App expert Vijay B. Iyer talks about reducing the cost of application support and maintenance, the problem of prioritization, and why CIOs need to restructure their IT department.
By Jack Rosenberger
Nearly four of every 10 dollars in a large organization's IT budget goes to application support and maintenance (ASM), according to a new survey of 300 U.K. and U.S. CIOs conducted by HCL Technologies. If that budgetary stat isn't disturbing enough, consider this one: 83 percent of the aforementioned CIOs expect the cost of app support and maintenance to increase this year and next. All of this ASM activity is putting a burden on IT departments, which have been slammed by a 29 percent upturn in app support tickets during the last 12 months.
It is hardly surprising—given the overriding emphasis on creating new apps, supporting existing ones, and preventing future app problems—that nearly nine in 10 IT organizations complain that app prioritization is a challenge. Compounding this problem is the fact that many existing ASM systems are reactive and focus on fixing current problems, such as solving app incidents on a case-by-case basis, as opposed to being proactive and using an industrialized and consistent app solution.
For expert advice on ASM, CIO Insight recently spoke with Vijay B. Iyer, senior vice president of applications outsourcing at HCL Technologies, about reducing ASM costs, the overriding problem of app prioritization, and how CIOs can shift their focus to business transformational initiatives.
What are the key takeaways of the application support and maintenance (ASM) survey for CIOs?
Vijay Iyer: Today's CIOs need to understand that they can get much more out of ASM than just outsourcing and cost reduction. They lose out on millions of dollars' worth of operational value ideas, in addition to aligning business with IT even more closely.
Most organizations have implemented their IT systems—either ERPs or custom applications—to streamline and automate their business processes. The level of from-the-ground-up insights available to the team performing day-to-day application support and maintenance goes untapped in many organizations. ERPs, or any form of IT systems, were implemented to gain operational efficiencies. Often, after the system's implementation, most IT organizations look for enhancements or new projects, but the focus also has to be around the adoption of the implemented processes and systems. This is visible only to the team performing the work on the ground, and any amount of day-to-day improvements in ensuring process compliance gets the organization closer to the intended goals of the IT system's implementation.
One of the survey's most troubling findings is that ASM consumes four of every 10 dollars in the IT budgets of large organizations. Also, many organizations expect these application-related costs to continue to increase. How can CIOs reduce these costs?
The CIO's focus has to be twofold: One, CIOs should look at options for reducing costs that can be achieved by not just through labor arbitrage, but through applying Lean Six Sigma principles and eliminating incidents. Second, CIOs should look at ways of extracting higher value for the money being spent on ASM.
The HCL survey makes a connection between how the reactive use of ASM is hindering IT organizations' ability to undertake business transformation projects. If IT organizations were more proactive with ASM instead of being reactive, how much time and money could they free up for transforming their business? What changes have you observed when IT organizations are reactive with ASM?
CIOs can easily free up to 30 percent of money and time from their existing ASM organization, both insourced or outsourced, to focus on transformational activities.
Most organizations today are reactive—the ASM team starts the work only after receiving a ticket. In fact, it's not uncommon to hear that very large global organizations pay their IT service providers per ticket. With this model, what kind of incentive will a service provider have to reduce their own revenue if they are being paid per incident?
When IT organizations are reactive with ASM, then we get what I call a "Watermelon effect" —the IT SLAs are green (i.e., time to respond to an incident, time to resolve an incident, etc.) but the business users are red. Unless an IT organization strives to eliminate incidents, business user disruption will continue to happen, which hampers their execution.
One of the top ASM problems confronting IT departments is prioritizing application problems and service requests. Why does this situation exist?
CIOs have been expected to reduce costs for ASM, but now very few CIOs have changed the model while also trying to reduce costs. Many of them have not changed the core model, and have tried to do the same things with lesser spend. What happens most often in these cases is a prioritization problem, and they are faced with the decision of fixing something that's broken, or working on a new request coming from the business, or preventing a problem that might occur in the future. The problem is that the CIO cannot pick just one of these as all three are required to be done—and then some. Also, it's important to note is that this cannot be done by just replicating the current operating model with a labor arbitrage; the answer is changing the core model.
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