This blog post is an excerpt of Microexcel’s newly published whitepaper: The Top 10 Pitfalls of Application Management Services (and How to avoid them). Download the full whitepaper now!
IT outsourcing is ubiquitous and Application Management Services (AMS) is, for many companies, the foundation of their IT outsourcing program. The goal of any Application Management outsourcing partnership is to reduce cost and complexity, increase agility and innovation, and reduce risk by delivering from multiple locations around the world.
As with everything in technology, the outsourcing environment is extremely dynamic. We’ve cataloged what we believe are the Top Ten Pitfalls we’ve seen in our collective 16+ years of AMS experience and provide helpful tips on how you can avoid them.
Pitfall #1: The transition from sales pitch to delivery
An important element to accomplishing a smooth and reliable transition is to complete the requirements analysis, design and execution for the steady-state.
The following highlights a few of the six things that you should to help ensure a successful transition:
- Validate the assumptions made during the proposal and statement of work (SOW) finalization stage and perform a gap analysis
- Close any gaps – from lack of documentation to existing resources not participating in knowledge transfer
- Run a pilot before the start of steady-state support
Pitfall #2: Not undertaking an Applications Portfolio Rationalization – current state, future state, and the roadmap to get there
One of the most consistent discoveries our customers make in the rationalization process is that they’re at a competitive disadvantage. There are a number of questions you need to ask to accurately assess your own IT environment situation. How can you minimize incidents and reduce change requests? How do you ensure that you are focused on core business functions, such as finance, supply chain, marketing, etc.? What core technologies are essential to reaching your desired state? What applications will you require?
Microexcel has created a sample checklist in the full whitepaper you can use to develop a Total Cost of Ownership (TCO) for applications.
Pitfall #3: Not getting what you pay for
Even if you can’t always get what you want, you should at least insist upon getting what you pay for. To ensure this, Microexcel outlines steps to follow during contract negotiations with your potential AMS partner. Below are a few points from the white paper.
- Make abundantly clear what is in and out of scope. Do not allow for any “gray” areas or catch-all scenarios.
- Review the carefully crafted criteria you developed for evaluating the bid response.
- Similarly, carefully evaluate the delivery team, more so than the entire company. Worldwide resources and name brand clients are important. But who will actually be doing your work is more important.
Pitfall #4: Not understanding/defining quality?
There are a number of widely recognized best practices that can inject quality into your IT systems and business. We recommend partnering with vendors that employ universally-recognized quality standards, such as Lean Six Sigma Methodologies, ITIL™ best practices, and a PMI-based Quality Framework to develop a culture of continuous improvement. ISO certifications are another criterion for evaluating who is best qualified to meet your quality needs.
Pitfall #5: Communication problems
Look for an outsourcing partner that uses a centralized ticketing tool and insist upon being actively involved as a co-collaborator in developing a strong network of information sharing. Create well-documented support processes with clearly defined roles and responsibilities for both you and your partner(s) and make sure that your AMS partner has someone locally assigned as a single point of customer contact for all communications. Your communications flow will complement your IT governance structure and involve information sharing among all parties throughout all levels of the organization: anything less, invites problems.
Pitfall #6: Not establishing relevant metrics
Customer satisfaction isn’t the only area in which relevant metrics are important. IT and business metrics are critical to assessment and improvement. To create effective metrics, focus them on two main areas – point in time and trending analysis. A good rule of thumb to remember is if you aren’t going to do something with the data, don’t look at it! Best practice is to pick three to five reports and evaluate their usefulness over time. If you are going to collect and review the data, ensure that your metrics are delivered in an easily understandable fashion.
Pitfall #7: Not establishing effective governance
Business leaders from all areas need to work in an integrated fashion. IT governance is the system by which all stakeholders – including the board, internal customers, and (especially) departments like Finance and Human Resources – have the necessary input into, and awareness of, the decision-making process.
Pitfall #8: No methodology for managing change
During contract negotiations, we recommend getting a sample change order template in the contract so that both parties understand what is expected. Upon the engagement, establish clear roles for both your organization and your AMS partner. Create and document well-defined criteria for change approval, test environments, and prioritization factors. Establish a common repository for storing work-in progress changes as well as completed change documentation, thereby minimizing confusion around scope.
Pitfall #9: Lack of a framework for process management
If you adopt the ITIL™ approach for process management, then make sure that you maintain and evolve it over time to continually meet the changing needs of your organization. If you cannot or choose not to adopt the ITIL™ approach, then focus on incident management as your highest priority. A well-structured Incident Management plan will serve your IT organization well. But what’s most important is to implement an effective process management system across your entire organization and adhere to it in a coordinated fashion.
Pitfall #10: A lack of innovation in your partnership
Most IT providers lack the capacity to infuse innovation into an Applications Management relationship. Companies that fail to launch the right new product at the right time will be punished more severely now than ever before. But how do you develop new solutions? Can innovation really be strategically planned? Read the full white paper as we discuss three types of innovation strategy: First Movers, Fast Followers, and Trendsetters.
A tight, well-designed approach to outsourcing Application Management Services should certainly start with the fundamentals. What do you hope to achieve in the short and long term?
But your research should also evaluate the role of innovation in your AMS partnership. Does your partner bring ideas to you that are outside of scope? Do they consider the long-term objectives and not just their narrow scope of responsibilities?
By avoiding the common pitfalls outlined in the full whitepaper, you can craft a relationship that will yield substantive, measurable, and innovative benefits for your IT organization and your entire company.
For more information on Microexcel’s ExcelCare SAP AMS program, contact us at firstname.lastname@example.org and download the whitepaper for more details on how to avoid common pitfalls of SAP AMS. Also available is our on-demand webinar of The Top 10 Pitfalls of SAP AMS.