Smart Sourcing: Application Management Services

In the first blog post on the topic ‘From outsourcing to smart sourcing’, I dealt with the topic of smart sourcing in the context of the sourcing strategy and the fact that companies today are better at implementing so-called ‘multi-vendor strategies’ or ‘best-of-breed sourcing models’.

Smart sourcing is the strategic implementation of the defined sourcing mix. This applies both to the IT sourcing of IT projects and to the IT sourcing of IT services to be provided on an ongoing basis.

In this blog post, I will deal with the smart sourcing of application management services (AMS).

Acronyms, acronyms, acronyms

Today, a wide range of service compositions and productised AMS services can be found on the market. The following table shows a selection of common acronyms and names for IT services related to applications.

When looking at this overview, it becomes clear that an acronym can also represent different service contexts. Therefore, when exchanging information on this topic, it is recommended to clearly define the scope right at the beginning.

In the following, I will use the approach of the AMS for Application Management Services.

Application Management Services (AMS)

Application Management Services (AMS) are IT services that ensure the smooth operation of software applications in a company, either in whole or in part. This ranges from daily maintenance (application operations) to updates and further development.

Typical AMS services and functions include:

• Installation and configuration: The software is installed and configured to fit into the existing IT landscape and to comply with the specified guidelines. These include technical specifications, security or compliance guidelines.
• Operation and maintenance: tThe applications are monitored and maintained as needed.
• Incident processing and troubleshooting: If problems arise, they are resolved as quickly as possible or reported to the next problem-solving instance.
• Monitoring and reporting: Monitoring system performance and creating reports on the availability and use of the applications.
• Capacity management: Provision of the resources needed for current and future requirements.
• Updates and upgrades: Ongoing checking of the software to ensure it is up to date and updates as agreed. An automatic update can be agreed for minor patches or fixes, for example, or a change management process can be initiated.
• Further development and maintenance: The applications are adapted to new requirements and new functions are added.
• Test management: As part of the software development process, the aim of test management is to ensure the quality of the software. It includes the planning, execution and evaluation of tests.
• Security management: Protecting applications from cyber attacks and data loss.

Documentation: Provision and ongoing maintenance of application documentation

Within AMS services, two common subgroups have been established in which AMS service content is summarised:

• Application Development and Maintenance (ADM): This is particularly concerned with the further development and maintenance of the application. Specifically, this means that adjustments are made to the source code of the application.
• Application Operations (AO): The focus here is on the operation and maintenance of the application. The applications are monitored according to defined parameters and KPIs and maintained as needed. This may also include installing updates, patches and fixes, but there is no active development of the source code.

It should be noted that the core service elements listed above, such as incident processing, documentation, reporting, ensuring and complying with security guidelines, etc., are taken into account when providing the service in order to ensure a seamless service chain.

Typical reasons for choosing application management services (AMS)

Many companies today have complex application landscapes that have grown over many years, are heterogeneous and sometimes even ‘hysterical’. They often contain a mix of custom developments, standard applications, SaaS applications, etc., often even with different versions, patch levels, etc.

The challenge then often lies in the fact that only limited documentation is available for applications and application landscapes that have grown over time, and the necessary knowledge is in the heads of the employees – also known as ‘head monopolies’. This poses a considerable risk for companies to ensure operational security and business continuity. More and more companies are therefore considering outsourcing their application landscape in whole or in part to an IT service provider specialising in AMS.

Other reasons for considering the use of AMS service providers are:

• Greater flexibility: AMS providers can respond quickly to changing requirements and introduce new technologies.
• Focus on the core business: By outsourcing software management, companies can concentrate on their core competencies.
• Scalability: As a company grows or shrinks, an AMS provider can adjust services accordingly.
• Risk minimisation: AMS providers often have extensive experience and can minimise risks associated with software use.
• Cost savings: By pooling resources and exploiting economies of scale, AMS providers can often work more cost-effectively than internal IT departments.
• Adherence to compliance and regulatory requirements: AMS providers can help companies to comply with legal regulations and compliance requirements.

Smart Sourcing of Application Management Services (AMS)

Here, too, a well-thought-out sourcing strategy is essential to determine the right sourcing mix. The question arises as to whether the AMS as a whole should be outsourced to one service provider (single sourcing) or to several service providers (multi-sourcing), or whether it would be better to selectively assign applications to selected service providers (hybrid sourcing). Hybrid sourcing in AMS represents a combination of in-house services and external service providers.

• Entire application landscape: The complete outsourcing of AMS is a strategic decision that must be carefully considered. The advantages are obvious, but the risks should not be underestimated. Two key aspects are: loss of control and know-how, which I will discuss later.
• Selective AMS assignment: Selective assignment of AMS is an alternative to the complete assignment of the application landscape. In this case, not all applications are outsourced, but only certain areas or applications. This also ensures control over important applications.
• Use of SaaS (Software-as-a-Service): The use of SaaS models is another interesting alternative to AMS. Here, software applications are provided in the form of services and can be used on the basis of a usage fee. They are usually provided via the internet. Maintenance and support are provided by the service provider.

Scope of services

The specification of the scope of services is of central importance. It defines which tasks and responsibilities are expected of the AMS service provider and which obligations and services are to be assumed by the company itself. It is important to define clear interfaces in order to avoid misunderstandings and gaps in responsibility.

The following figure shows how applications can be selectively outsourced. In this example, one application (A1) from the group IT and one application (A2) from company division 3 are transferred to an AMS service provider.

While both applications are receiving services from the application operations of the AMS service provider, the service module ADM is also receiving services from the service provider for application ‘A1’.

Smart sourcing in AMS makes sense when companies decide in their sourcing mix to no longer operate parts of their application landscape in-house (‘make’), but instead to outsource them to specialised service providers (‘source’). To avoid the risk of losing control and expertise, companies can use selective sourcing of AMS services.

What is the difference between this and traditional AMS?

Traditional AMS tends to be more of an operational approach that focuses on the stable operation of applications. By contrast, smart sourcing in AMS is a strategic approach that uses flexible and modular methods to provide targeted support for the individual needs of the company, thus enabling an optimal balance between costs, control and innovation.

In concrete terms, this means that companies:

• More control: companies retain more control over their IT landscape because they can decide for themselves which services they outsource and which they provide internally.
• Greater agility: companies can respond more quickly to changes and introduce new technologies.
• Cost efficiency: companies can save costs by comparing and selecting service providers in a targeted way in the ‘make’ or ‘buy’ process.

Conclusion

In this blog post, I have dealt intensively with the concept of smart sourcing in the area of application management services (AMS). In contrast to traditional AMS approaches, which are often rigid and not very flexible, smart sourcing offers companies the opportunity to manage their IT landscape in a targeted and efficient manner.

By flexibly combining internal and external resources and selecting service providers carefully, companies can

• gain more control over their IT landscape,
• responding to changes more quickly and
• reducing costs.

Smart Sourcing enables companies to adapt their IT strategy to their individual needs and thus achieve competitive advantages.

In the next blog post, I will discuss important aspects that should be considered when outsourcing AMS services in order to minimise risks and reap the benefits.

Would you like to learn more about exciting topics from the adesso world? Then take a look at our previously published blog posts.

Also interesting:

• From Outsourcing to Smart Sourcing