Legacy applications are the backbone of 71% of Fortune 500 companies, running 30 billion transactions daily and holding 80% of the world’s business data. Yet, 35.4% of surveyed IT leaders identified legacy applications and custom code as a top barrier to meeting revenue growth goals.
Clearly, the talent war in IT is not new, but it gets really painful when you don’t have the budget or size to outsource back-office systems to Peoplesoftmanaged services. Despite its prevalence in finance, retail, manufacturing, and government, skilled talent to optimize and maintain legacy applications, like SAP and Oracle, running internally-deployed environments is scarce and expensive.
The annual salary for a highly experienced SAP engineer is $135K — on top of the software vendor’s annual fees that amount to roughly 22% of licensing costs. Top PeopleSoft developers can command up to $68/hour – especially for large multi-year migration projects to Workday. Finding and retaining talent to execute big strategic projects to support innovative new technologies, like AI/ML, that depend on the data housed in ERP systems, can be both cost- and time-prohibitive.
This leads many businesses to turn to staff augmentation models to bring in temporary, experienced IT talent for legacy ERP systems on a project-by-project basis. The result is that businesses depend on these temporary contractors who are not familiar with their long-term goals or how the business processes have evolved over many years.
The impact? A laser focus on project work, with little attention paid to preventative maintenance or continuous improvements.
The Great Retirement: How ERP Skills Gaps Stifle Growth
Not a new concept, staff augmentation, is a common solution for ERP maintenance when specific talent is needed. Especially post-pandemic – as many IT resources are re-thinking their lives and future. And let’s face it, it’s easier to cross-charge business departments for the funds they want to spend, based on a project that scoped how they want it.
However, with mature ERP systems, some up to 40 years old, you’d expect there would be a lot of experts with decades of experience. And there are. However, the availability of many of those experts with years of hands-on experience working with legacy ERP systems is diminishing – resulting in disconnected user experiences, limited ability to scale, massive process bottlenecks, and added pressure to move to more “intelligent ERP” solutions.
As existing experienced ERP talent resources retire, advance into new roles, or leave the industry, they take with them critical knowledge that isn’t being replaced by the next generation of IT graduates. This knowledge is key as businesses look to leverage these applications to drive innovation. The new graduates coming out of school aren’t studying legacy systems. They’re studying the exciting technologies, like cloud, IoT, and big data.
As the outlay for keeping legacy, mission-critical applications running smoothly increases, the pressure is straining budgets and business relationships. Leadership is looking for more value out of IT spending. Doing so often can mean reducing the large line items for ERP maintenance and optimizing the IT budget to support more strategic projects around improving customer experience, supporting new business models, and executing on digital transformation.
Vulnerable applications: Security risks and short-term fixes
On the other side, business user confidence is also low due to higher than usual backlogs causing missed project deadlines. As a result, business users are turning to shadow IT using SaaS and other cloud applications to fill the gap. While it may put needed functionality into users’ hands more quickly, implementing applications outside of IT’s purview creates security risks, data silos, and wasted spending.
Without the right expertise to optimize and maintain legacy ERP systems, businesses are left in an environment where mission-critical applications are vulnerable. When upgrades or customizations are needed, IT feels forced to turn to staff augmentation for fast bandwidth and instant access to advanced ERP application skills — often at a steep premium. But once the project is over and the consultant leaves, so too does the system knowledge and a chunk of the IT budget. Businesses are then left without a holistic view of what’s possible with its ERP systems or comprehensive support across its application ecosystem.
By design, staff augmentation models aren’t focused on preventative maintenance or proactive optimization. They are time-sensitive, short-term fixes. What businesses really need is a root cause approach that dives into why there’s a ticket instead of just fixing it, and a proactive, preventative look at the application environment to catch potential issues before they become problems.
How Integrated Managed Services Fill the Legacy ERP Skills Gap
The diminishing legacy knowledge pool and increasing ramifications of application outages or breaches requires a new approach to ERP system maintenance. Even in an outsourced model, traditional managed services providers still struggle with lower-skilled resources.
Traditional AMS models have served as an alternative to IT staff augmentation challenges, but the AMS model is broken. With a focus on siloed services, billing hours, and incident handling, it suffers from the same afflictions of staff augmentation models. Conversely, modern unified support models have evolved to include unlimited ticketing, continuous improvements, four-hour resolution targets for common service requests, incident response, routine tasks, and enhancement hours focused more on customer outcomes than billable hours.
An integrated application management approach entails a unique combination of application management services and software support to address application break-fix support with Peoplesoft managed services that help reduce incident backlogs. By shifting from a service-level approach to a value driven-approach, IT teams can focus on leveraging technology to advance the organization’s goals.
After selecting Rimini Street for application management services for SAP, NIBCO, a leading manufacturer of valves, fittings, piping systems, and a variety of flow-control solutions, was able to reduce issue backlogs with an average case closure of 86%. “We’ve found that by utilizing a single-source managed services and support vendor to oversee SAP, we can redirect monies into optimizing business processes and leveraging our customizations to their full potential. We’ve simplified workflows and automated processes so that the rest of the business can work more efficiently on growth initiatives, acquisitions, and new product development,” explains Jeff Miller, Director of Business Relationship Management for NIBCO.
Rimini Street Unified Support Services Model
A pool of temporary contractors usually won’t have the vast skills and depth of experience needed to keep mission-critical systems running. Time and time again, I’ve seen this approach lead to uneven service delivery, delayed resolutions, and unanticipated spikes in ticket volume as noted in the ticket analysis below.
“Being able to redirect IT resources to carry out a series of innovative projects was a fundamental triumph for us.”
– Valdemar Castilho, IT Operations Manager Iguatemi Empresa de Shopping Centers S.A.
With a model based on outcomes and engineers compensated based on client satisfaction, clients can reap the benefits of better service to support their business without the scope creep or endless change requests common with staff augmentation vs. managed services models. And clients agree – citing productivity improvements – including:
- 76% overall reduction in open incidents
- 68% year-over-year reduction in average time to close data fixes
- 77% year-over-year reduction in average time to close security access requests
- 99% average incident close rate over 12 months
- 90% average change request close rate over six months
Unified Support in Action
Iguatemi, a $129M Brazilian retailer, faced an increased demand for its Iguatemi 365 platform due to the pandemic, which created an immediate need for application improvements. Using Rimini Street Application Management Services for SAP, it was able to better support incident management, service requests, and needed improvements resulting in fewer hand-offs between suppliers and reduced backlogs. Another Rimini Street AMS for SAP client, IATA, a trade association of commercial airlines representing a majority of worldwide air traffic, found that a unified support solution provided them with continuous improvements, reduced potential risks, and provided proactive problem-solving to improve overall system performance.
For CIOs looking for a better way to manage mission-critical ERP applications without hiring expensive talent, relying on “one-and-done” staff augmentation models, or dated traditional AMS providers, the unique combination of application management services and ERP support can help alleviate the pressure from leadership for more agility and increase user satisfaction by dramatically reducing backlogs to deliver new functionality faster.
Read more about how AMS models address the IT talent shortage and the business impact of AMS for CIOs.