T-Systems: a major Application Management player in Europe
Best Practice interviews analyst Klaus Holzhauser, Director of PAC
How can businesses benefit from Application Management (AM)?
First of all, companies want to drive down costs. AM helps them achieve this goal through improved delivery models, nearshoring and offshoring, and fixedprice elements. Furthermore, outsourcing to a specialist provider results in more efficiency and better quality. This is evident, for example, in the professionalization of maintenance, development, and compliance activities. And last but not least, outsourcing usually brings about an improvement in the quality of documentation.
First of all, companies want to drive down costs. AM helps them achieve this goal through improved delivery models, nearshoring and offshoring, and fixedprice elements. Furthermore, outsourcing to a specialist provider results in more efficiency and better quality. This is evident, for example, in the professionalization of maintenance, development, and compliance activities. And last but not least, outsourcing usually brings about an improvement in the quality of documentation.
And what about the disadvantages? Why are some companies hesitant to deploy AM?
In the early days of AM, some companies feared losing in-house expertise, or becoming overly dependent on a single provider. However, experience has shown that these fears are unfounded, and they have become less acute. The feasibility of bringing Application Management back in-house, or transferring it to another provider, are no longer considered to be critical points. However, it is a good idea for companies not to outsource their entire expertise. Overall control and governance must remain in-house, including key users. And businesses must keep in mind that implementing AM with the goal of simply cutting costs will not bring about satisfactory results. AM must also focus on improving processes.
In the early days of AM, some companies feared losing in-house expertise, or becoming overly dependent on a single provider. However, experience has shown that these fears are unfounded, and they have become less acute. The feasibility of bringing Application Management back in-house, or transferring it to another provider, are no longer considered to be critical points. However, it is a good idea for companies not to outsource their entire expertise. Overall control and governance must remain in-house, including key users. And businesses must keep in mind that implementing AM with the goal of simply cutting costs will not bring about satisfactory results. AM must also focus on improving processes.
Are companies outsourcing their entire software landscapes, or are they focusing on individual applications?
Transferring the entire application landscape and infrastructure to an external provider is no longer a very common practice. Companies are becoming more selective, and are outsourcing individual applications. In the German-speaking world, AM is frequently used for SAP. However its deployment for Product Lifecycle Management (PLM) is also set to increase.
Transferring the entire application landscape and infrastructure to an external provider is no longer a very common practice. Companies are becoming more selective, and are outsourcing individual applications. In the German-speaking world, AM is frequently used for SAP. However its deployment for Product Lifecycle Management (PLM) is also set to increase.
How has the AM market developed in Germany and around the world?
The German AM market is still relatively young. It has expanded robustly in the SAP space, though there has been a halt in growth in 2008/09 due to the economic crisis: existing business has experienced cost pressure, and some customers (KarstadtQuelle, for example) have encountered financial difficulties. However, the number of AM contracts valued between 5 and 30 million euros is on the rise again. AM has a long-standing tradition in countries such as the USA, France and the UK. In these countries, outsourcing company-specific, custom-tailored software is a lot more common than in Germany.
The German AM market is still relatively young. It has expanded robustly in the SAP space, though there has been a halt in growth in 2008/09 due to the economic crisis: existing business has experienced cost pressure, and some customers (KarstadtQuelle, for example) have encountered financial difficulties. However, the number of AM contracts valued between 5 and 30 million euros is on the rise again. AM has a long-standing tradition in countries such as the USA, France and the UK. In these countries, outsourcing company-specific, custom-tailored software is a lot more common than in Germany.
How has the AM market developed in Germany and around the world?
The German AM market is still relatively young. It has expanded robustly in the SAP space, though there has been a halt in growth in 2008/09 due to the economic crisis: existing business has experienced cost pressure, and some customers (KarstadtQuelle, for example) have encountered financial difficulties. However, the number of AM contracts valued between 5 and 30 million euros is on the rise again. AM has a long-standing tradition in countries such as the USA, France and the UK. In these countries, outsourcing company-specific, custom-tailored software is a lot more common than in Germany.
The German AM market is still relatively young. It has expanded robustly in the SAP space, though there has been a halt in growth in 2008/09 due to the economic crisis: existing business has experienced cost pressure, and some customers (KarstadtQuelle, for example) have encountered financial difficulties. However, the number of AM contracts valued between 5 and 30 million euros is on the rise again. AM has a long-standing tradition in countries such as the USA, France and the UK. In these countries, outsourcing company-specific, custom-tailored software is a lot more common than in Germany.
In view of the financial and economic crisis – which is not over yet – where do you think AM is headed?
As I mentioned, growth slowed over the last two years. However, the market will pick up in 2010. In 2013, the global AM market will have a compound annual growth rate of around 7 percent, and will increase to around 60 billion euros (with standalone applications accounting for around 50 percent of this figure). For SAP-related AM, we predict a compound annual growth rate of 8 percent, and a market volume of around 11 billion euros in 2013.
As I mentioned, growth slowed over the last two years. However, the market will pick up in 2010. In 2013, the global AM market will have a compound annual growth rate of around 7 percent, and will increase to around 60 billion euros (with standalone applications accounting for around 50 percent of this figure). For SAP-related AM, we predict a compound annual growth rate of 8 percent, and a market volume of around 11 billion euros in 2013.
