementation services:

• Involve business users and jointly explore, by

process and function, how each of the nexus

technologies, individually and synergistically,

may be used in your enterprise to increase

revenue, customer engagement and

satisfaction, or reduce cost. Proactively reach

out to business units to discuss the possibility

of applying nexus technologies in their

business, or, if they already have some form

of nexus solution in place, the possibility of

increasing its value through integration. Thencreate a plan and road map to implement

these nexus-related solutions, with help from

ESPs if necessary.

• For every new IT solution, explore the

inclusion of social, cloud, analytics and

mobility technologies to see if they can

enhance the value of the solutions, and

expect service providers to include such

technologies in their proposed solutions.

• Plan for and shift the mix of external

application services budget to support nexus

solutions.

• Update vendor evaluation models to select

consultants/SIs based on the type of

capabilities needed to tackle these types

of IT initiatives. For example, selection of

providers of cloud-enablement services

should include an evaluation of capabilities

such as cost, data protection and integration

while selection of providers of mobile or

social computing services should include

an evaluation of capabilities such as agile

development methodologies, reusable assets

and user experience/design. For more holistic

nexus solutions, look for service providers

with a vision for how these technologies can

be used for business benefits in your particular

industry.

Strategic Planning Assumption: By 2016,

the disruptive impact of SaaS deployment on

application services providers’ traditional revenuestreams will be less than 4%.

Analysis by: Patrick Sullivan

Key Findings:

• There is a concern that SaaS applications

require reduced levels of consulting and

implementation services compared with

traditional solutions, and significantly reduced

efforts in application management are

identified as concerns.

• Consulting and implementation services

associated with SaaS-based applications

are typically about 80% of the effort that

are associated with on-premises package

implementation projects for comparable scope

and scale.

• Although SaaS is growing rapidly and

application services related to SaaS software

are also growing rapidly (19% CAGR through

2016), nevertheless, these services will still

be less than 10% of the overall applicationservices marketplace in 2016.



12

• The application services market will continue

to be dominated by the “traditional”

(labor-based) services centered on custom

application and on-premises packages, which

include consulting, implementation and

application management.


This prediction addresses the concerns of

application services providers that the rise of

SaaS may have a cannibalistic impact on their

revenue. Currently, the revenue from SaaS

software represents 16% of the total enterprise

software market at $16 billion but growing

through 2016 at a high rate (CAGR 19.1% 2012

through 2016) which is four times the rate of on-

premises software. This adoption is shifting the

application portfolio mix within enterprises away

from custom applications to packaged software,

and SaaS; this prediction addresses the impact of

this shift (see Figure 1).

Application services for SaaS-related software

are also growing at a high rate (CAGR 18.8%,

2011 through 2016). This represents both

an opportunity and a threat to application

services providers that have built sizable

revenue streams implementing and managing

custom and packaged software. The consulting,

implementation and management efforts of SaaSapplications are similar to, but different from,

traditional applications in that the traditional

FIGURE 1 Shift Expected in Application Portfolio

12%

22%

45%

45%

43%

33%

Today In 2015

Custom applications

Packaged applications

SaaS applications

Note: The same survey generated similar results for Western Europe, with SaaS applications growing from 11% to 19%, while

custom applications in the portfolio shrink from 48% to 37%.

Source: Gartner (November 2012)

labor-centric model for these services needs to be

adapted. Critical characteristics of SaaS software

engagement are:

• Projects are typically shorter and smaller

relative to large package implementation, duemostly to reduced scope and scale. Today,

typical SaaS engagements are six to 18 weeks

in duration. There is a growing tendency for

projects to become larger, as SaaS efforts

become larger and more complex.

• SaaS deployments require business users to

adopt the processes that are configured in

the software. Therefore, the projects require

significant business user participation and

process change management as part of

deployment.

• Implementation efforts today are focused on

integration with other existing applications

that centers on data and interfaces as well

as configuration of the software to match

business needs.

• Typically, agile development processes are

used that involve business users and IT staff

through the integration and configuration

phase (as opposed to more-waterfall-like

efforts on large on-premises efforts).

• For the same scope and scale of solution,

SaaS engagements today are less effort due



13

mostly to reduced business requirements and

design efforts (solution is more predefined

along with technology architecture). Research

of contracts suggest about 20% reduced effort

and fees for similar scope and scale of efforts.

• Application management and updates are

considerably less than traditional packages,

because only the interfaces with other

systems and/or custom modules that were

developed to supplement to SaaS software

need to be updated. However, these will

need to be reviewed, and possibly changed,

multiple times each year as the SaaS software

provider applies software updates. In most

instances, the updates are easy if standard

“adapters” and integration techniques are

used, but they still must be done and tested.

Thus, the actual efforts to maintain SaaS are

more significant than often anticipated due

to the frequency of updates but typically less

than custom or package management.

Gartner forecasts the total market for application

services (technology consulting, implementation

and application management) at $230 billion.

Of this, less than 4% is focused on SaaS, with

custom applications and packaged applications

being the focus (traditional services). By 2016,

we anticipate that SaaS-related efforts will

grow to $19 billion, which still will be only 7%of the total application services marketplace.

Finally, should the differential between SaaS and

traditional efforts of 20% savings be applied to

the full SaaS market, it represents only around $4

billion in potential erosion of traditional services

by deployment of SaaS alternatives. Thus, the

disruptive impact of SaaS on application services

is minor. A larger opportunity is also presented

by establishing a presence in the high-growth

market for application services brought by

SaaS with revenue opportunities in consulting,

architecture and design.

Recommendations:

Application services solution managers should:

• Invest in SaaS solutions and develop practices

for selected SaaS packages that are in demand

by your targeted market segments. SaaS

service growth of close to 20% represents an

opportunity to establish a competitive position

within a high-growth market.

• Invest and expand your ability to sell directlyto the business and bring solutions directly to

business buyers. As business buyers continue

to drive and participate in SaaS deployments,

relationships with business buyers are needed

not only for successful services, but also to

differentiate from a business development

perspective.

• Do not be overly concerned with the disruptive

impact of SaaS on traditional application

services due to the small size of the SaaS

market and massive size of traditional

application services. Continue to focus on

targeted segments and traditional application

services.

Strategic Planning Assumption: By 2016,

application services providers will have replaced

20% of their internal application management

staff with crowdsourcing and community

sourcing.

Analysis by: Gilbert van der Heiden

Key Findings:

• Demand for cost reductions continues and

drives service providers to reduce local staff

in favor of offshore delivery capabilities. The

expansion rate of global delivery capabilities,

however, does not match the global demand

in platform and domain experience andexpertise.

• Demand for application services capabilities

in the nexus areas (cloud, social, mobile,

big data), including the integration of such

developments with the existing application

and services portfolio, will grow. Service

providers are investing in building and

expanding such capabilities.

• Capabilities are searched for globally, through

traditional methods, as well as new methods

such as social media, but more and morethrough professionalized crowdsourcing1 and

community sourcing.2 These communities

reduce the traditional method to hire

individuals as the required capabilities can be

accessed online at lower cost.

• Crowdsourcing and community sourcing are

sustainable because of the abundance and

continued growth of supply of resources and

the gamified and very granular comparability

of resources, in combination with the fact that

access is global, as is delivery.



14


The large potential of skilled individuals that

can be accessed through professional crowd

and community sourcing agencies3 (effectively

staffing search engines) and the granularityof experience and rating of individuals – all

directly accessible online – allows for detailed

comparisons of individuals. The continued

economic pressure will ensure a continuous

growth of contractors that can be accessed.

New graduates may potentially directly move

to crowdsourcing to remain independent from

employers. This is a global development resulting

in a global pool of effectively local capabilities as

well as global delivery capabilities.

Service providers will use crowdsourcing and

community sourcing to create distinct application

management communities, broken down into

development and maintenance communities.

Such communities will not be visible directly to

the clients of the providers, but will be part of

the global delivery organization. Communities

will consist of individuals with validated skills

who the service provider will allocate work

on a regular basis to keep them involved and

committed.

Application development community: A service

provider would use crowdsourcing to find theright skills the first time for an application

development exercise to determine who could

become part of a development community and

act as an application development community

for the development platforms the provider

is seeking skills for. The term “community”

fits better as it is about creating a controlled

environment and access to known skills with

a level of continuity. Crowdsourcing will

continue to be a means to resolve attrition in

the communities and continuously evolve the

community’s capabilities, and the gamification

part will continue to challenge the community

members to excel. Gamification embeds

challenges and prices and competition in the

crowd and community sourcing. The detailed

level of selection is the same level of awarding

prices/benefits. If individuals want to be

selected, they have to score. If they want to

increase their rate, they have to win. If they want

to make real money, they continuously need to

win. Awards will represent certifications/proof

of capability. Gamification, hence, will challenge

community members to excel, no different from

any other competitive market that effectivelyalso represents competition.

The service provider will control requirements,

design and integration and hand out only coding

and unit testing to the community initially. With

expanding experience, service providers will hand

out requirements to the community to determine

the most suitable design as well.

Application maintenance community: Such a

community approach will also be deployed for

ticket-based incident resolution of software

by independent software vendors (ISVs,)

especially when software is SOA-based and

hence modularized and built on reusable assets.

Reusable assets can be maintained through

such an application maintenance community.

Let us not underestimate: (a) the expanding

broadband capabilities; (b) the increased pressure

on allowing home-based work scenarios; and (c)

the growing videoconferencing capabilities at

desktop level. This will further grow the virtual

collaboration potential, decreasing the need

for on-site staff. So, even maintenance service

providers can build communities with selected

individuals with defined and restricted access to

service platforms.

Service providers can’t fully depend on

communities, for example, for highly secure

and controlled application environments, nor

can communities replace all internal staff as

there will still be a need for on-site capabilities;for example, on average 40% on-site for SAP

projects4 to 50% commonly for agile projects

and between 25% to 40% on-site for application

maintenance. Also, providers will maintain their

own senior developers and administrators to

ensure continuity of industry and technology

domain expertise and for continuity of client

knowledge and relationships. Service providers,

however, will increase dependency on

communities for the simple reason that cost

remains a core driver, and communities have

the potential to ensure a continuous access toskills while not having the bench or employment

issues. Although 20% of application services staff

is a huge number of individuals, we predict that

the market is ready for this change, and so, too,

are providers and developers.

Recommendations:

End users considering application services

providers:

• Verify their approach to crowdsourcing

and community sourcing: Initially discussdevelopment communities for agile projects

given the need to break down the work



15

in smaller pieces that can be allocated

to individuals. When they have built up

experience, end users should challenge

providers on the broader capabilities.

• Alternatively move directly into communitiesthemselves for business analysts, application

architects, test managers and testers, coders

and software and automation developers.

Application services providers:

• For those not considering crowd and

community sourcing, focus on niche

capabilities and build a distinct business value

story that allows for higher rates, or expand

investments in automation.

Strategic Planning Assumption: By 2016, themost profitable application services providers will

replace at least 20% of their labor-driven effort

with solutions architected from IP assets.

Analysis by: Allie Young, Frances Karamouzis

and Sandra Notardonato

Key Findings:

• The increased focus of providers in

developing/maintaining reusable IP assets

is evidence of a future in which cloud-based platform development, assembly-

based software strategies, IP leverage and

configurable solutions will be an option – if

not the norm – for some buyer solutions.

It also defines the convergence of software

and services shaping application services

providers’ strategy in the future.

• The convergence of software and IT services is

transforming the application services market,

redefining choice and benefits (for buyers) and

introducing new competitive dynamics and

strategies (for application services providers).

• Benefits to the buyer include faster time to

market, cost-effectiveness, and/or greater

efficiencies. From a provider perspective, asset-

based solutions will be a means of combating

margin head winds, particularly for offshore IT

services providers.

• Application services providers report accelerating

attention to the creation and maintenance of

their own IP software assets, specifically for

use in repeatable horizontal expertise (likesecurity) and in vertical offers. They are also

focusing on profitable growth that is premised

on repeatability of asset use (nonlinear growth)

versus growth tied to labor.


In this prediction, we implicitly address a

dramatic change in how buyers are eager to

consume aggregated or bundled services and

software functionality, as well as the challengesof application services providers to manage

more profitable revenue growth in a changing

marketplace. Buyers have recognized the

liability of custom solutions (high development

and ongoing maintenance costs, as well as

lengthy development cycles). Instead, buyers

favor packaged solutions (SAP or Oracle, as

an example) and accept prebuilt multitenant

software (SaaS options versus custom solutions)

for certain solutions. Buyers’ focus on speed

to market, business impact of their enterprise

applications, and efficiency of their application

portfolios underlie these new preferences.

Application services providers, on the other

hand, have had to adjust their strategies. Rather

than revenue growth and profit from labor-based

custom software development approaches for

one client, leading providers are creating and

maintaining their software as assets, to be

leveraged across multiple clients. This strategy

for providers to catalog and preserve their IP is

not new; what is new is the change in market

conditions where buyers’ expectations for IT’s

speed, quality, and cost-efficiencies, and theacceptance of industrialized approaches make

new approaches possible. Providers recognize

that their ability to leverage their software as IP

assets as reusable components in configurable

solutions is an alternative to revenue growth

that in the past was tied to a unit of labor,

and this unit of labor had a limit to utilization

potential. This new approach, called nonlinear

revenue growth, also has the potential for

greater profitability – build once, use many

times. Certain principles apply in this new

business model that supports application servicesproviders’ profitability: reuse and “harvesting” of

IP (as a software asset); access to leverageable

IP; exploit IP in cross-vertical or micro-vertical

solutions; and industrialized, focused labor model

(factory) that reduces labor cost of solutions.

The impact of the convergence of software and

services is seen in the outcome of fundamental

shifts:

• Less customization: With no letup in IT’s focus

to contain/reduce IT costs, organizations

have become selective in their decisionsto customize applications; Gartner’s user

data shows a clear decline the percentage

of custom applications to favor packaged

or SaaS. This suggests a negative impact on



16

revenue streams for providers in the long

term, because slowed growth from custom

application development/maintenance has

historically been a significant revenue source.

• Cloud-based options: Changing technologytrends that favor greater industrialization

and prebuilt solutions have resulted in

new options for organizations to access

applications functionality (SaaS and business

process as a service [BpaaS]) or build

functionality platform as a service (PaaS);

enterprise buyers even have choice to bypass

traditional application services providers

relationships completely or to adopt a hybrid

approach – which of course negatively

impacts application services providers’ growth

options. (Yet, SaaS is not the answer for all

enterprise applications needs.)

• Compete on labor pricing: The global delivery

model provided competitive advantage to

providers to lower the cost of labor, but the

benefits proved finite, because rates can

go only so low and still deliver the quality

needed. “Low cost” labor options have

become the norm and undifferentiating.

Therefore, the future potential to capitalize

on knowledge workers is to create “factory

settings” where IP creation is directed toward

building software assets for multiclient use(leveraged investment in nonlinear models).

• Business impact from provider relationships:

The increasing influence of the business

buyer to find the IT solutions that support

business growth has meant new priorities in

service provider relationships for enterprise

applications – use of new technology trends

(mobile, social, cloud), vertical relevance,

speed, agility, quality and cost-effectiveness.

Providers with proven assets have the

competitive advantage of “mining” their IP

assets for application in new vertical offerings.

The impact of the convergence of software

and services to create reusable IP assets

represents the potential for radical change in

providers’ business models: Instead of growth

historically constrained by labor and utilization,

we will see increased operating leverage.

The amount of leverage is dependent upon

the strategy. Different models are emerging:

licensing of proprietary software (sell a license

and maintenance to customer); leveraging

frameworks, technology-based tools andmethodologies (to use as part of implementation

for example); platform-based models (the vendor

creates and owns the platform, multitenant, pay

per usage, royalty fee).

To date, companies are taking on different

strategies around these new models, but the

focus is on decoupling the inherent connection

between revenue and head count. For example,

Infosys has an explicit growth strategy to drive

a specific amount of revenue from products,platforms and solutions; it is building out vertical-

and domain-specific platforms, and looking

to acquire IP-based solutions as well. Others,

such as Accenture, have introduced proprietary

software solutions that they license to buyers

– some of Accenture’s software has been built

internally and some has been acquired; it has

even formalized a separate software arm in

its organization. IBM GBS has a sophisticated

and extensive commitment and investment

to building, maintaining and leveraging its

software assets in sophisticated solutions;

how it takes these assets to market in both

horizontal and vertical solutions is a top priority

for IBM. Others, such as CSC, are dramatically

reducing customization as part of their portfolio

of offerings and introducing more standardized,

automated application solutions.

For providers, the business model is clear: If

quality IP assets can be developed (or acquired)

and maintained, and if the levels of IP asset

reuse can increase, the greater the profitability

they will garner. Application services providers

have indicated that asset reuse can increaseprofitability on a contract in the range of 15% to

50%. While much of this profit is being reinvested

in the business (creation of new assets, as well

as maintaining and refreshing current assets),

longer term – as the time frame of this prediction

postulates – we believe that the most profitable

application services providers will replace at least

20% of their labor-driven effort with solutions

architected from IP assets. Further, asset-based

solutions will be a means of combating margin

head winds, including pricing pressure, currency

appreciation and wage inflation, particularly forthe offshore IT services providers. We see this

strategy as providing a runway for profitability

improvement in the dramatically changing

application services business.

Recommendations:

• Application services providers: Immediately

evaluate how the convergence of software and

services opens potential new opportunities for

profitable growth; adopt a long-term strategy for

building/maintaining software assets, premised

on a nonlinear model to leverage these assets,and invest accordingly. Target specific solution

areas where you have established client base

and credibility, and identify an opportunity for

differentiation and innovation.



17

• Buyers of business solutions: Evaluate

current and prospective application services

providers’ focus on innovation and software

asset strategies. Providers that detail their

vision and commitment to a nonlinear

business model are likely to be the long-term contenders; such a strategy is also an

indication of investment. Application services

providers with formal software asset strategies

for reuse should be considered for those

processes where customization is not required

or where existing leading-edge solutions

suffice.

Strategic Planning Assumption: By 2016, more

than 50% of application modernization efforts

will address business demand for enhanced

functionality to legacy applications – not cost

reduction.

Analysis by: Allie Young, Patrick Sullivan

Key Findings:

• In the past five years (post-2008-

through-2009 recession), the primary drivers

of legacy application modernization were

focused largely on IT-led initiatives to

improve maintainability/usability of legacy

applications and to react to cost take-out

requirements, while preserving the enterpriseinvestment in core applications.

• In the coming five years, the intentions of

legacy application modernization efforts will

shift conclusively from an IT-centric cost

view to business enablement through new

technologies (such as analytics, mobility and

SaaS).

• Legacy application modernizations drivers

will accentuate gaining functionality from

exploiting new delivery models (like SaaS

and cloud-based platforms), pace-layering

best practices, integrated IT-business/

process approaches, real-time analytics and

new technologies to access customers and

to work in new ways (the Nexus of Forces –

information, mobility, cloud, social).5


Legacy application modernization has been a

reality for IT organizations for more than two

decades, occurring incrementally in various

forms: upgrade legacy applications (newfunctionality); replace legacy applications

(with packaged software or SaaS); replatform

applications (migration to new hardware, new

operating environment or cloud infrastructure);

and enhance functional but not replace

applications (user interfaces, new functionality,

supplemental modules).6

The 2008-through-2009 global economic

recession had a profound effect on modernizationefforts – IT priorities to reduce costs became

mandatory. Five years later, global economic

uncertainties remain, but the widespread

adoption of Internet technology and user/mobile

devices has fundamentally changed enterprise

computing. IT had to respond quickly to the

technology changes at multiple levels – the

infrastructure, applications and business process

levels. Core enterprise applications were either

enabling or inhibiting the dramatic change – but

in the vast majority of cases, they were inhibiting

change.

Gartner predicts that the resulting shift in legacy

application modernization will be evident in two

primary ways:

• Business outcomes drive investments:

Although IT involvement (architecture

strategy, compliance, security, integration)

is essential, the business involvement sets

the new goals for modernization, involving

business users and process experts.

• Differentiation through innovation becomesmandatory: Although efficiencies and cost

take-out remain critical, they become

an outcome, as opposed to the focus.

Modernization must harness ways that

new functionality can be brought into the

organization and how enterprise applications

support new functionality.

To depict the forthcoming change, Gartner

provides estimates on the focus of legacy

application modernization projects where

application services providers are engaged by

enterprise clients in 2010 and by 2016 (see

Figure 2).

This shift in focus that we predict means that

modernization efforts will rely on much higher

levels of innovation and iterative development to

enable new business functionality of emerging

technologies – in fact, many modernization

efforts will require skill sets that are lacking

in IT departments (such as business strategy,

architecture, analytics, social and mobility). Other

skills will be developed in the course of applying

new technologies in innovative ways. Automationthrough tools and frameworks, of course, plays

an increasingly important role in the success

of modernization; development toolsets and

products have improved considerably over the



18

years, enabling greater predictability and higher

success rates of modernization. Furthermore,

the close integration of experts from application

services providers and the client organization (the

IP knowledge of industry and process) become

tantamount to successful modernization of

legacy systems. Finally, success of modernization

that focuses on new functionality will be more

predictable when the following are in place:

• Business-driven needs and a holistic

enterprise application portfolio approach

(considers the entirety of the application

portfolio and architecture)

• Full life cycle and pace-layering approach to

the timing of modernization of the applicationportfolio (systems of record, systems of

differentiation and systems of innovation)7

• Prioritization of user adoption – not just user

acceptance – of the new systems as part of a

complete governance process

Recommendations:

For application services providers:

• Refresh your legacy application modernization

strategy and offerings to incorporate newtechnologies in Gartner’s Nexus of Forces

(cloud, social, mobile, big data) as well as

advisory services, application implementation

and management services.

• Update sales/marketing messaging from user

flexibility, maintainability and cost take-out to

articulate the business value propositions that

will drive clients’ business (speed to market,client access, differentiation/innovation,

agility, responsiveness and process alignment

gained from more responsive and integrated

enterprise applications that support growth

and ability to reach/respond to the customer).

• Reconfigure application modernization teams

to include cross-organization experts, from

leading-edge application development teams,

technologists, vertical experts, process experts

and architects.

Enterprise IT and business decision makers:

• Approach legacy application migration

projects as an evolutionary journey, following

portfolio rationalization efforts emphasizing

the holistic, strategic view that closely

links IT and the business. Ensure that this

is embedded into the organization’s IT

governance processes.

• Establish a strategic plan and road map

that identifies near-, mid-, and longer-term

functionality requirements for the enterprise

application portfolio and includes pace-

layering concepts.

FIGURE 2 Gartner Estimates of Primary Focus of Legacy Application Modernization Projects

Note: Gartner percentage estimates only.

Source: Gartner (November 2012)

10

5

30

20

40

20

20

55

0 10 20 30 40 50 60 70 80 90 100

2010 (estimate)s

2016 (estimates)

Percent

Replacement/retirement Replatform Upgrade of legacy systems Enhanced functionality



19

• Evaluate and select application services

providers that bring leading-edge technology

experience (Nexus of Forces) and a business-

led approach to modernization; these

modernization projects have risk and must run

in parallel with ongoing systems functionalityto cutover.

• Change your governance process to involve

both applications, IT infrastructure and

business users to identify specific areas where

modernization is needed; convene annual or

as-needed meetings of these individuals to

refresh modernization strategies.

A Look BackIn response to your requests, we are taking a look

back at some key predictions from previous years.

We have intentionally selected predictions from

opposite ends of the scale – one where we were

wholly or largely on target, as well as one we

missed.

On Target: 2009 Prediction – By 2012, of

Brazil Russia, India and China (BRIC) countries,

China will be the leading India-alternative

offshore location for highly scalable resources,

followed by Brazil; Russia, being viewed as

offering only niche capabilities, will fall behind.

This prediction has been largely accurate interms of the volume of organizations that use

these countries for their offshore and nearshore

services. In a Gartner’s IT and Business Processes

Sourcing Survey of 419 organizations that took

place in May 2012, the following data was

gathered from respondents:

• Of organizations using the Asia/Pacific region

for offshore and nearshore services, 48.5% are

using India, and 45.9% are using China.

• Organizations using the Latin American region

told us that 46.8% are using Brazil for offshore

and nearshore services.

• However, for respondents using the Europe,

Middle East and Africa region, only 19.2%

are using Russia for offshore and nearshore

services (more than 6 percentage points

behind Poland).

This data does not point to the total revenue

that is being generated by each country; for

example, only 2.6% more respondents in the

Gartner survey are using India over China, butthe overall volume of revenue generated by India

is considerably higher in deal size and volume

than China. However, it does reflect the growing

importance of China as an offshore and nearshore

location for application services in particular. A

number of Chinese “pure play” offshore service

company have recently reached a critical mass

of 10,000 to 20,000 employees, and the pending

merger of VanceInfo and HiSoft will create the

first China pure play with more than 30,000employees. A significant number of multinational

service providers are also now located there.

As pointed out in the original prediction, the

geopolitical and economic environment in Russia,

combined with high costs in the major business

centers of Moscow and St. Petersburg, has

continued to undermine the efforts of some very

capable service providers from the country. These

factors have also dissuaded many multinational

service providers from adding Russia as a key

geographic hub within their global delivery

models. The result is that Russia has struggled

to keep pace with China’s and Brazil’s efforts to

close the gap on India’s dominance in offshore

service delivery. Brazil is still positioned well

as a hub within Latin America, and many

multinational service providers are located there

to service Latin America and North America.

However, its progress is slower than anticipated,

with few Brazilian providers offering offshore and

nearshore services from large delivery centers.

Evidence

1According to Wikipedia, crowdsourcing is

a “neologistic compound of ‘crowd’ and

‘outsourcing’ for the act of outsourcing tasks,

traditionally performed by an employee or

contractor, to a large group of people or

community (a crowd), through an open call.”

2There is no official definition of community

source, nor has Gartner developed one yet. A

“good enough” definition (and one of the earliest)

was provided by the Sakai project (see www.

sakaiproject.org): Community source describes

a model for the purposeful coordination of workin a community. It is based on many of the

principles of open-source development efforts,

but community source efforts rely more explicitly

on defined roles, responsibilities and funded

commitments by community members than

some open-source development models.

3Example agencies are: Elance (www.elance.com)

– 1.7 million contractors offer their services and

growing. It provides online reports and graphs

with rates per country; TopCoder (www.topcoder.

com) – 420,000 contractors and growing;

Guru (www.guru.com) – more than 1 million

contractors; Odesk (www.odesk.com) it separate

itself as it refers to businesses using Odesk, being

more than 350,000. You can select contractors to



20

a very granular level; Vworker (www.vworker.com)

– more than 380,000 contractors. It differentiates

itself by offering a sort of project base. That is,

it allows you to select multiple individuals to

assign them to a single job; uTest (www.utest.

com) – more than 50,000. Year over year it adds10,000 testers; the more development moves

to Web and cloud, the more can be tested by

crowdsourcing.

4See “Lessons From 169 SAP Implementations

Using Service Providers in North America.” This is

a nice overview of end-user experience, including

the notice that 60% of effort, on average is done

onshore. With Indian providers it is just 30%.

5Gartner’s Nexus of Forces describes the

convergence of four elements (social, mobile,

cloud services and information) which will

demand a totally new approach to all aspects of

information management.

6“Hype Cycle for Application Services, 2012.”

Gartner defines application modernization as an

initiative that “addresses the migration of legacy

to new applications or platforms, including the

integration of new functionality to provide the

latest functions to the business. Modernization

options include replatforming, rehosting,

recoding, rearchitecting, re-engineering,

interoperability, replacement and retirement, aswell as changes to the application architecture

to clarify which option should be selected.”

In Wikipedia: The complexity of modernizing

legacy applications is noted in Wikipedia: “A

legacy code is any application based on older

technologies and hardware, such as mainframes,

that continues to provide core services to an

organization. Legacy applications are frequently

large and difficult to modify, and scrapping or

replacing them often means re-engineering

an organization’s business processes as well.

However, more applications that were written

in so-called modern languages like java are

becoming legacy. Whereas ‘legacy’ languages

such as COBOL are top on the list for what

would be considered legacy, newer languages

can be just as monolithic, hard to modify, and

thus, be candidates of modernization projects.”

Also: “Challenges in Legacy Modernization:

Typical legacy systems have been in existence

for more than two decades. Migrating is

fraught with challenges: Organizational change

management. Coexistence of legacy and new

systems. As each increment is completed,

the percentage of legacy code decreases.

Eventually, the system is completely modernized.

A migration strategy must ensure that the

system remains fully functional during the

modernization effort.” (see Wikipedia: SoftwareModernization; http://en.wikipedia.org/wiki/

Software_modernization#Challenges_in_Legacy_

Modernization)

7Refer to “How to Use Pace Layering to Develop

a Modern Application Strategy.” In this report,

Gartner defines the three layers of applications:

• Systems of record – These established,

packaged applications or legacy homegrown

systems support core transaction processing

and manage the organization’s critical master

data. The rate of change is low, because the

processes are well-established, common

to most organizations, and often subject to

regulations or recommended practices

• Systems of differentiation – These

applications enable unique company

processes or industry-specific capabilities.

They have a medium life cycle (one to three

years) but need to be reconfigured frequently

to accommodate changing business practices

or customer requirements

• Systems of innovation – These new

applications are built on an ad hoc basis to

address emerging business requirements

or opportunities. They are typically short

life cycle projects (up to 12 months) that

use departmental or outside resources

and consumer-grade technologies. Also

refer to “Concepts of Pace Layering in

System Design.” Pace layering is a concept

that can be applied to various activities,

system designs, and strategic relationships

within and between organizations. As an

application portfolio activity, pace layering

classifies applications as systems of record,

differentiations, or innovations based on their

rates of change and life cycles. Within system

design, pace layering relates to separation of

concerns, logical and physical architecture

techniques, service modeling, and other

practices.

Source: Gartner Predicts, G00230299, Allie Young, Patrick Sullivan,

Susan Tan, Gilbert van der Heiden, Frances Karamouzis,

Sandra Notardonato, Ian Marriott, 21 November 2012

http://en.wikipedia.org/wiki/Software_modernization#Challenges_in_Legacy_Modernization








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