New AMS models take on the IT talent shortage

Profile picture for user Phelan and Plese By Pat Phelan and Anne Plese April 28, 2020
Summary:
Traditional Application Management Services don't deliver what businesses need. Pat Phelan and Anne Plese of Rimini Street make the case for new AMS models

Architecture of ERP system with connections and hand showing gear to success concept © everything possible - Shutterstock
(© everything possible - Shutterstock)

The pool of IT experts is shrinking and the talent that remains is being spread thinner as new technologies create demand for expertise. According to Gartner's Survey Data: Gartner Talent Management for Tech CEOs Survey, 2020, tech leaders see attracting and retaining talent as a top three priority over the year ahead. Meanwhile, the cost of maintaining older technologies continues to rise. According to Gartner's Predicts 2020: Negotiate Software and Cloud Contracts to Manage Marketplace Growth and Reduce Legacy Costs:

[E]ach year, support costs for legacy software increase, while the benefits gained from that support decrease, leading to more organizations seeking lower-cost third-party support options.

What does this mean to your organization?

Organizations looking for staff augmentation are often are doing so as a short-term bandage for IT talent. But, it's expensive – and just when you get new resources trained on your business, they get recruited away. When IT expertise is coupled with the need for experts to understand the business, the IT pain becomes acute for many CIOs.

What's more, traditional strategies for offshore or nearshore outsourcing, shared services, or captive centers for business and IT services are often not enough to address a talent shortage. This is putting pressure on IT operating models globally, often around two key trends:

  • Original ERP experts are rapidly disappearing

  • New cloud and SaaS landscapes demand new talent and skills

How this impacts your ability to deliver new or critical IT services

The pool of talent that understands your business needs is set to shrink dramatically in the future, and the impact could be unstable systems, more escalations, less control, missed milestones, or increased friction with the line of business. Here also, Gartner, in its 2019 Strategic Roadmap for Postmodern ERP, highlights the acute impact that many are feeling:

ERP talent shortage is already causing problems and will be a major impediment to success over the next three to five years.

Many enterprises are facing escalating operational costs and productivity drag, and they are already shifting toward automation or swarming as alternative approaches to filling the skills shortage. Or, they are diligently mapping talent or skills needed to ITIL 4 – and looking to both swarming and shifting left. But they remain continually challenged with such a shortage in legacy ERP talent and knowledge, which is leading to a growing backlog of IT projects and seemingly endless incidents.

Are Application Management Service providers stepping up?

Not really.

Why? Simply put, their business models aren't designed to. That's because they have a ‘land and expand’ model, based on man-hours. The Application Management Services (AMS) industry has operated this way for years, admitting that value-driven AMS has been elusive and problematic, according to Deloitte’s historical observations:

  • Labor arbitrage and scale provides some initial cost relief, but resulted in increased pressure on quality, risk, agility, and internal management.

  • Separation between maintenance and continuous value delivery prompted ‘over the wall’ engineering – favoring… speed over insight. Attempts to supplement resources with skilled talent lead to prohibitively high costs – especially for architects, project managers, and senior business analysts.

  • Cost, capacity, and contract execution against tactical SLAs drove the agenda, not results and value.

  • Deals were structured around business process improvement, but these were rarely achieved. Body count was all that mattered.

So, what are your options? Here's a deeper look

Many IT leaders are still pursuing traditional, low-cost outsourcing, staff-augmentation, apprenticeship programs, and scenario planning to look ahead at what skills and talent will be needed. Gartner itemizes key approaches with How to Develop an IT Strategic Workforce Plan and Getting started on Your Apprenticeship Program. This research includes using advanced methodologies, such as scenario planning, to look ahead at the skills and talents that will flex with the business – as well as programs to retool your workforce.

Beyond automation and swarming, we see clients using more creative approaches, such as looking to the gig economy. Labor cost differences across national boundaries are creating a strategic pool of invisible talent that exists beyond those borders. Gartner, in its Maverik Research: CIOs Must Tap Into the Invisible Talent Pool, admits that CIOs must learn to tap this pool as a key resource in the digital business era, but will that be enough?

The skills may not be there. Availability and skills matching are not guaranteed. But such skills do already exist in independent, third-party support models. Those models are expanding to include Application Management Services (AMS).

Stay ahead of the curve with integrated support and AMS

Enterprises are already getting ahead of staffing shortages.

For example, the progressive construction and civil engineering firm, BrandSafway, found more value by integrating independent, third-party support and AMS into an integrated IT service delivery model for its Salesforce application. As Jay Fisher, CIO, BrandSafway explains:

We were struggling with a mountain of tasks, which were incredibly time-consuming, and were looking into hiring additional personnel to help manage the workload.. We also knew that we weren't realizing the full potential of our Salesforce system due to this backlog.

In another example, Brazil-based Promon Engenharia – providing infrastructure solutions for customers across electric and bio-power, mining and metallurgy, oil and gas, fertilizer, chemical, and petrochemical markets – elected to combine AMS and support services to streamline SAP IT operations. Marco A. Lamim, information systems manager for Promon Engenharia, comments:

We believe that IT is critical to achieving our business objectives, creating competitive advantage and supporting growth, and our SAP ERP system is an important part of our strategy. We rely on it to stay up and operating smoothly.

Maintaining a balanced pool of talent requires including experts that understand what the business needs along with getting the right mix of legacy and cloud skills. Use a business-driven roadmap to guide development of an IT skills roadmap that can support technology needs in the short and long term.