Cost Impact of Automation on Application Services Space – More Than Just Input Labor Reduction | Sherpas in Blue Shirts

Posted On July 18, 2016

Service delivery automation (SDA) is gaining a lot of traction in the application management arena. As CIOs face tighter IT budgets each year, they also look at creating more value for business in the form of aligning IT applications to business outcomes through digital initiatives. This increased spending on discretionary digital projects has to be compensated through reduced spending on legacy services.

SDA not only targets reduction of input FTE or labor but also aims at improvement of business outcomes. The four pillars that drive automation-related cost savings in an application context can be classified as follows:

  • Reduction in input labor – This is the most talked about area on which the premise of SDA has been established. Some of the key areas where reduction has been targeted include tasks (job scheduling, ad-hoc reports, active directory requests etc.), technical monitoring, and preventive maintenance of downstream systems.
  • Time to market – As companies look toward evolving business models that demand moving to digital space for survival, five or more releases in a month has become a new normal. The earlier practice of an annual or bi-annual release has become redundant due to the fast changing shape of the market. DevOps has been adopted as a practice by many organizations to meet this requirement, and it aims at shifting organizational structure from a traditional silo- based team to an agile one-team approach with focus on people, processes, tools, and accelerators.
  • Service management – Service management targets improvement of the service experience for clients. Some of the key value-additions by service providers have been in the area of service reporting. They have established command centers that churn data extracted from the client service management tool and translate it into visual representations in a single click that are easy to follow and can provide deep insights into weak links of the service value chain.
  • Improved business outcomes – Accelerators and pre-configured templates serve as one of the highest value adds in terms of automating business processes for applications. As companies, such as SAP, launch specific pre-configured templates for different verticals like Retail, Energy, etc., the need to customize the ERP solutions has reduced. For others, who look to automate their processes, automating the configuration of reports/items into existing systems (e.g., creating a sales order in the order-to-cash system) present good opportunities. Apart from that, developing dashboards that can align IT SLAs to business KPIs can help business and IT teams collaboratively identify the impact of IT issues on business in a time-bound manner as well as reduce the value loss due to IT failures.

Service providers have been leveraging automation in some shape or form for a number of years now, though the mechanism of passing the risks/benefits to buyers has been hazy. As buyers’ maturity and understanding has increased over time due to the adoption of Robotic Process Automation (RPA) and Cognitive technologies, the automation discussion has become center-stage.

Automation is bringing significant change to service delivery mechanisms as deals come up for restructuring or re-pricing. It will serve as one of the key areas for the service providers to focus on to differentiate themselves and increase their share in an extremely competitive market.

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