Application Maintenance Outsourcing on the Decline

February, 2018

The need to maintain enterprise applications is more critical than ever. The security risks of poorly maintained systems, as well as the fast-paced change of business processes, can strain an IT organization. To handle the application maintenance burden, many IT organizations see outsourcing as a way to get the job done.

However, the percentage of IT organizations outsourcing at least some of their application maintenance chores declined in 2017. As seen in Figure 2 from our full report, Application Maintenance Outsourcing Trends and Customer Experience, the percentage of IT organizations outsourcing at least some of their application maintenance work declined to 35% in 2017. That is down from 43% in 2016 and 53% in 2015.

AppMaintOutsourcing fig 2 - Application Maintenance Outsourcing on the Decline

 The data also reveals that the market for these services appears to have only low growth prospects, because the number of companies outsourcing this function has leveled out. That is, the percentage of organizations increasing the amount of application maintenance work they outsource—minus the percentage decreasing the amount—is lower than the net growth trend of other services in our outsourcing study, IT Outsourcing Statistics.

“In our view, software as a service is the main factor affecting application maintenance outsourcing,” said Tom Dunlap, director of research for Computer Economics, based in Irvine, Calif. “With SaaS, the provider hosts the application and takes much of the routine maintenance off the hands of the organization, as well as reducing the security burden. SaaS is also displacing legacy applications that often require specialized skills.”

Still, we are a long way from eliminating application maintenance from the IT organization, and, for many companies, outsourcing partners have a vital role to play in the management equation. Even with SaaS, application maintenance is not 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.

The application maintenance arena could be at a crossroads. The number and complexity of applications in the enterprise keeps growing, and well-maintained applications are critical. SaaS is rising, but an opportunity still exists for service providers. They will have to respond to the SaaS challenge to see the market return to higher levels.

To assist IT executives, this 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).