Many organizations are choosing the option to explore outsourcing – contracting out all or parts of their business processes to an outsourcer, also known as a systems integrator (SI). This enables the organization to focus on its core competencies, while mitigating any weaknesses by using the expertise of an outsourcer.
This blog explores details of the trend towards outsourcing and its pitfalls, offering guidance on strengthening the partnership between organizations and the outsourcer by addressing some ongoing concerns.
The here and now
According to recent research, which polls 590 CIOs and IT directors from nine countries around the world, nearly half of all organizations with mainframes are currently outsourcing the development and maintenance of their mainframe applications to SIs. Over 60% of respondents say they have some form of outsourcing agreement. The outsourcing market has grown vastly over the past decade and it looks like the trend is set to continue with the outsourcing market expected to reach USD 4.49 billion globally in 2020.
By outsourcing, organizations are aiming to derive business value, yet the difficulty of establishing and managing an effective and cost-efficient outsource model is well-known to organizations across the globe. The result: an operational imbalance between organizations and their external suppliers – and the industry seems to agree…
The mainframe has been the bedrock for masses of IT environments over the past fifty years and will continue to be so according to research. Yet, many organizations are looking to leverage the reliability and capabilities of the mainframe to accomplish even more – and, as such, an increasing number of CIOs are looking towards outsourcing.
Over many years key applications have advanced in order to meet business demand – in support of this the skills required to maintain and develop these applications have evolved. Ultimately, as a direct result, a well-publicized skills deficit within mainframe development has been created – whereby demand is outweighing supply. College leavers have limited COBOL programming knowledge and other object-orientated languages, such as Java, are currently the ‘in-thing’. Consequently, recent years have seen an increasing number of organizations exploring outsourcing options so they can benefit from skills which in-house teams are lacking.
A 2012 study led by Compuware Corporation surveyed 520 CIOs and had a look at the attitudes towards – and the experiences with – mainframe outsourcing. The study outlines that:
- 71% of organizations are frustrated by the hidden costs of mainframe outsourcing
- 67% expressed dissatisfaction with the quality of new applications or services provided by the outsourcer
- 88% of organizations on CPU consumption-based pay structures believe their outsourcer could manage costs better
- 68% of organizations outsource maintenance of mainframe applications because their in-house team no longer has the knowledge to maintain them
- 80% of organizations believe difficulties in knowledge transfer are impacting the quality of outsourced projects.
Though the results outlined above depict an overall mixed experience, it’s important to recognize the vital role an outsourcer can play when the balance is right. A good understanding of the challenges which may arise will enable an organization considering outsourcing to be one-step ahead, providing preparation time to implement processes and technology to ensure a successful relationship.
The challenges of outsourcing
Let’s consider a number of typical concerns facing organizations looking to outsource application maintenance for parts of their IT portfolio:
Inherited application complexity
Many years of innovation and change has inevitably created a highly complex application environment. As a result, for both parties, getting up to speed is often difficult and time-consuming as access to vital application knowledge is slow.
Difficulty of task
More likely than not, the part of the portfolio being outsourced is, unsurprisingly, motivated by the current difficulty, costs, or sheer effort of the client doing tasks themselves. Large ‘legacy’ systems are often poorly documented, written and maintained by many developers over the years. This lack of insight and inconsistent approach makes them difficult to enhance and innovate. Sometimes, the outsourcer can inherit unexpected challenges, immediately jeopardizing the initial objectives.
Reliance on older technology
It can sometimes come as a surprise that the existing processes to support rapid application change are dated at best. While the client might outsource the task of changing applications to gain more people to do the work; what it doesn’t do is fundamentally improve the efficiency of the process. Often there is a reliance on older technology and processes which are not fit for 21st century IT delivery or user expectation.
Limited delivery and testing cycles
Another significant bottleneck is the normally highly-regimented schedule for delivery and testing. Driven by hardware or system constraints, there are typically fixed windows of opportunity for development and QA phases. With such delay comes rework, and with rework comes additional resource burden, and cost – each phase in the coding, debugging, unit test and QA phase consumes vital resources. In many cases though, increasing Million Instructions Per Second (MIPS) to accommodate the Outsource Service Level Agreement (SLA) is not an option.
Client IT resources are precious
These include key staff, who are constantly in firefighting mode, as well as the hardware and infrastructure, which keeps the whole operation running. While adding extra SI staff to the mix might provide more developer resource, meeting this new increase in demand for infrastructure is not easy. Additional hardware resources may well be needed and day-to-day response times may be longer if the outsourcer’s staff are in a different time zone.
Getting the balance right for outsourcing success
While IT organizations require better value, faster turnaround, enhanced quality deliverables, and innovation from their SIs, the system integrators struggle to contain costs, cope with inherited application complexity, and manage large project teams all of whom may be accessing the mainframe and further increasing MIPS usage. Understandably there will be obstacles along the journey.
Getting the right balance ensures outsourcing success, and that comes down to having the right technology. It should focus on knowledge transfer and quality of code changes, enable a higher degree of quality assurance, and have faster delivery cycle turnarounds. Most importantly, it must provide significantly more computing capacity to get the job done efficiently.
To ensure both client and SI gain, they need to:
Gain a comprehensive understanding of application portfolios
A solid knowledge foundation enables architects to quickly identify ways to boost application efficiency and flexibility as well as accelerate optimization activities and ongoing maintenance.
Provide greater capacity for application change and testing
The latest integrated development environment (IDE) technology can improve productivity by up to 40% and remove any capacity bottlenecks, enabling Service Delivery and QA teams to cut through workload with unprecedented speed, subsequently accelerating delivery times.
Introduce quality assurance earlier in the process
Perform a variety of pre-production testing on low cost commodity hardware, avoiding unnecessary cost and delay. Meet delivery demands even at peak testing times without compromise.
Minimize mainframe usage and contention to reduce cost
Analyze, develop and test without incurring the costs of additional MIPS usage. Reduce the ongoing cost of mainframe testing resources and contain costs of expanding test resources by exploiting lower-cost alternatives.
The Micro Focus way…
From the start, Micro Focus helps efficiently manage outsourcing planning. By exposing the application landscape, application complexity becomes simplified for better knowledge transfer and more accurate specifications. An enterprise development environment that supports cross-skilling, removes mainframe constraints and lower infrastructure cost through reduced MIPS usage – as a result the hundreds of SI programmers may not have to touch the mainframe at all.
Micro Focus Mainframe Solutions address the imbalance, enabling organizations and their suppliers to meet the challenges of outsourcing and gain more value while reducing the hidden costs of the outsourcing contract.
Interested in finding out more? Make sure you read our white paper to take the first steps towards smarter outsourcing.