The Application Lifecycle Services market seems at first glance to be a reasonably stable market, which is developing slowly but steadily. But if you venture into the impenetrable forest of clients and contracts, talk with directors and peer through to see what is happening below the surface, you notice a number of interesting developments. These developments are deciding the path for the continued development of the IT function at organizations and Capgemini’s current service provision in the area of Application Lifecycle Services.
From focus on technology to focus on innovation
Since the credit crisis, growth has become the new mantra of the business. For the IT department this means that the attention to ‘through-put’ – the IT products and services – is shifting to the clients, the business. On the business side, the urge for growth has resulted in something of a client obsession. Business directors are more attentive than ever to the requirements and wishes of buyers and realize that IT is the key to innovation. They also have a better understanding of the possibilities and impossibilities of IT. What is defined as innovation will still require more clarification on both sides. It could involve improving the IT operation, improving the functionality of the applications or changing the processes – the business model. The aim of the latter could be to develop an entirely new economic driver for turnover and profit on the basis of IT. At Capgemini, we implement the first two innovation variants with Application Lifecycle Services, while the last is implemented by means of ‘Digital Transformation’.
The IT director himself is becoming a legacy
In Application Lifecycle Services, we are not concerned so much with the development of applications, followed by proper management and maintenance, but mainly with the constant improvement, modernization and rationalization of these applications. In this context we see that the traditional, technology-focused function of the IT director is coming under major pressure and is even starting to disappear. Managers in the role of CIO – focused on information management – seem to be retaining their place, but we are seeing more and more new roles focused on the digital era, such as the Chief Digital Officer and Chief Innovation Officer. IT managers whose main focus is the operations and technology are increasingly becoming more isolated. CIOs, on the other hand, usually have a clear step-by-step plan in mind to increase the added value to the business.That starts with aiming to safeguard and improve the operation in order to strengthen quality and continuity. Parallel to this, they intensify the relationship with the business. For the rest, more and more applications fall outside the CIO budget because the business buys them in directly – often from the cloud – with all the challenges this entails for the IT department.
Best Value Procurement
The challenges for CIOs have increased significantly therefore. Costs must be reduced considerably, the operation must become ever smarter and more effective, new functionality must be available more quickly and the pre-financing of investments is becoming less open to discussion. At the same time, retaining talented employees requires a great deal of attention and the added value that IT represents for business growth must also be demonstrated.
A very strong and complex paradigm that is tackled on the one hand via the step-by-step plan and on the other by working with a limited number of service providers – by means of selective sourcing. These service providers put themselves in the position of real partners, who participate in the risks. Some of the ways this can be done is by offering transparency in contracts, costs, delivery and performance. The traditional procurement method based on the ‘thousand questions lists’ no longer fits in with this. Instead, more and more use is being made of Best Value Procurement. With this kind of procurement, the customer indicates what he expects as result and the service provider indicates how it can achieve this. This lends itself better to selection on the basis of complementarity, added value and initiative. And even to a personal assessment of the providers, because ultimately it is all about choosing the right people for the work. We also see increasing flexibility in agreements, which puts pressure on a relationship based on partnership.
While it was customary in the past to source per silo or functional IT domain, now one or several service providers are selected for integrated service provision in the application landscape. Thinking cyclically is the basis here, management and maintenance are the point of departure. Depending on the dynamics of the applications, the life phase, integration points and business context, additional activities are subsequently expected of the provider in order to guarantee that the applications tie in with the changing business processes. That is why CIOs are more frequently charting out the baseline of their IT operation: What applications are in the portfolio, what are their features and what potential is there for improvement? The direct costs for each application are identified and the productivity of the whole is determined. This results in decisions to rationalize or modernize, for instance, and in insight into the potential for improving the quality of the applications and the effectiveness of the IT operation.
One Xcellent organization
Porter already advised in 1957 that organizations should carry out their activities as efficiently as possible in order to prevent them becoming too expensive and losing market position. In combination with renewed attention to the customer, it is becoming more common therefore to standardize the processes and IT of similar business operations, unless legislation or local market conditions dictate de-centralization. Centralization is a common topic on the agenda therefore. After centralization comes standardization and integration. Standardization offers the possibility of replacing and rationalizing systems, which results in major cost reductions. And that requires insight into the baseline.
In the meantime, service providers are adjusting their services to the changing demands on the market. The market leaders are constantly working to improve productivity at the insistence of customers. The quality and standardization of service provision are important preconditions for this. One consequence is that customers are increasingly more satisfied and also more willing to conform to the provider’s standards. This improves the quality of the operation, enables new functionality to be delivered faster and pushes down costs considerably. Offering standardized services also allows the service providers to offer a predefined set of services, depending on the context of the application. We call this productized services. Capgemini is a frontrunner in this. Our various standard delivery models – industrial models – match the dynamics, integration and business orientation of the applications. And every delivery model has its own managerial profile, with specific features relating to, for example, resources, risks, KPIs and costs. Every one of these models can be supplied in cooperation with or entirely by our colleagues in India to effectively keep costs down. One of the newest delivery forms – called DevOps – is even already suitable for ‘Continuous Delivery’ of new functionality for systems that require a great deal of updating in order to continue satisfying rapidly evolving customer expectations.
The future of IT
For the rest, the increasing maturity of service provision makes it necessary to bring demand articulation to the same level. As a result, the development of the business information management function receives a great deal of attention while it’s still going in all directions. After an initial technical or geographical classification, in keeping with the current maturity, the expectation is that this function will be set up for each end-to-end process, such as ‘Order2Cash’ or ‘Procurement2Pay’ for instance. These business information managers will, in several years’ time, also presumably procure on the market the services that are needed to support their process. The IT department will then become a small management organization that coordinates and configures this cohesion. This is then finally the realization of Garner’s IST light model from 2003.
This article was written by Co Van Leeuwen from CapGemini: Capping IT Off and was legally licensed through the NewsCred publisher network.