The Steady Decline of Application Management Outsourcing

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. However, the number of organizations outsourcing their application management has been dropping steadily since 2015.

As seen in Figure 2 from our full report, Application Management Outsourcing Trends and Customer Experience, the percentage of IT organizations outsourcing at least some of their application maintenance work declined to 33% in 2019. That is down from 36% last year, 35% in 2017 and 43% in 2016.

The growth of software as a service (SaaS) partly explains the decline. With SaaS, the provider hosts the servers and software, keeps applications patched and updated, resolves issues, and backs up data. For the most part, the client lets the SaaS provider worry about many aspects of application management, which is a significant departure from the traditional on-premises model. For IT executives who face expensive application management chores, the SaaS approach can often mitigate the cost and complexity. As SaaS becomes increasingly popular, the management problem becomes smaller.

“The trend is unlikely to turn around any time soon,” said David Wagner, vice president, research for Computer Economics, based in Irvine, Calif. “While our research shows that IT organizations are trying to divest themselves of their infrastructure burden, it seems organizations are doing that more through the use of SaaS rather than through outsourcing.”

Still, we are a long way from eliminating application management from the IT organization. Even with SaaS, application management is not completely removed from the equation. Much of it is bundled with the subscription fee. At the same time, 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 on this subject, Application Management Outsourcing Trends and Customer Experience. The full report is available at no charge for Avasant Research subscribers, or it may be purchased by non-subscribers directly from our website (click for pricing).