Application Outsourcing: The management challenge

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1 White Paper Application Outsourcing: The management challenge Embedding software quality management for mutual benefit Many large organizations that rely on mainframe applications outsource the management of all or part of their application estate many are on their second or third contract renewal. The original gains that were identified substantial cost savings and access to a large resource pool have started to be tempered by the ongoing management challenges. Key to this is an increased realization that things need to be done differently in order to re-instate cost differentials from outsourced application development and maintenance compared to in-house delivery. Experience has shown that this is in a large part due to a high level of focus on initial functional requirements rather than a holistic approach which takes into account key aspects of long term, cost effective maintainability achieved by applying good coding standards, reducing complexity and improving application quality. Service delivery and value need to be measured over the lifetime of an outsource contract and be underpinned by tools which analyze more than traditional break / fix service levels and FTE costs the main original driver. This means including long term maintainability criteria such as operational and cost improvements and rapid response to business change which are supported by analyzing and measuring application quality and complexity over time.

2 Given that this coincides with a renewed drive from the outsourcing vendors for internal delivery improvements and greater client transparency, there is the opportunity for both to work together towards these shared goals. Outsourcing is often viewed as a cure all, offering companies the promise of much needed cost savings and skills. However, there is a growing suspicion that outsourcering may not be the remedy to enterprise application woes. 67% of companies expressed dissatisfaction with the quality of new applications or services provided by their outsourcer. Companies are increasingly looking for outsource providers to possess technical and industry-specific knowledge, solid understanding of QA best practices and methodologies and proficiency with QA tools and metrics. So, how did we get here? For many organizations, the applications they originally outsourced are substantially different today and usually more complex. Given that most outsourcing relationships have traditionally been to drive cost reduction without quality being measured and managed, this has resulted in a number of serious management challenges : Operational overhead in production has increased due to ever increasing complexity leading to inflated infrastructure costs Decreased application quality leads to longer, costly change cycles and increased defects Driving major overhauls of application functionality are needed modernization as opposed to small additions on code where there is little or no in-house knowledge Opaque costing for change requests because of poor documentation and impact analysis Lack of transparency and mutual on costs and resources between customers and outsource service providers leading to tense relationships The failure to resolve many of these challenges is leading to organizations seeking alternative delivery models for their application development, support and maintenance where they feel that they are in control of the costs and the outcome. Many are moving to offshore resource augmentation under their own demand and project management to retain overall responsibility and put pressure on outsource providers to be more transparent in terms of resource and costs. This can be challenging enough in a one to one enterprise to outsourcer model in reality, most organizations deal with multiple outsource providers in complex sourcing relationships. Managing these interdependencies across the providers and multiple technical environments/teams within the enterprise IT organization can be a real headache. Often the application and infrastructure contracts will be divided up between several suppliers, so the enterprise will have the additional challenge of retaining an overall architectural understanding of the inter-dependencies and associated testing complexities. Increasingly, activities beyond pure coding are delivered by outsourcers unless there are specific measures to drive improvements in application quality along with reductions in complexity, this will often lead to significant additional costs for the enterprise as the cost of poor quality escalates, along with increased hardware capacity for the same application Page 1

3 World Quality Report Page 2

4 How do we move forward? Extend the scope of application outsource contracts to include requirements and clear metrics for elements of maintainability cost, complexity, quality and incentivize your outsourcer to deliver improvement and innovation over the life of the contract for mutual gain. The missing link is that there is no joint approach by customers and their outsource service providers to put improved software quality at the heart of their relationship and through it deliver not only cost efficiencies for both, but also applications which become valued core platforms rather than unwanted legacy. This shared approach is in contrast to the alternatives, where either the enterprise or the outsourcer only provides the most basic shared controls to manage application development, maintenance and support with no long term view of either the application asset or the relationship. Taking the example of coding standards, were an enterprise to implement a solution in isolation, whilst this would provide them the ability to manage application quality, it would still be late in the software lifecycle and only identify issues that would be costly and time consuming to remedy and probably not included in standard break/fix cover in the service level agreement. This scenario can be compared where the appropriate controls are identified and then implemented so then can be used in a timely way by all parties allowing the ability for the crucial metrics to be available in near real time as follows: Developing a joint operating model between enterprises and outsourcers with a clearly defined structure, metrics and tools to measure achievement of service levels is essential to improvement. Page 3

5 Implementing this approach through the lifecycle ensures that: Applications are initially better by design through improved standards Change assessments are objective and quantitative Inefficiencies are removed through in-time detailed analysis Testing improvements are achieved by identifying the scope more accurately Applications become simpler and easier to maintain with higher quality In this way the enterprise can realize value and the outsourcer can be rewarded based on : Improved productivity through the lifecycle High levels of test accuracy and regression certainty Decreased rework Higher levels of transparency and a better relationship Prioritzed spend for application innovation Page 4

6 How can EZSource help? By 2016, more than 50% of AD outsourcing contracts will mandate the use of a specific software quality management tool. Gartner Predicts 2013: Application Development The key to managing the application outsource contract is a transparent, objective set of metrics supported by robust software quality management tools that can be used for common advantage by both client and supplier. Rather than ignore the common metrics used today (break/fix times, cost etc) they should be additional measures that are not currently actively managed. EZSource has a simple, 3 step approach underpinned by our EZSource suite of software quality management tools which can be jointly adopted and used by the enterprise and the outsourcer based on a single version of the truth about the outsourced application portfolio : Page 5

7 Once implemented and the current baseline is established, improvement initiatives can then be identified and the applications portfolio be more actively managed. Fundamental to these metrics is that they should be objective, i.e. automatically generated with no user involvement and according to a common understanding of their derivation and importance. Ongoing management can then be quantified both for support (business as usual activities) improvements as well as project based initiatives involving major functional change, modernization or re-development. These improvements should be driven to the benefit of both parties. Contracts, despite their often considerable budgets, may well be operating on small margins. If the initiative to improve governance and focus delivery effort can be achieved, then a gain sharing arrangement from the additional efficiencies achieved can produce a genuine win win scenario. Page 6

8 Step 1 Appraise Up to 50% of maintenance effort is spent trying to understand applications rather than adding functionality. The first step is for all parties to agree on the additional measures that need to be understood, what are the critical factors and how they should be improved. Getting a common baseline on the key metrics of the entire application software portfolio is at best non-trivial and at worst an IT manager s worst nightmare unless there is : A clearly defined process A commonly agreed set of metrics and their derivation An integrated suite of tools to automate data collection (and keep it up to date) An easy to use reporting/tracking mechanism Implementing strategic application lifecycle planning and portfolio management is next to impossible without the first stage on the appraisal journey the INVENTORY. This should include : All technical platforms and languages All application components All interdependencies It should be derived from the application source code WHICH IS ACTUALLY DEPLOYED and reflects the true situation rather than from design documentation which may be incomplete and out of date. The second stage, ASSESSMENT is the next level of information, based on the inventory. This is a more in depth analysis of the applications and their components using either industry standard or custom metrics and is the first view of application software quality. Typically, this would include : Complexity (e.g. Function Point, McCabe, Maintainability Index, Heuristic) Quality (e.g. Coding standards, Dead Code, Failed Jobs) Cost (e.g. Development Weekly Cost, Planned vs Actual Cost) This then allows an overall view to be formed of the application portfolio and prioritize areas for improvement whether by: Simplification Enhancement Upgrade Modernization Replacement Cloud migration It should also support estimation of change impact in terms of cost, time and resources. Page 7

9 Step 2 Improve Structural quality issues in applications are often the root cause of outages, defects, poor performance and security violations. Without deep, automated understanding and impact analysis capabilities they can often be almost impossible to detect. Determining how best applications can be improved, both individually and in context of the overall application software portfolio and then applying the improvements in a development context requires discipline, accurate analysis information and automated tools which can handle the complexities of change impact across application platforms, languages and versions. Development teams need a common repository which provides them with a continually updated view of the application code components across development, test and production environments plus role based views according to job function. Using a common toolkit enables developers to consistently conform to: Architectural constraints, especially in large, legacy systems Coding standards Use of common services and interface mechanisms Consistent use of data, including update mechanisms Compliance regulations Being able to assess impact, perform where used type analysis allows developers to focus only on affected components and reduces the risk of structural defects only manifesting themselves at the time of integration test. Technical teams can exchange information and make application software improvement across technical platforms. This provides an accurate basis for integration, risk based regression and user acceptance testing as all the changes can be executed in parallel and packaged for release. Automated updates to code analysis based on changes can also be used to ensure immediate quality and consistency metrics across development, test and production environments. This can be particularly helpful to maintaining quality in an organization where core application maintenance and enhancement activity is outsourced, either to a single or multiple providers. It also enables the IT organization of the application owner to ensure that the outsource provider is: Adhering to architectural standards Adhering to coding standards Committed to improving quality Institutionalizing these tools and techniques helps IT to deliver todays software assets rather than tomorrow s legacy headache. Page 8

10 Step 3 Manage Actively monitoring and managing quality improvements over time is a critical process for IT managers to reduce application rework, improve time to market and accurately predict performance. Managing application software quality no longer has to be dependent on IT managers having in depth technical understanding of application code components. It also reduces reliance on out of date or incomplete design documentation and removes the worst case scenario that entire application knowledge is lost due to staff turnover. Using automated reporting and dashboard tools, based on the single repository of analysis results generated during the Assess and Improve steps, automatically updated as the quality improvements are made to the underlying code allows IT managers at all levels to gain insight into how these improvements are delivering tangible business value. Combining and correlating key application software metrics around quality and complexity with configurable IT business metrics such as: Cost; Resource; Time to implement; Performance; Service delivery can make all the difference in terms of understanding not only today s situation but also whether the IT organization is improving over time. This drives: Investment prioritization for new application projects and programs Higher levels of project certainty on timescale, cost and resources Freeing up of IT budget from maintenance to business enhancement Better dialogue between business and IT on the value delivered Improved relationship satisfaction and improved renewal rates Of course, management of application software quality is an ongoing process and needs to be maintained. More than 80% of organizations who operate a mature management process supported by robust, dedicated tools for application software quality management clearly demonstrate value to their business organization. Page 9

11 Recommendations Structural quality of While the market is business applications in its early stages, drives more than 50% results from early of application adopters have been development and positive. In fact, some maintenance costs in vendors are now most large starting to use these organizations. software quality management tools to measure the code quality when they are bidding to take on an application maintenance outsourcing contract. Gartner Predicts 2013: Application Development More than 80% of companies say they collect and report on quality metrics; only 24% of them actually use professional tools to underpin this process. Both the enterprise and outsourcer are starting to benefit from use of embedded software quality management tools in outsource contracts. This is helping the jointly solve some of the core management challenges in maintaining a valuable outsource relationship : The inability to focus on high value deliverables, as an undue percentage of the budget is taken up supporting the status quo There is no ability to manage ongoing quality, resulting in increased production inefficiencies, outages and change costs. Implementing a common platform both for the management of key metrics as well as enabling the improvements to be realized is fundamental to increased satisfaction and more accurate alignment of the available budget and business priorities. Using our 3 step approach, we recommend that you take action now to improve both your governance procedures and the support for the teams who need the detailed understanding. 1. Appraise the application software portfolio a. Establish your baseline b. Set the change assessment frameworks c. Set your priorities for improvement d. Set your improvement targets and define your metrics e. Plan your improvements and honestly assess the cost and gain share 2. Improve the quality of your application software a. Simplify and modernize where you can b. Correlate the production improvements to track the benefits realized c. Reduce the cost of business as usual d. Enable agility and shorten delivery cycles 3. Manage your metrics continuously a. Track/monitor your improvements over time b. Adjust and adapt your metrics to business needs c. Look at your entire application software portfolio, not just point code Most importantly, make sure that the application outsource contract reflects the correct measures of delivery, both functional and non-functional and that these metrics are monitored transparently via a common process and toolkit on both sides of the contract. Page 10

12 There is little leeway for poor software quality as companies deal with a volatile economic climate. Using EZSource helps our customers manage increasingly complex application portfolios and outsource contracts to deliver real business value. About EZSource Established in 2003 and now with more than 50 customers worldwide, EZSource is a market leader in application understanding and measurement; we address both the mainframe, distributed and SAP/ERP worlds with our EZSource suite of products. We have achieved a proven track record of value delivery with high profile clients such as Aviva, CA, Maybank, 7-Eleven and Fujitsu plus proven partnership potential with large software and services providers such as CA, Compuware, Serena, IBM, and SAP. Our 3 step approach to has been designed to be automated and supported by our EZSource product suite. Page 11

13 About the author Bev Brookes is VP Marketing & Services for EZSource. Prior to joining the company in 2010, Bev was an IT Advisory Partner with KPMG in London and with Deloitte in Zurich With over 25 years in the IT industry, assisting customers with major, business driven IT transformation programs and working with global CIO s on IT strategy and applications portfolio management, she has a proven track record of delivering business value from IT. Contact her at or visit our website Sources : Gartner Predicts 2013: Application Development IDC Marketscape Software Quality Analysis & Measurement Gartner Outsourcing Trends 2013 World Quality Report Compuware Mainframe Outsourcing CIO Survey Page 12

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