The writer is Lars Janitz, Global Head Application Management, itelligence AG
I’m responsible for the global Application Management Services at itelligence. Almost every day I’m in contact with IT managers in different countries around the world. Together with my team we support their productive SAP solutions – consistently and reliably. In the following I want to illustrate the demand and the value of the Application Management Services with the use of a short story.
Mr. Meyer is Head of IT of a medium-sized logistics company. A lovely sunny summer weekend is just around the corner and he is looking forward to spending time with his family, if it weren’t for that one problem. The colleagues from the business departments have informed him about planned extra shifts over the weekend because of the positive market situation causing an extraordinary order volume. These are good news, of course, but require corresponding support from the IT department as well, since almost all business processes are supported by IT processes of their SAP ERP solution.
How can he manage this challenge? His SAP support team is not that large to fully cover this request. The team contains one expert per topic only, two colleagues are on vacation because of the summer season, one colleague has been on maternity leave since last month and all others have already been working on the limit during the last weeks.
He had already asked his boss regarding a possible team expansion end of last year, but the IT budget doesn’t enable this request.
Mr. Meyer faces the same pressure as most of his CIO colleagues. They are requested to keep the IT costs as low as possible. They are furthermore requested to ensure high quality and smooth operations to mitigate the risk of business impacts because of IT issues. But meanwhile CIOs are also requested to generate business value. He is aware of the changing CIO requirements in the market not only to take care of the IT costs but also to perceptibly contribute to the business strategy and value generation within the company.
That’s pretty clear to him. He appreciates that approach to be perceived not only as a pure cost factor in the company any longer. This strengthens not least his own position and helps him to become a strategic stakeholder in the company. However, providing a cost-efficient and high-quality support with high user acceptance and satisfaction is still a foundation for this IT transition towards a business contributor.
He is aware that he would not be able to provide adequate application support taking all the existing requirements and frame conditions into consideration:
- Demand to fully cover all skill-sets of the implemented ERP solution during all business hours incl. extra times independent on real current load
- Impossibility to exactly forecast/ plan the daily support demand per topic (required support capacity)
- Smooth operations and high and stable support quality not affected by any absence of support employees (e.g. vacation, leave or illness)
- Limited IT budget according to the size of the company
- Need to adopt the steadily increasing technological and functional progress in the market and to translate it into business value (permanent up-skilling demand)
- Requirement for ongoing process improvement
Based on this discrepancy he arrives at the decision to look for a professional external Application Management Services (AMS) offering. Therefore he recaps the different demands for a successful AMS approach for a medium-sized, but international company:
- Cost efficiency and predictability
- Flexible sourcing model fitting to the specific customer requirements (language, availability, skills)
- Appropriate mix between offshore, nearshore, onshore and onsite resources (not all of those four components need to be used in all engagements) incl. efficient back-/front-office model
- That right delivery mix is particularly important within the mid-market providing an increasing demand for international support but still requesting local language and culture, proximity, habit, intimacy and personal relationship. This hampers the usage of cost-efficient but mostly anonymous offshore centers
- Low (primary) delivery costs shouldn’t be the only decision criterion
- Flexible pricing model incl. “on demand” volume that meets the fluctuating support demands of the customer
- An appropriate “risk” sharing model between customer and provider (cost efficiency for customer, at least minimum predictability regarding resource management for provider)
- Pay what you get – It’s not necessary to hold the complete IT support ready for all potential but not predictable demands (see the weekend situation mentioned above)
- Understanding at least the key business processes of the customer
- Transparency (reporting) regarding efforts, changes/ activities, status, open items
- Ability to manage complexity and to flexibly adopt technological developments
- Process standards ideally based on ITIL (Information Technology Infra¬structure Library) framework
- Ability to provide also business risks consulting, not only reactive ticket (incident) handling
What does that mean regarding Mr. Meyer’s request? Of course, it’s mostly an issue to hand over the responsibility for such an essential topic to an external provider. Questions and topics as “data security risks”, “commercial and functional dependency” and “loss of own skills and IP” often arise during those sourcing discussions. These are serious points that need to be discussed. And that’s one reason to select a reliable and well-known provider ensuring intimacy and close collaboration, particularly in the mid-market, where personal relationship on management and expert level still plays a significant role.
A professional AMS provider can take over the load balancing for you and should provide the latest knowledge based on scaling effects. These are two major aspects as basis for cost savings and smooth operations.
This service mentality is getting more and more familiar in most countries, where it’s already no question not to maintain and repair the own car or to renovate the own rooms and to let these tasks done by a specialist. Normally those service providers deliver these tasks more cost efficient at higher quality while you can focus on your core competency and earn more money with this than additionally spending for the service provider.
These are major aspects that AMS is still one of the fastest-growing IT services in the market.
Last but not last it’s very important to consider an AMS contract relationship as real win-win partnership between both parties. Both contract partners normally start a joint multi-year engagement, that’s going to be successful only if both parties get their value out of the partnership, offhand spoken “have fun with this engagement”.
But what about the future of the existing own support employees? Of course, this is a critical question in case of a pure cost cutting exercise. Talking about value provision out of IT in periods of growth the own IT staff’s valuable time should be utilized during the external AMS engagement by two main topics:
- Key users for the AMS deal enabling the customer to steer and influence the AMS engagement and to define the right requirements by keeping a minimum own experience/knowledge within the company
- Consultants for innovative, business-focused initiatives to increase the value provision out of the IT
By implementing this concept you keep your IT staff well-equipped and –skilled. This mitigates the danger of losing these employees because of missing job perspective. Furthermore it limits the risk of functional dependency from the service provider mentioned above.
One year later: A lovely sunny weekend is just around the corner and Mr. Meyer is looking forward to spending time with his family. He can rely on the implemented Application Management model and doesn’t need to take personally care of the support during the weekend. Thus he can enjoy the weekend with his family without any hurry while smooth operations and support are ensured. Perhaps he is going to spend one hour for thinking about the next steps to even more support the business strategy of the company by an further enhanced IT strategy. And perhaps he calls his colleagues from the business department to get confirmed that everything truly went fine without appreciable issues. Thus he can resolve all possible doubt.