More than a decade since I have been associated with global delivery based “Application Management” (read: Application Support) outsourcing, I have seen this service mature and transform.  “Application Management” outsourcing was first among American corporation CIO’s due to relative lower risk and quicker ROI. Among the first focus were; significant cost savings, SLA based services, continuous improvement and best practices to realize efficiencies.  The advent of ERP applications (both for SAP and Oracle Applications) saw benefits beyond  such as  speeding up capital projects implementation and further cost savings with business knowledge gained. The era of “Application Outsourcing” (AO) saw application transformation, optimization and consolidation as major source of efficiencies.

Off late “Revenue Model” coupled with “Application Portfolio Management” is gaining ground in the outsourcing market. This is generally used for support and projects combined.  Let me explain, considering an enterprise IT scenario. (1) Your key applications need a dedicated support. I.e. you’re critical business applications that have highest complexities and larger user base, needs highest level of support and hence a “Dedicated Model” from your service provider is a must to meet your business needs.  (2) Your less complex applications, even if large user base might suffice a “Shared Model”. When managed well, this will provide higher level of efficiencies and greater cost savings. Both these models have been in place for a while, the scope of shared services model has been growing. (3) There is always (small) set of applications that are low in complexities and small user base in most enterprise IT.  These are effective candidate for “Pay-Per-Use” model. I.e. a ticket/transaction based model and one pays for services only when required. Much like our toll roads, you pay when you use. I must warn you though “Pay-Per-Use” term is used in many contexts and generally for projects.

Applications management services are like buying insurance, as contingency. CIOs can now view the entire IT applications as portfolio and divide them to be serviced in “Dedicated, Shared and Pay-Per-Use” model for best efficiencies. The industry should see growing maturity with these offerings in next few years, but this is right time to ask your outsourcer(s). The availability of APM (Application Portfolio Management) tool should further help this cause.

I would love to hear your views or any experience.

We recently conducted a very successful webinar “Peer Advice: The Inside Story on Upgrading to Oracle E-Business Suite R12” in collaboration with CIO.com. One of our customers Clopay Corporation, the nation’s largest manufacturer of residential garage doors along with Oracle Corporation participated sharing their insight and experience. This webinar was very well attended with large number of CIO’s and VP’s of IT throughout North America. You can view more details at our website. A large part of the webinar was devoted to Clopay Corporation discussing their R12 upgrade journey with details on strategy, business case, execution, successes measurement and finally advises to CIOs. Oracle also updated the participants on the business benefits they will realize upgrading to R12. One of the benefits to live interactive webinars is that you can get real world feedback on the fly.

When we asked the participants “Are you planning to upgrade to Oracle EBS R12? More than 50% of the participants mentioned that they are not looking for upgrading to R12 in 2010. I was really surprised that more participants hadn’t started the upgrade planning process. There are many benefits that can be realized by upgrading. Part of the reason could be waiting for Fusion. I expect Oracle will be clearer on this path over the next few months. Companies that are starting to research their service provider will be on top of their game. An interesting next question was – What is your reason for not upgrading until now? 32% of the participants cited no in-house bandwidth as the reason with 30% not sure about ROI. This partially answered above response. Choosing a right service provider to help with your upgrade is critical – given the R12 upgrade momentum, one might want to consider moving fast to get the right attention from a provider whose capabilities fit the best. Creating an ROI can be daunting; this is where methodical approach such as Clopay’s can help in overcoming the issue. Every organization is unique – with Oracle and service provider’s help, IT leadership team can make an appropriate case with ease. I would love to hear your thoughts. Have you started your upgrade yet? If you haven’t started the upgrade what is the reason? I look forward to your feedback and thoughts on this interactive blog.