Gartner Research

Effective Strategies to Deliver Sustainable Cost Optimization in Application Services

Published: 04 October 2017

ID: G00327748

Analyst(s): Stewart Buchanan , Kris Doering


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



  • 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

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