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Application Services

How IT Service Providers Can Beat the Anti-incumbency Menace | Sherpas in Blue Shirts

By | Blog

The sobering writing is on the wall, and only getting bolder: nearly 50% of enterprises are dissatisfied with their incumbent IT service provider. With this all-time low enterprise satisfaction level, and outsourcing deals worth more than US$50 billion coming up for renewal over the next 18 to 20 months, service providers are rolling up their sleeves and fighting to protect their turf. Whether they succeed in notching their performance up to the enterprise expectation levels – or are led to digging their own graves – remains to be seen.

“Change the Business” is Becoming Table Stakes

Enterprises today are trying to ease into the digital age, and realigning their focus from the erstwhile cost-efficient, technology-focused solutions towards more business-focused, productivity-enhancing, and outcome-oriented service models. Next-generation themes such as automation, analytics, and DevOps have started to capture the imagination of IT leaders as they seek to improve overall service quality and agility.

In this regard, enterprises expect their service providers to start focusing beyond the traditional “run the business” mandate, and function as end-to-end transformation partners. This means bringing in strong point-of-view and context around how disruptive technologies can be leveraged by enterprises to drive competitiveness and business agility/resilience.

These evolving enterprise expectations, coupled with massive technology strides, have placed a huge responsibility on the service providers’ shoulders, especially in an environment wrought with strong anti-incumbency sentiments. To be able to increase deal renewal success, service providers need to work on building a broad set of organizational capabilities and solutioning best practices to supplement their investments in building differentiated service offerings and solutions.

Here are some of the key factors that, if managed the right way, can influence deal renewals in the service providers’ favor.

Contract Renewals Blog

Interesting times lie ahead, brimming with massive sets of opportunities and challenges for services providers as they continue to wage wars in the contract renewal battlefield. As service providers work their way around retaining existing relationships, meeting renewed enterprise expectations, and warding off strong competition, will there be clear winners and losers? Only time and numbers will tell.

May the force be with you, service providers!

For drill-down data and insights into outsourcing transaction trends by function, geography, industry, and service provider type, and implications for key stakeholders (both buyers and suppliers), please see Everest Group’s newly released reports, “Upcoming Contract Renewals: Application Services” and “Upcoming Contract Renewals: Cloud & Infrastructure Services.”

Enterprises Demanded Advanced Automation in 33% of Application Services Contracts in 2016 | Press Release

By | Press Releases

Outlook for 2017-2018: Automation, artificial intelligence, cognitive computing and robotics will become mainstream and pervade the enterprise portfolio.  

Enterprises no longer consider automation merely a service delivery tool; in fact, automation is now “front end,” with enterprises proactively demanding strategy, vision and strong Proof-of-Concepts (POCs) for advanced automation in 33 percent of all application services contracts in 2016, according to Everest Group. Everest Group expects this trend to accelerate in 2017 and 2018.

“Automation will become a high-priority investment for buyers in the coming years, owing to automation’s direct impact on software development life cycles [SDLCs] and speed to market,” said Yugal Joshi, practice director at Everest Group. “Also, artificial intelligence, cognitive computing and robotics will no longer be fringe technologies dominated by major players; rather, these technologies will begin to pervade the enterprise portfolio and will eventually become mainstream in the application landscape.”

Compared to adoption of automation, enterprises adoption of artificial intelligence (AI) is progressing at a slower pace, with only 15 percent of application services contracts of 2016 including AI in the scope. Although enterprises are currently taking small steps to adopt AI in their IT services environments, AI and its allied techniques soon will profoundly impact application services in the way applications are developed, tested, and maintained.

“AI is no longer a fringe, fantasy-riddled technology,” added Joshi. “AI techniques present significant opportunities in the application services landscape, and enterprises can leverage these techniques to completely transform application services functions. The key to unleashing the transformative potential is to move beyond using AI for enhancing developer productivity to making intelligent machines that develop their own snippets of code, allowing developers to focus on more complex tasks.”

Activities in the testing and maintenance functions of the SDLC present the most opportunity to leverage AI techniques. Even creative activities such as software development can be significantly improved by leveraging AI.

These results and other findings are explored in a recently published Everest Group report: “Application Services—Annual Report 2016: AI in SDLC? There is a Long Journey Ahead

Other key findings:

  • A decline of 28 percent in application services deal sizes (to an average contract value of US$5.4million) in 2016 is a cause for serious concern for application services providers.
  • Owing to the nascence of fields such as deep learning, there is a dearth of talent to develop innovative use cases for AI. Startups that have made some headway are becoming prime targets for acquisition and talent sourcing.
  • Stand-alone application services deals continued to dominate the IT services landscape, with 62 percent of deal activity.
  • Deal activity continued to be dominated by small buyers (i.e., revenues less than US$5 billion) that took up 47 percent of application services deals.

***Download Complimentary 11-page Preview Report Here*** (Registration required.) This preview summarizes the report methodology, contents and key findings and offers additional resources for further study.

The full report analyzes the application services market, focusing on:

  • Major trends in application services adoption
  • Key factors shaping the market, including buyer expectations
  • The outlook for 2017-2018

***Publication-Quality Graphics***

High-resolution graphics illustrating the key takeaways from “Application Services—Annual Report 2016: AI in SDLC? There is a Long Journey Ahead” may be included in news coverage, with attribution to Everest Group. Graphics include:

  • Talent for artificial intelligence: a whole new ballgame
  • Enterprises are demanding automation
  • Applications services technology providers missing disruption opportunity
  • Artificial intelligence adoption
  • AI techniques present significant opportunities in the application services landscape

Download graphics here.