Application services encompasses multiple services across the traditional application life cycle and DevOps, including application development (build), run, quality assurance, and modernization/transformation services. This category strategy template is ready to use, offering editable frameworks for internal assessment and detailed industry and market category overviews to assist category managers, procurement professionals, and CPOs in creating an informed category strategy for application services. The template can be customized by category managers with internal category information, such as spend, suppliers, and subcategory overview. The category manager can also use industry and market insights provided in this template to build a strong supply base understanding. A category strategy’s goal is to create an action plan for effective category management, and this template provides the requisite tools, frameworks, and information to create a robust strategy. Best-in-class procurement organizations effectively leverage such tools and techniques to drive continuous improvements in their categories. Scope All industries and geographies Category in focus: application services Contents In this category strategy, we provide templates based on a four-step process to assist in the creation of a category strategy: Define internal needs: defining category maturity and objectives, creating a buyer profile to gauge the current state of the supply base and predict future demand, and total cost modeling Understand the market: building an understanding of the industry and supply base by evaluating aspects such as market trends, key suppliers, major delivery locations, pricing trends, performance benchmarks, and category risks Determine sourcing strategy: deciding between an in-house versus outsourced model for the category and identifying best practices and value levers to drive category efficiency Create action plan: identifying and prioritizing projects and driving them toward execution

As a sign of outsourced IT and BPO services maturity, Everest Group has observed contract benchmarking clauses being diligently invoked at regular intervals. Over the years, a corresponding proliferation in benchmark providers has also been observed that promise to help evaluate and optimize contracts. However, the focus of most benchmarking / contract review exercises tends to be on the directly “visible” levers such as resource unit rate cards and delivery mix alignment. There are a number of levers that remain hidden and are often ignored, resulting in untapped optimization potential. This viewpoint outlines some of the common obscure “choke points” that buyers need to be aware of, in order to avoid significant value leakage in contracts. CONTENTS This report provides an overview of the typical optimization levers that remain “hidden” in contracts, resulting in significant untapped optimization potential. The key sections of this viewpoint include: Factors causing value leakage in outsourcing contracts Typical sources of these choke points Proposal vs. solution approach Lack of contract “right sizing” Misaligned productivity charter Inequitable contract T&Cs Conclusion Key questions addressed by this research are: What are the typical factors that remain hidden in IT and BPO contracts, resulting in value leakage? What are the typical sources of these choke points? How can buyers avoid the negative impact of these choke points?