CIOs are clueless when it comes to understanding their application maintenance costs. But it's not ignorance that prevents them from taking control of skyrocketing expenses. It's the lack of visibility.
Ever-expanding maintenance budgets have tied the hands of CIOs, who would rather send money to new projects that add value to their businesses. A little visibility into how those maintenance dollars are spent might loosen the knots.
"CIOs can't manage what they can't see," said Phil Murphy, principal analyst at Cambridge, Mass.-based Forrester Research Inc. Murphy said decades of growing IT environments have left CIOs with a murky view of how to spend their maintenance dollars.
A Forrester survey, cited in a new research report by Murphy, revealed CIOs will spend only 20% of their 2006 IT budgets on new projects. Murphy said CIOs are spending the other 80% of their budgets to "keep everything else running."
Indeed, 30% of the average IT budget goes straight to the salaries of staff performing ongoing operations and maintenance, Murphy found.
"It's cumulative," Murphy said. "You built five new systems last year. You've got five more to maintain this year."
Murphy said it's this lack of visibility into a company's application portfolio that allows maintenance budgets to grow out of control. This has CFOs upset because they are convinced "CIOs are salting money away," Murphy said.
CIOs simply don't have the information they need to better manage the maintenance of their legacy systems. They don't have the metrics to measure how large their applications are, how much value they bring to a company, or how much money it costs to maintain them.
CIOs are fully aware of this problem, but they seem to be struggling with how to deal with it. MKS Inc., a provider of application lifecycle management solutions, sponsored a survey last month that revealed that 50% of CIOs believe that being able to measure application maintenance and development activities is a high priority. But only 4% of them have that sort of visibility into the maintenance.
But Murphy said there is a technology that can help. Application portfolio management (APM) tools provide those metrics. Murphy said APM technology allows management to make strategic decisions about their applications.
"It wraps some metrics around your existing applications," Murphy said. "How many do you have? How big are they? How complex are they? How many times are you changing them, and why do you change them."
With APM technology, CIOs have real-time views of the application portfolio within an organization and can see trends over time, such as whether applications are getting more expensive to maintain. CIOs can measure the balance between the value of an application and the cost of maintaining it. Armed with this knowledge, they can decide whether they want to rebuild, replace or even outsource the application. Now CIOs can begin to prioritize maintenance projects and keep an eye on them.
APM solutions have been around for a few years, but adoption has been slow.
"It's been around for a couple of years, but it's an 18-month implementation. And everyone needs to hear a success story before being the next one in," Murphy said.
Murphy said two leading APM vendors are HAL Knowledge Solutions in Milan, Italy, and Metallect of Plano, Texas. He said other companies are moving into the APM space, such as MKS of Waterloo, Ontario, which has announced a new version of its application lifecycle management product that includes APM functionality.
Without visibility, political pressures within a company can sometimes upend an IT department's priorities. For example, Murphy said, a business unit manager might pitch a maintenance project to IT, but it doesn't get funded. That manager might take advantage of a working relationship with some programmers in the company.
"He's disappointed. [The programmers] really want to help him out. They decide to put time on the project, one bug at a time. In effect, they're stealing resources from a prioritization scheme. It happens with the best of intentions, but it bleeds a company dry. Multiply that scenario by dozens and dozens of business unit managers. This is what visibility shows us."
Chris de Mol, director of process and software engineering at Tele Atlas NV, adopted MKS's application lifecycle management solution two years ago. He said his Boston-based company, a supplier of digital maps, needed to formalize its application lifecycle in order to comply with an International Standards Organization standard for the automotive industry, which buys the company's maps for navigation systems.
De Mol said visibility into the application portfolio is critical. "You have the typical management questions that are always there and are difficult to give an answer to: What are the people working on? If I start working on a new project who will I put on it?"
After two years working with MKS, de Mol said his company is now ready to start managing its maintenance budget better with the data it has collected. "We have improved our organization, because we were forced to put our process for [software] engineering on paper and implement it in MKS. At that point, we saw some changes. The roles and responsibilities of people became more clear."
Let us know what you think about the story; e-mail: Shamus McGillicuddy, News Writer