Application Managed services (AMS) market is at an inflexion point. There are two key trends that are strongly emerging as game changers:

• Business Aligned Application Management
• Service Delivery Automation (SDA)

All AMS Providers are making significant investments in the above two areas, for reasons like

• To gain competitive edge
• Consolidate market share by winning newer renewal deals
• To retain existing contracts

Some AMS providers have clearly steered through the complexities involved in integrating the two solution elements in their managed services proposition. These providers have gained a lot of ground and competitive advantage.

While the above trends relate closely to emerging commercial models like Outcome based Models in Application Managed Services, we would not be delving on these emerging commercial models. The focus of this post would be aligned to Service Delivery Innovation capabilities.

Business Aligned Applications Management – Moving Beyond IT Outcomes

While the idea of Business Aligned Application Management has been there for some time, identifying the right solution blue print for this, has been quite a challenge.

Complicated Portfolios for ASM: Majority of large corporations that outsource AMS have complicated portfolio of applications with a mix of large ERP applications(SAP, Oracle etc) along with bespoke applications on multiple technologies(Java, .NET etc), that cuts across their core business processes. While the vendors of the large ERP apps offer business aligned application management capabilities with their own tools and frameworks, the applicability and adaptability of these tools for their entire portfolio outside ERP and process inventory remains a question.

Mapping Business outcomes through Frameworks: The next challenge is to map the business outcomes and quantify the associated business benefits by implementing Business aligned Application management. Business aligned Application Management Frameworks cuts across application middleware, Infrastructure layer to provide visibility and flexibility to proactively address the bottlenecks impacting business operations. ASM providers strive to address this issue through framework and tools that takes care of all impacted areas in the IT stack and business process.

Domain Expertise: A critical aspect of Business Aligned Applications Management is domain expertise. To create a significant impact on business outcome, it is essential to gain a solid understanding of business domain of customer and their best practices.

Correlating Industry KPIs: Understanding the KPIs impacting customer business environment and associating them with the underlying IT systems is the first step in business –IT alignment. Correlating Industry KPI benchmarks of the domain with that of the customer and jointly identifying areas of improvement, will provide a clear direction to start.

Most of the business KPI tools offer configuration of the IT systems to Business Process alignment and monitoring. Business KPI tools have visibility across business value chains and allow proactive system based business process intervention for successful implementation.

The provider should clearly articulate the link between their involvement in this initiative and associated business outcomes, to ensure customer acceptance. Opting for an outcome based model would bring in high level of trust between customer and service provider.

Service Delivery Automation – (SDA) – Industrializing Delivery

Technology disruptions are continuing in the IT Service Delivery at an unprecedented pace and service providers are under pressure to respond quickly to changes and to establish themselves as strategic business enablers.

Everest predicts that Service Delivery Automation (SDA) would be the next big thing in ITO and BPO service delivery. Service Delivery Automation in Application Managed services has ushered in a new way of disruption that forces all leading Managed Service providers to re draw their strategy.

Automation is a critical lever in achieving industrialized delivery. SDA vendors like IPSoft and Aargo are committed to automating up to 70% in their service delivery value chain, using knowledge based automation tools.

Knowledge based automation tools heavily rely on knowledge repository and their cognitive capabilities in providing resolutions to Incidents. In cases of complex scenarios, experts support would be used to handle those scenarios.

Almost all traditional AMS providers have forged partnerships with leading automation vendors and offer automation as a part of their Managed Services framework. Traditional AMS providers have all realized that to sustain in the longer run, they need to have their own automation tools and have started to invest in them.

While there is so much happening and positive endorsement on automation, from both Analysts and Provider Community, there is a lot that needs to be achieved to gain wider acceptance and adoption from customers.

Based on success stories shared by Automation vendors, it appears that there is a good amount of progress made on Infrastructure and Business Process service delivery automation. On the applications side, the success so far has been limited to Automation of Level 1 and Level 1.5 category of Incidents.

Application Managed service providers trying to invest in automation and aiming to get the best from this disruptive wave will have to get clear perspective on the below points:

• Will Service Provider’s Automation capability be a critical buying factor for enterprises?
• Will AMS buyers prefer proprietary or commercial automation tools?
• Who will own the IP of the Automation tool set and how will the benefits derived from Automation from an existing provider carried forward in the event of a change in provider?
• How will the Automation tools sets integrate with the Service providers’ Managed services delivery framework?