App Maintenance Outsourcing Feels the SaaS Pinch

As the applications portfolio of an enterprise grows, the need to maintain those systems increases and can easily become an all-consuming burden on the IT organization. In response, many IT organizations see outsourcing as a way focus their efforts on deploying new systems instead of maintaining old ones. The move to SaaS is also contributing to this trend.

However, as shown in Figure 2 from the full report, Application Maintenance Outsourcing Trends and Customer Experience, the percentage of organizations engaging in application maintenance outsourcing declined in 2016. Among IT organizations that outsource, about 43% outsourced some maintenance application work in 2016. Before that, the percentage the past four years had stabilized to between 53%-55%.

Application maintenance can include monitoring and managing a software application on a day-to-day operational basis. The service provider not only maintains the program code but also takes responsibility for monitoring the application’s performance; analyzing how effectively it can detect problems before they emerge; and responding to production problems. These are important responsibilities, especially for mission-critical applications. Outsourcing application maintenance to a third party can be one way to lower, or at least stabilize, the cost of maintaining applications, as well as improving service. However, our data reveals that the market for these services appears to have only low growth prospects, and the cost and service benefits for customers, while positive, are not overwhelming.

“Software-as-a-service providers are also changing the application maintenance workload, as some of the duties are shifted to the provider,” said Tom Dunlap, research director for Computer Economics, an IT research firm based in Irvine, Calif. “This may be one reason we are seeing a decline in the outsourcing of this function. Many IT leaders are seeing that a SaaS approach can reduce the cost and bother of maintaining the application portfolio.”

Still, we’re a long way from eliminating application maintenance from the IT department. Even with SaaS, app maintenance isn’t completely removed from the equation. SaaS needs to be customized for business-specific processes, monitored to make sure it keeps up with the business needs, and resources need to be made available to perform administrative activities.

To assist IT executives, the full report examines application maintenance outsourcing adoption and customer experience. We report the percentage of organizations outsourcing application maintenance (frequency), the average amount of work outsourced (level), and the change in the amount of work being outsourced (trend). We also assess the customer experience by showing how many IT organizations successfully lower costs or improve service by outsourcing application maintenance.

This Research Byte is a brief overview of our report on this subject, Application Maintenance Outsourcing Trends and Customer Experience. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).