Ashish Chaturvedi, Bruce Guptill, Jan Erik Aase Research Alerts
What is Happening?
ISG has released its first ISG Provider Lens™ Quadrant research study on Application Development and Maintenance (ADM) services for the U.S. market. ISG’s analysis of enterprise digital business growth indicates a series of disruptive changes in enterprise application development and maintenance (ADM) use and benefits, which changes not only how and why ADM exists within the enterprise, but also the types of ADM services that IT providers bring to market.
This research report juxtapositions insights developed from ISG’s work with hundreds of enterprises worldwide against ISG’s analysis of providers’ ADM offerings, capabilities, and market presence to help both ISG advisors and clients evaluate current provider engagement and consider new relationships in meeting different enterprise business needs specific to their US operations. The results are plotted in a four-square quadrant format as illustrated in Figure 1.
Figure 1: 2017 End-to-End ADM Quadrant – U.S. Source: ISG Research, 2017.
ISG’s Provider Lens quadrant model positions IT services providers as follows:
- Leaders. These are the most appropriate set of providers to cater to the needs of the enterprise client needs as described.
- Product Challengers. These providers have a very attractive portfolio of services, but are limited by their competitive strength.
- Market Challengers. The providers possess competitive strength, but need to improve portfolio attractiveness.
- Contenders. These providers need to work on their portfolio attractiveness as well as their competitive strength.
- Rising Stars. Services providers that didn’t make the Leaders quadrant, but which demonstrate significant traction in either competitive strength or portfolio attractiveness, and which are expected by ISG to continue this trajectory based on current trends, are identified as Rising Stars.
Please note: Featuring a provider on a quadrant directly indicates that it is a relevant player in the market irrespective of its relative positioning.
The evaluation parameters and rating criteria for each quadrant are developed from ISG analyst and advisor experience with large enterprise IT and business organizations. The data regarding service provider capabilities comes from focused surveys, briefings and interviews with providers, inputs from ISG advisors, ISG benchmarking data, ISG Contracts Knowledgebase, ISG Engagement database, and desk research.
The x-axis of the quadrant is focused on the competitive strength of providers, evaluated using parameters such as brand image & awareness, geographic coverage, experience, execution capability, and their sales & marketing ecosystem. The y-axis of the quadrant takes into consideration services providers’ portfolio attractiveness, and evaluates them on parameters such as vision and strategy, pricing competitiveness, technology competency, partnership ecosystem, innovation and differentiation, and their breadth of services.
Why is it Happening?
As noted in the report, ISG analysts see several significant trends shaping, and reshaping, the typical enterprise need for, and value of, ADM itself – and therefore reshaping the value of what enterprises receive from providers’ ADM services. These include the following:
- Digital transformation. The digital business drive is giving rise to several sub-trends that affect ADM, such as multi-modal operations in which business units run at different paces based on business urgency and criticality, low-code/no-code platforms that allow organizations to quickly configure rather than code applications, enthusiasm for more data-led initiatives and the adoption of cloud-native architectures.
- Modularization, containerization, and componentization are growing. Because an application gets broken down into workloads and microservices, its release and production cycles are short, which makes applications easier to modify and deploy. Taking a modular, container or component approach also decreases the dependencies among team members because they no longer need to deal with tightly coupled applications.
- Business digitization is dividing the enterprise application function. Business digitization is expanding quickly to eventually break the application function into two areas or approaches: traditional and digital. The traditional organization can focus on stability and efficiency through linear growth, following stringent governance rules, executing plan-driven conventional projects and working with traditional providers. Meanwhile, the digital function can be an experimental, agile organization focused on time-to-market, agile app evolution and projects with shorter working cycles and smaller teams.
Net Impact
As ADM itself is changed by the shift to digital business, so does its relative value – and so must the relevant services and the providers delivering them. Enterprise app and maintenance budgets are shrinking, and ADM services contracting is shifting to shorter-duration contracts with smaller overall cost for the enterprise (and revenue for the providers). As a result, providers are more willing to engage in more outcome-based and gain-sharing-based pricing, as well as pricing based (at least partly) on factors such as the number of users, application maturity, or number of transactions. We also see more bundling of ADM services across more application types, as providers strive to further improve their value to the enterprise while trying to extend their own presence and influence within the enterprise.
The ISG Provider Lens Application Development and Maintenance Services quadrant report explores all of the above as well as providing in-depth analysis of ADM services positioning in the Banking/Financial Services/Insurance (BFSI) and in Healthcare/Life Sciences industry (HCLS) segments – two segments with well-established application outsourcing histories, and often seen as leading-edge indicators of more widespread IT services outsourcing and related behaviors.
This report is not meant to rank providers or to assert that there is one top provider whose abilities can meet the requirements of all clients. However, it does suggest that based on the current market requirements, which providers have the most attractive capabilities, presence, and track-record to meet these requirements.
To obtain a full copy of the report, contact ISG at ISGLens@isg-one.com or call +1.203.454.3900. Clients of ISG Insights subscription research services will see further analysis and insights from this and other, future ISG Provider Lens studies.