ORGANISATIONS REVEAL THE FUTURE OF ... - HCL research project involved interviewing Executives from 300 ... report from HCL examining the impact of ... working capital
Post on 26-May-2018
Embed Size (px)
300 GLOBALORGANISATIONSREVEAL THE FUTURE
OF APPLICATION SUPPORT & MAINTENANCE
Survey participantsThe research project involved interviewing Executives from 300 Large Enterprises from the UK (150 participants) and US (150 participants). The interviews were conducted between October and November 2013.
The focus of the research was to understand the profile, priorities and strategic intent of these organisations when it came to Application Support & Maintenance (ASM). The organisations surveyed were required to have at least 1,000 employees.
A research report from HCL
examining the impact of
current ASM practices across
300 large enterprises
Demographic profile of project participants
3001-5000 Employees Globally
5000+ Employees Globally
1001-3000 Employees Globally
Executive summary Organisations are spending 68% of their IT budget on run the business (RTB) activities; 31% of
organisations are spending 80% on RTB ASM accounts for 38% of large organisations overall IT budget each year, with 83% stating the cost of
maintaining and supporting applications was increasing year-on-year 87% of organisations see budgetary pressure impacting their ability to innovate with 83% saying they
need to reduce RTB costs in order innovate more 81% of organisations say only a small number of applications generate a disproportionally high number
of tickets The majority or organisations think that their in-house teams and/or outsourcer could be more
innovative when it comes to delivering ASM Only 14% of organisations have mapped business benefit from IT Through a 30% cost reduction in ASM Global 2000 organizations could free upto $6.8 billion of
Spiralling ASM costs in the face of reducing IT budgets
Software and applications are increasingly dominating the corporate IT landscape, playing an increasingly pivotal role in enabling companies to launch new services and derive competitive advantage. Despite the huge buzz around cloud and SaaS (Software-as-a-Service), the vast majority of organisations (87%) believe on-premise applications are here to stay; therefore their ongoing support and maintenance remains essential.
4% 6% 8% 10% 12% 14% 16%
Healthcare (public)11% Healthcare (private)
12% Other commercial sector13% Government & civil service
15% Other public sector15% Manufacturing15% Retail, distribution & transport15% Financial Services
Our survey reveals that currently ASM (covering incident resolution, service/change requests and day-to-day application management) accounts for 38% of large organisations overall IT budget each year. Based on the IT expenditure of Global 2000 companies this equates to $11.3 million per organisation annually. Furthermore, 83% of respondents stated that the cost of maintaining and supporting these applications was increasing year on year, while over the last 12 months organisations have on average seen a 29% increase in support tickets for ASM. For those organisations that primarily outsource their ASM function, they in fact saw a 32% increase in support tickets. This is a clear indication that many organisations are struggling to meet users heightened expectations of application performance, which in turn is leading to an ever increasing number of support tickets.
Do you think on premise applications are here to stay?
What percentage of your overall IT budget is spent
on ASM each year?
Approximately 20%Approximately 30%Approximately 40%Approximately 50%Approximately 60%Approximately 70%Over 70% (please specify)Average percentage of annual IT budget spent on ASM each year
Is your ASM cost increasing year on year?
68.30%Average percentage of annual IT budget spent on RTB
Average percentage of annual IT budget spent on CTB
100% RTB90% / 10%80% / 20%70% / 30%60% / 40%50% / 50%Less than 50% RTB
What percentage of your annual IT budget is spent on running the business (RTB) compared to innovation and
development projects that are designed to change the
45% of respondents believed that while their IT running costs had been steady, annual budget decreases meant they were unable to take enough cost from IT to invest in change the business (CTB) initiatives. A further 30% stated that their IT costs had in fact been increasing, which was leading to a higher RTB v CTB ratio. Against this backdrop it is hardly surprising that 87% of respondents believed that budgetary pressures were hindering their ability to undertake the innovation and development projects that could transform their business. For many CIOs this is a considerable challenge; where previously business transformation initiatives were only a small part of their overall activity, it is now a key part of their role.
In our survey, the majority of respondents (83%) stated it was priority for them to reduce the proportion of their organisations IT budget on running the business; so that they can invest more on transforming the business through innovative technology projects. At the same time, CIOs are concerned that hammering down RTB costs by too much and too quickly, could have a negative impact on overall business performance. However, it is clear that ASM is a cost centre that can be reduced while at the same delivering greater value to the business. Yet a worrying 86% of respondents indicated that they didnt expect their existing ASM function (whether in-house, outsourced or combined) to deliver any costs savings in the next three years.
IT running costs have been decreasing due to scientific programs like
Lean implementation which is having a positive
effect on CTB spend.
IT running costs have been decreasing but we can sense a decrease in quality of service being provided
IT running costs have been increasiing every year leading to a higher RTB to CTB ratio
IT running costs have been steady but with budgets decreasing every year morebudget is required
Is it a priority for you to reduce the proportion of
your organisation's IT budget on running the
business, so that you can invest more in transforming
the business through innovative technology
Do you expect any cost saving from your own or
outsourced ASM function in the next 3 years?
In todays era, with the need to drive greater efficiencies and business value from IT, organisations can no longer allow their ASM function to stagnate. These figures show that the commonly accepted rule that ASM will consume a significant proportion of the IT budget no longer stacks up. Through a 30% cost reduction in ASM Global 2000 organizations could free up to $6.8 billion of working capital
In-house vs. outsourced ASM functionWhen it comes to who actually undertakes ASM in an organisation, our survey revealed a number of different approaches. 45% of respondents stated that ASM was primarily undertaken in-house, while 17% said they outsourced the function. The remaining 38% stated that ASM was undertaken by both an in-house team and an outsourcer.
One of the biggest barriers towards reducing ASM costs is a reluctance to disrupt the current status quo. As an industry, ASM hasnt needed to innovate as contracts are typically renewed non-competitively every three to five years. This continual revenue stream for outsourcers has meant it hasnt been in their interests to modernise or propose a new model for ASM. Of those organisations that outsourced part or all of its ASM function, more than three-quarters (78%) believed that their outsourcer could be more innovative in delivering ASM but was reluctant to do so because it might result in reduced work and revenue. Furthermore, 72% of respondents believed that their outsourcer tries to keep the level of support tickets high to ensure their revenues are not reduced.
ASM is primarily indertaken by an outsourcer
ASM is undertaken by both our in-house team and an outsourcer
ASM is primarily undertaken by an in-house team
Do you believe that your outsourcer could be more
innovative in delivering ASM but is reluctant to do so because it might result
in reduced work and revenue?
Do you believe that your outsourcer tries to keep the level of support tickets high
to ensure that to ensure their revenues are not
Lack of innovation isnt just restricted to the outsourcer; our survey reveals that of those organisations that undertake ASM in-house, 92% believe their team could be more innovative in transforming the model of ASM. This illustrates that many in-house teams remain concerned that by making improvements to ASM they could be doing themselves out of a job, rather than thinking about how their skills could be deployed elsewhere in the business.
For those organisations that have outsourced, our survey revealed that it has taken them nearly two years to see tangible benefits from outsourcing ASM. With IT having to evolve at a rapid rate to become more aligned with business needs and deliver tangible results in the form of cost reduction and revenue growth, it can no lon