Application Management Outsourcing Booming Despite SaaS

December, 2023

As the application portfolio of an enterprise grows, the ongoing support for those systems can become a burden on the IT organization, leaving little time for developing and implementing new applications. In response, some organizations see outsourcing application management as an attractive option. Although SaaS and the cloud have taken over many application management responsibilities, businesses continue to outsource this function.

As seen in Figure 2 from our full report, Application Management Outsourcing Trends and Customer Experience, 52% of IT organizations outsourced their application management function in 2023, slightly greater than the 2022 frequency (50%). In previous years, the percentage of outsourcing hovered in the thirties.

Outsourcing Frequency 2 1030x687 - Application Management Outsourcing Booming Despite SaaS

The growth of SaaS partly explains the stagnant trend in previous years. Nevertheless, the shift toward outsourcing application management responsibilities has continued to gain traction. More organizations are offloading their high-level management and monitoring activities to focus on key business decisions. The increased maturity and ease of solutions offered by service providers, as well as the overall cost of implementation and shorter payback periods have allowed many organizations to make this decision. Furthermore, SaaS applications still need everyday support, such as reconfiguration as business processes change, and most SaaS products require some customization based on verticals or on regional or compliance issues.

“Many of us thought that the introduction of SaaS would reduce the application management burden,” said Waynelle John, research analyst for Computer Economics, a service of Avasant Research, based in Los Angeles. “But that has not been the case. SaaS applications still need ongoing support, so application management continues to be paramount.”

However, we are still a long way from completely eliminating in-house application management. Even with SaaS, application management is not completely removed from the equation. Much of it is bundled with the subscription fee. SaaS applications still require daily support, such as reconfiguration as business processes change performance monitoring, implementation of user change requests, on-boarding new users, and other administrative activities. Therefore, rather than a complete shift, we can expect organizations to have a combination of in-house and outsourced application management.

To assist IT executives, our full report examines application management outsourcing adoption and customer experience. We report the percentage of organizations outsourcing application management (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 management. We conclude with recommendations for an efficient application management outsourcing strategy.

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