APM Benefits Both Sides of the Outsourcing Contract

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 and

how they relate to one another. When implemented as part of an APM effort,

impact analysis tools provide significant value in their own right – as

the one “source of truth” about the applications, it is a reference for

programmers who may be unfamiliar with the application’s structure,

dependencies and features. A readily available reference on every

application within the enterprise will shorten the time programmers waste

reading source code to try to learn an application before making changes.

Thus, maintenance costs – one of the primary application costs – are

significantly reduced.

The corollary to application understanding is

faster and more accurate scoping of new enhancements and projects, saving

money in costly redesign and recoding efforts due to a lack of application

understanding. These programmer-level features benefit outsourcers by

containing costs in fixed pricing engagements, increasing profit, reducing

errors and improving quality that may bear on service-level agreements

(SLAs). APM will aid their ability to respond accurately to requests for

proposals (RFPs) by placing an objective complexity rating on

candidate-client applications. For example, responses to RFPs could be

factored by the organization’s overall application complexity rating as

established by the APM tool.

The value-add for APM, however, is its new capabilities – beyond the

benefits of impact analysis – as a source of truth about application

knowledge on which to build new information that adds strategic value. In

the case of outsourcing, for example, trending information about

application complexity and emergency production repairs can show whether

application quality is improving or declining. A sudden surge in activity

against an application may show that programmers are acting carelessly,

testing is insufficient or user organizations are requesting a conflicting

series of enhancements.

By recording weekly maintenance effort against

applications and establishing fully loaded cost figures for staff,

management can benchmark expenditures by applications to

evaluate/prioritize IT spending. Outsourcers that collect this type of

information for all of their clients could sell the benchmarking

information, use it to refine their estimating process or use it to

leverage other business. With a trusted source of truth as its base, the

type of intelligence collected/drawn from APM is limited only by the

imagination/requirements of the organization and its ability to join

complementary data.

Beyond the many possibilities for strategic value-add, there is value in

APM to both sides of an outsourcing contract, to establish a fair and

equitable base for contract pricing, to set quality and complexity

benchmarks at contract inception that will aid year-over-year comparisons

to note improvement/declines and to answer strategic, ad hoc questions

about the applications.

Outsourcing companies should evaluate the handful of vendors that offer

APM tooling and choose one on which to standardize – leading vendors

include HAL Knowledge Solutions, and Crystal-Systems / Blue Phoenix

Solutions. Alternatively, companies with existing application mining tools

should determine whether they can / or the vendor plans to – add APM

functionality – leading mining vendors include Cast Software, IBM, Micro

Focus, Relativity, Seec and others.

Consider crafting a contract that establishes the APM vendor as the

exclusive provider in exchange for favorable terms – perhaps a site

license with revenue splits for each new client that chooses the APM

offering and a small revenue bump for the APM vendor if the client does

not – to compensate for the impact analysis usage. Client organizations

that are considering outsourcing should approach APM vendors about a

service offering whereby the APM vendor builds a temporary APM repository

as a prelude to outsourcing contract negotiations. The peace of mind that

results from establishing fair contract pricing and the potential for a

significant reduction in price because of the ability to prove a certain

complexity level may more than offset the cost of the temporary APM

service.

The APM market is nascent, but the tools are well proven, making

this far less of a gamble than traditional new-tool offerings.

Organizations seriously considering APM must realize that implementing APM

requires a fair amount of process change to collect and continuously

record the data that will enable strategic decision-making, along with the

passage of time, so that historical data accumulates to enable trending.