Compuware Study: 71% Of Firms Frustrated By Hidden Costs of Mainframe Outsourcing

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The atrium fountain at Compuware headquarters in downtown Detroit. Photo courtesy Maia Cowan.

The atrium fountain at Compuware headquarters in downtown Detroit. Photo courtesy Maia Cowan.

DETROIT — Compuware Corp. (Nasdaq: CPWR) Wednesday announced the results of a global CIO survey on attitudes and experiences with mainframe outsourcing.

The survey found that reducing costs is a major business driver for outsourcing mainframe application development, maintenance and infrastructure. Yet multiple hidden associated costs are causing frustration for 71 percent of CIOs.

These hidden costs result from increases in MIPS (million instructions per second) consumption, as well as higher investments in testing and troubleshooting all due to poor application quality and performance. In fact, two thirds (67 percent) of respondents reported an overall dissatisfaction with the quality of new applications or services provided by their outsourcer, citing a widening in-house skills gap, difficulties with knowledge transfer and staff churn within outsourcer organizations. Compuware has published a related white paper titled, “Mainframe Outsourcing: Removing the Hidden Costs,” which details the findings from the study.

“It is true that outsourcing can help companies reduce costs and gain access to technical expertise they might not have in house, particularly as experienced mainframe developers move on and take their applications knowledge with them,” said Kris Manery, senior vice president and general manager for mainframe solutions at Compuware. “However, as the research shows, there is a growing frustration that outsourcers are failing to meet expectations. Because there is no means to easily transfer application knowledge to the outsourcer — and to verify code quality and performance when it is delivered — application quality suffers, thus undermining any potential savings.”

One of the greatest expenditures relating to mainframes is MIPS consumption. Contrary to popular belief, mainframes are being used more than ever, meaning consumption is naturally on the rise. However, consumption is also escalating due to inefficient coding, adding unnecessary costs:
* MIPS costs are increasing on average by 21 percent year over year, with 40 percent of respondents claiming that consumption is getting out of control.
* 88 percent of respondents using pay structures based on CPU consumption (approximately 42 percent of those surveyed) think their outsourcer could manage their CPU costs better.
* 57 percent of all respondents believe outsourcers do not worry about the efficiency of the applications that they write.
* 68 percent of respondents believe that the increase in mobile applications, for things like mobile banking, is driving higher MIPS usage and creating additional costs.

Quality issues in the outsourced development of mainframe applications are also increasing total cost of ownership, as additional time and resources are required to complete projects, contributing to an overall picture of dissatisfaction within the end-user community:
* 54 percent of companies have had to increase investment in performance testing and troubleshooting due to the poor quality of work provided by their outsourcers.
* 51 percent of respondents outsourcing their mainframe application development and maintenance believe they are having to increase their investment in their internal QA team due to the poor quality of work being delivered by outsourcers.
* Almost half of respondents (47 percent) find that the error and bug rate in application code delivered by an outsourcer is higher than with in-house developers.
* IT teams are spending an average of 10 days fixing application bugs and performance problems from outsourcers on any given project.
* 67 percent of respondents expressed that the quality of new applications or services provided by their outsourcer is not always satisfactory.

While some outsourcers invest in best-in-class application performance management tools to ensure the applications perform optimally before delivering them to their client companies, many do not.

“Outsourcers and enterprises need to look at how they are working together and implement processes and tools that will lead to better outcomes,” said Manery. “For example, how can they document legacy applications to address problems around knowledge transfer? Can they bring performance testing into the development cycle earlier? Using simple solutions such as these, companies can better manage their outsourcer contracts and reduce the total cost of ownership of mainframes by removing the hidden associated costs, ultimately improving the quality of service delivered to end-users.”

The increasing complexity of the mainframe ecosystems outlined above is creating a greater need for existing applications to be modified, as well as creating a need for new services to be developed and integrated with existing mainframe applications. However, a significant lack of in-house legacy skills and documentation creates challenges, increasing the drive towards outsourcing and impacting quality:
* 80 percent of respondents claim difficulties with knowledge transfer is impacting on the quality of outsourced projects.
* 68 percent say their in-house teams no longer have the legacy knowledge to maintain mainframe applications while 41 percent of companies state that the lack of in-house expertise is a key motivator for outsourcing.
* 65 percent of respondents claim staff churn within outsourcers’ organizations negatively impacts the quality and turnaround time of work they deliver.

Commissioned by Compuware and conducted by independent research company Vanson Bourne, the survey was administered to 520 CIOs from large companies, covering a cross-section of vertical markets in Australia, Belgium, the Netherlands, Luxembourg, France, Germany, Italy, Japan, the United Kingdom and the United States of America.

Compuware’s mainframe software helps the world’s leading organizations maximize developer productivity, minimize costs and deliver better service. The software is available within the Compuware Workbench, an open development environment that features an intuitive and easy-to-use graphical user interface. Workbench makes common mainframe tasks faster and simpler to perform for both experienced mainframers as well those new to the mainframe, enabling companies to develop new services faster, more efficiently and with higher quality utilizing existing resources.

More at www.compuware.com.

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