Study Shows Only 10% of Enterprises Have Effective Applications Strategy

In an ideal world, enterprises that invest in application services capabilities would see a return in the form of application quality, operational efficiency and speed to value, but only 10% of enterprises have an effective Applications Strategy, according to a recent report by the Everest Group.

The firm recently surveyed nearly 200 C-level officers of global enterprises with revenues over US$1 billion and found that nearly 90% of global enterprises are unable to achieve the desired business outcomes of their application portfolios.

“Unfortunately, too many enterprises focus entirely on either investing in new technology stacks or blindly replacing their legacy applications, and this unbalanced approach is highly ineffective,” said Yugal Joshi, vice president, Information Technology Services, at Everest Group.

“In contrast, 10% of enterprises are able to achieve significant improvement on their business metrics as a result of their applications strategy. What these leading organizations have in common is that they take a balanced view of their legacy and new application investments,” he added.

Everest Group identified four more elements of effective applications strategies that leading organizations share, namely: 1) alignment of business and IT objectives 2) outcome-oriented organizational structure 3) robust talent strategy for legacy and 4) new applications as well as investment in strategic automation.

The study shows that application services, which comprises application development, maintenance and testing services, accounts for approximately 32% of the US$539 billion global information technology services (ITS) outsourcing market, which is expected to continue growing at 2% per annum.

Also, application strategies are the fulcrum of the ITS industry, the study shows over 79% of ITS deals having some form of application services in the scope. Stand-alone application services deals have been growing consistently and contribute the largest share (68%) to the IT services market, it said.

Of the other findings, the study shows that enterprises are not shying away from making long-term investments. That is to say that deals with longer duration (longer than three years) have seen an increase at the expense of deals with shorter duration.

Joshi further observed that the average deal sizes in most verticals have plummeted, except for healthcare and life sciences, which saw a marginal increase in deal sizes. Multi-region deal signings decreased sharply from 11% in 2017 to 2% in 2018, the study said.

In the current scenario, transformative enterprises should balance application development and modernization of legacy apps through effective Applications Strategy to drive agility, better customer experience, recommends the study.