Companies are Raising the Bar for AMS Providers

How CIO’s and CTO’s are Changing the Narrative on AMS Expectations

Application Management Support (AMS) providers aren’t winning or preserving AMS awards based on rate arbitrage alone.  CIO’s, CTO’s, and infrastructure leaders want more from their AMS delivery providers.  The mantra of “show me the money” is quickly evolving into “show me the continuous improvement” and “show me the improvement in business outcomes.”

Cost arbitrage and commitment to a managed service model for application support services are still table stakes for consideration by companies.  However, the deciding factor in selecting the right fit for application support is provider commitment to productivity and continuous improvement, not just to process efficiency but also improvement to business outcomes.

AMS providers have attempted to address commitments to productivity and continuous improvements touting AI tools like IBM’s WatsonTM, Cognizant’s Evolutionary AITM, TCS’s ignioTM and others, but have lagged in making commitments to specific and tangible improvements.  Companies now are requiring firm commitments to these types of improvements over the term and insisting on measuring the realization of these improvements with specific language and supporting service levels.

Gone are the days where service-level agreements (SLAs) were acceptable based on commitments to incident response, incident resolution and, where applicable, application availability.  SLAs are standard in the IT outsourcing landscape.  As large enterprises have outsourced more IT functions, they have viewed SLAs as mini-insurance policies. The idea was to “guarantee” the chosen IT service provider would deliver the promised performance levels or face penalties (like credits). The “guarantee” would allow the enterprise to focus its attention and internal resources in other value-add areas.

But AMS service providers, in particular, have yet to commit to providing that “guarantee” when it comes to productivity and continuous improvements and when committing to CSAT (Customer Satisfaction) SLAs, they continue to push back on penalties.  AMS service providers still think of SLAs as something they simply have to do and must include in every master services agreement to reassure their customers.  Yet they remain reluctant to put skin in the game with strong SLAs and related penalties tied to these metrics, often offering only vague or generic language that doesn’t match the customer’s desired performance, outcomes and/or needs.

Companies now are mandating customer satisfaction, productivity and continuous improvement service levels with sizeable penalties tied to adherence.  Examples of how companies are gauging these now mandatory measurements are:

  • CSAT SLAs: Average scores of 4 on a scale of 1-5 or percentages of “Satisfied” to “Highly Satisfied”
  • Productivity Improvement SLAs: Greater than or equal to “x” number of productivity improvements per quarter (either offered by providers or implemented by providers)
  • Mean Time to Resolve: Measuring specific reductions in effort hours or total time
  • Robotic Process Automations: # of manual processes automated per month or quarter.

Whether companies are looking to outsource their application management support or considering a renewal of their current agreement with their incumbent provider, all are looking for the next step in evolutionary value.

In an ideal scenario, the benefits of an established relationship with your AMS provider should be evident.  A mature relationship should drive the appropriate level of efficiency within your delivery model, demonstrated through cost reductions realized over time, continuously improved service levels, and innovation.  However, our experience reveals that vendor incumbency often leads to value erosion across the various areas of your relationship, resulting in a 15% — 20% average opportunity loss when all factors are considered.

AMS providers are stepping up to the challenge but the resistance is tangible.  Be ready for your provider to test the strength of your resolve to measure and penalize for not meeting these improvement targets and CSAT measurements.  Companies must secure executive-level commitment to these requirements and often will need to generate leverage via competition and/or a willingness to change providers to garner these 2nd generation commitments.

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