Outsourcing companies that implement application performance measurement (APM) processes will gain efficiency in maintenance operations, thereby reducing costs, and will increase the accuracy of scoping application enhancements and the size of outsourcing contracts. Client organizations gain contract negotiation leverage via the ability to objectively quantify the complexity\/structure of the candidate applications. Both sides may benefit from APM being a standardized offering to outsourcing clients - the client gains access to continually updated metrics about its own applications to feed strategic decision-making as well as benchmarking data about other organizations, while the outsourcer adds a new service to its offering.APM extends the capabilities of impact analysis tools to a higher purpose- building a base of metrics that records all parts of an application andhow they relate to one another. When implemented as part of an APM effort,impact analysis tools provide significant value in their own right - asthe one "source of truth" about the applications, it is a reference forprogrammers who may be unfamiliar with the application's structure,dependencies and features. A readily available reference on everyapplication within the enterprise will shorten the time programmers wastereading source code to try to learn an application before making changes.Thus, maintenance costs - one of the primary application costs - aresignificantly reduced. The corollary to application understanding isfaster and more accurate scoping of new enhancements and projects, savingmoney in costly redesign and recoding efforts due to a lack of applicationunderstanding. These programmer-level features benefit outsourcers bycontaining costs in fixed pricing engagements, increasing profit, reducingerrors and improving quality that may bear on service-level agreements(SLAs). APM will aid their ability to respond accurately to requests forproposals (RFPs) by placing an objective complexity rating oncandidate-client applications. For example, responses to RFPs could befactored by the organization's overall application complexity rating asestablished by the APM tool.The value-add for APM, however, is its new capabilities - beyond thebenefits of impact analysis - as a source of truth about applicationknowledge on which to build new information that adds strategic value. Inthe case of outsourcing, for example, trending information aboutapplication complexity and emergency production repairs can show whetherapplication quality is improving or declining. A sudden surge in activityagainst an application may show that programmers are acting carelessly,testing is insufficient or user organizations are requesting a conflictingseries of enhancements. By recording weekly maintenance effort againstapplications and establishing fully loaded cost figures for staff,management can benchmark expenditures by applications toevaluate\/prioritize IT spending. Outsourcers that collect this type ofinformation for all of their clients could sell the benchmarkinginformation, use it to refine their estimating process or use it toleverage other business. With a trusted source of truth as its base, thetype of intelligence collected\/drawn from APM is limited only by theimagination\/requirements of the organization and its ability to joincomplementary data.Beyond the many possibilities for strategic value-add, there is value inAPM to both sides of an outsourcing contract, to establish a fair andequitable base for contract pricing, to set quality and complexitybenchmarks at contract inception that will aid year-over-year comparisonsto note improvement\/declines and to answer strategic, ad hoc questionsabout the applications.Outsourcing companies should evaluate the handful of vendors that offerAPM tooling and choose one on which to standardize - leading vendorsinclude HAL Knowledge Solutions, and Crystal-Systems \/ Blue PhoenixSolutions. Alternatively, companies with existing application mining toolsshould determine whether they can \/ or the vendor plans to - add APMfunctionality - leading mining vendors include Cast Software, IBM, MicroFocus, Relativity, Seec and others.Consider crafting a contract that establishes the APM vendor as theexclusive provider in exchange for favorable terms - perhaps a sitelicense with revenue splits for each new client that chooses the APMoffering and a small revenue bump for the APM vendor if the client doesnot - to compensate for the impact analysis usage. Client organizationsthat are considering outsourcing should approach APM vendors about aservice offering whereby the APM vendor builds a temporary APM repositoryas a prelude to outsourcing contract negotiations. The peace of mind thatresults from establishing fair contract pricing and the potential for asignificant reduction in price because of the ability to prove a certaincomplexity level may more than offset the cost of the temporary APMservice. The APM market is nascent, but the tools are well proven, makingthis far less of a gamble than traditional new-tool offerings.Organizations seriously considering APM must realize that implementing APMrequires a fair amount of process change to collect and continuouslyrecord the data that will enable strategic decision-making, along with thepassage of time, so that historical data accumulates to enable trending.