Smaller Enterprises Eye Application Services Management
October 18, 2021
applications is a mandate for enterprises of all sizes, but enterprises seek
more business value from sourcing engagements.
Enterprises with revenue less than US$5 billion have witnessed a steep increase
in adoption of application services (AS), increasing from 55% to 79% in the last
two years, according to Everest Group. The growing share of smaller enterprises
in AS engagements reinforces the fact that optimizing the application estate has
become a universal mandate. The COVID-19 pandemic has also forced many smaller
enterprises to undertake modernization initiatives to remain resilient in the
wake of another black swan event.
Although AS engagements take the top spot (more than 70%) in an IT services
market expected to grow by 5-7%, most enterprises consider application
management to be a necessary evil and the sourcing of application management to
be solely a cost take-out function. According to Everest Group’s most recent
poll of enterprise buyers of application services, enterprises believe service
providers have not been able to add value to application management initiatives
beyond cost-take out; value addition received the lowest score among assessment
The key value-add benefits enterprises desire from their AS engagements
include the following:
Enable better experience for customers
Increase scalabilty and resiliency of existing applications
Facilitate advanced analytics and forecasting capabilities
Increase security, reduce risk and adhere to compliance
To help organizations derive more business value from application services,
Everest Group proposes a model that enterprises can use to drive transformation
in their AS function. The “Business Value Orchestrator Platform” views
application management as one part of a broader initiative comprising other
technology towers, operating models, service management solutions, delivery
enablement, and next-generation sourcing.
The model is described in detail in Everest Group’s newly published State of the
Market Report, “Application Services – Transform Application Management to Drive
Digital Success.” In this report, Everest Group also examines the market trends
in the AS market, including IT services market size; AS buyer adoption trends
across geographies, industry verticals and revenue sizes; and key trends shaping
the AS market.
Selected Report Highlights:
enterprises plan to adopt cognitive capabilities in application management
functions, only 16% have adopted it thus far. The key challenge is the
unavailability of suitable mature AI solutions.
Sixty percent of enterprises are integrating site reliability engineering (SRE)
with application management.
With incumbent application management service (AMS) providers unable to drive
more value, enterprises are willing to work with challengers. Everest Group sees
nearly 20% of AMS engagements now being signed with challenger service providers
rather than incumbents.
Discrete application services engagements continue to form 71% of the IT
Enterprises continue to prefer short-term AS engagements (less than three
years). The proportion of short-term engagements has risen over the last two
years from 23% to 36% of all engagements.
AS engagements in the North American market continued to decline in comparison
to other geographies, but Everest Group expects the North American market to
grow faster than other regions as the market recovers from pandemic influences.