Outsourcing of Application Management Increasing Despite Growth of SaaS

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, a growing number of organizations see outsourcing application management as an attractive option.

As seen in Figure 2 from our full report, Application Management Outsourcing Trends and Customer Experience, 50% of IT organizations outsourced their application management function in 2021. Previously, the percentage of outsourcing hovered in the 30th percentile from 2017 to 2020. It should be noted, though, that part of the jump is due to the change in our survey sample this year, which includes a greater percentage of large organizations, which tend to outsource this function more frequently.

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The growth of software as a service (SaaS) partly explains the stagnant trend from 2017 to 2020. Nevertheless, the shift towards outsourcing application management responsibilities has continued to gain traction. More organizations are now 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 pivot.

“Applications are getting more complex every year,” said Reneece Sterling, a research analyst for Computer Economics, a service of Avasant Research, based in Los Angeles. “And yet well-maintained applications are critical. Paying a service provider to manage these applications is a growing trend and IT leaders are increasingly pursing this strategy ”

Still, we are a long way from eliminating application management entirely from the IT organization. Even with SaaS, the internal IT organization is not completely removed from the equation. Although much of the application management function is bundled with the subscription fee, SaaS applications still need day-to-day support, such as reconfiguration as business processes change, performance monitoring, implementation of user change requests, and other administrative activities.

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).