Apps management to buck IT spending slide

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Spending on applications management services in Western Europe will exceed €9 billion (£7.6 billion) in 2009, according to a new study from IT services researcher, Pierre Audoin Consultants (PAC).

It said applications management would be one of the few areas to dodge the widely predicted contraction in IT spending due to ongoing, global economic uncertainty, as enterprises look to reduce their operating costs, rationalise their applications estates and improve their software processes.

Nick Mayes, PAC senior consultant, said: “Applications management will remain a robust area of spending for organisations during the current economic downturn, as it can offer a way to reduce operating costs without the commitment and sourcing complexity of a large outsourcing engagement.”

Applications Management in Europe – A Buyer’s Guide defined application management as the maintenance and enhancement of existing applications, as well as initial development work. The report made a distinction between application management and application outsourcing, when a supplier takes responsibility for managing the entire application chain including the server and operating system.

It advised those looking to find an applications management provider to look for one offering transparent pricing that includes a breakdown of saving through labour arbitrage; additional savings and service improvement methods; and proactive evaluation and improvement of the service in terms of efficiency, effectiveness and flexibility.

It also recommended establishing how secure the supplier’s current and future financial positioning is and considering, as a result, whether or not to commit to a multi-year deal.

Mayes said that those suppliers that are able to go beyond simple labour arbitrage savings will be best placed to deliver long-lasting value in terms of process improvement, industrialisation and resource optimisation.

“The application management suppliers that will succeed in the current market will be those that can deliver a ‘blended’ service combining onshore customer intimacy, as well as cost effective offshore skills,” he added.

Logica was ranked as the largest provider of applications management in the region, off the back of recent acquisitions of France’s Unilog and WM-data in the Nordics. It held an 8.5 per cent share of the €7.6 billion (£6.4 billion) spent in this market in 2007, which put it ahead of Accenture and IBM and European rivals Capgemini and Atos Origin, respectively.

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