Gartner Research

Effective Strategies to Deliver Sustainable Cost Optimization in Application Services

Published: 04 October 2017

ID: G00327748

Analyst(s): Stewart Buchanan , Kris Doering

Summary

The pressure to optimize application service costs is compounded by the demands of digital business initiatives. Sourcing and vendor management leaders can move to fixed-price, outcome-based contracts, leverage automation and perform an application portfolio analysis to deliver sustainable results.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Move to Fixed-Price, Outcome-Based Pricing Models
    • Benefits of the Fixed-Price Model
    • Why the T&M Pricing Model Is Prevalent
    • How Agile Development Can Help
    • How Productivity Units and Measurement Tools Can Help
  • Negotiate Year-Over-Year Cost Reductions Through Efficiency and Automation for Application Management Contracts
    • Add Efficiency Improvements as KPIs
    • Adopt a Reinvestment Model to Incentivize Providers
  • Conduct an Application Portfolio Analysis to Drive Long-Term Value

Case Study

Gartner Recommended Reading

©2020 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see Guiding Principles on Independence and Objectivity.

Already have a Gartner Account?

Purchase this Document

To purchase this document, you will need to register or sign in above

Become a client

Learn how to access this content as a Gartner client.