ISG Provider Lens™ Next-Gen Application Development & Maintenance (ADM) Services - Pan America 2019 - Next-gen ADM
Pan America Perspective
The Pan America Next-gen Application Development and Maintenance Services study covers North, Central and South America. The Caribbean countries are not included, and the U.S. and Brazil are covered in separate reports. This research has evaluated 47 service provider companies; 24 qualified for inclusion and 23 did not. Those that qualify operate in a minimum of four countries, can support at least three of the four official languages (English, French, Portuguese and Spanish) and can deliver services at scale. All the companies that qualified have nearshore capabilities (delivery centers in the Americas) and 14 have offshore delivery centers, predominantly in India.
Some of the challenges for service providers to support the continent are client dispersion and distances to cover. Developed economies have high population densities that support scale for local business to respond to local demands. For example, Japan has 349 people per square kilometer, Germany 236 and the U.K. 275. In the Americas, Mexico has 67 people per square kilometer, Brazil 25 and Argentina 16. These figures illustrate how difficult it is for a local IT provider to scale, because demand is not concentrated. Low density allows international service providers to use their global scale to be competitive in local markets.
Another way to see the low concentration challenge is to look at population figures. In Central America, the average is 7 million people per country. South America, excluding Brazil, averages 20 million people per country. In contrast, the U.S. has 326 million people, Brazil 210 million and Mexico 130 million. These three countries account for two-thirds of the 1 billion people that live in North, Central and South America, concentrating the demand for IT business.
Demographic and economic data are from the United Nations Conference on Trade and Development’s UNCTADstat database.
Global Trend Impacts on Pan America Nextgen ADM Market
The global market is moving in toward more automation of the application lifecycle. Application service providers are investing in platforms that accelerate application development and automate application maintenance. The development platforms use libraries, microservices, cloud, low-code programming, test automation and bots for script writing. The maintenance platforms use cognitive and artificial intelligence to automate ticket classification, to run scripts that automate service delivery and to apply troubleshooting procedures.
Digital labor goes far beyond the realms of bot-based automation, to include diagnostic, predictive and remediating capabilities using intelligence acquired over time to solve non-linear problems. Digital labor is enabling the current ADM workforce to focus on higher-value work. Low cost labor is no longer a competitive edge and higher skills are required.
The consequence is that global service providers are increasing nearshore and onshore headcount and reducing the importance of offshore resources. Service providers reported strategies to increase full-time equivalent (FTE) staffing levels close to clients, improve automation and reduce offshore dependence.
Next-gen ADM Trends
Scale, fabric and robots: Small and large clients’ workloads can benefit from automation to reduce costs and improve speed. With the appropriate parameterization for each client, a single platform can handle many clients on a global scale. Parameterization replaces costly tools customization. Clients share the same platform with appropriate privacy and security, which reduces adoption barriers to shared services. The observed high level of automation trend is irreversible as it reduces costs while improving time-to-market and quality.
Higher demand for hybrid cloud environments: Enterprises are increasingly creating cloud-native applications that can be moved directly to the public cloud. However, a pool of applications still resides in the dedicated private cloud for security and regulatory reasons. Therefore, enterprises are seeking providers that can accomplish migration and maintenance across cloud environments.
Business-based metrics to measure results: To divert budgets towards digital transformation, enterprises are looking for methods to quantify the next-gen services and their direct impact on business. The commercial contracting structures and preferences are shifting from traditional input-based transactional models to ones that are built on business-based metrics.
Agile at Scale
Agile is “de facto” standard for new application development: Traditional development still accounts for 70 percent of development revenues for the study participants and is strongly driven by the difficulty of adapting SAP and other ERP and legacy applications to agile. Providers recognize agile as the market force pushing new developments. The majority of participants can deliver new releases in a month or less.
SAFe® is the most popular framework: Agile projects typically have eight to ten people working in collaboration, which imposes cultural and behavioral challenges for both service providers and clients. Scaling to hundreds of developers in large organizations is an even greater challenge. Several agile service providers have developed methodologies and identified best practices to make the change happen. In most cases, providers use the Scaled Agile Framework (SAFe®) and involve dozens of agile teams in the same client organization; in several cases, providers have reported success in delivering agile projects at scale.
Design and user experience have merged into application development: Agile project development has incorporated design thinking and user experience (UX) methodologies into the standard agile service offering. Although some service providers can separate the design and development pricing, in general they are considered stages within the same application development flow.
DevSecOps becomes the new normal: DevSecOps has replaced DevOps across the board. Enterprises and providers alike are realizing that security cannot be an afterthought. Thus, during early DevOps implementation phases, security principles are being incorporated as a default feature.
Full-stack developers for application development: Providers prefer full-stack developers for application development to avoid unnecessary coordination cycles. Having a single resource provides a 360-degree view of the environment that can speed the entire development cycle. A full-stack developer has knowledge and expertise to work from back-end through front-end application components.
Continuous Testing
Testing services are gaining traction due to the momentum of agile and DevOps. Automation is increasing through platforms and commercial tools and as a result of service providers’ investments in proprietary tools, scripts and bot deployments to run on top of commercial tools and shared cloud-hosted testing platforms.
Testing as-a-service has emerged in the cloud: Several service providers can offer testing in a pay-as-you-go arrangement. A client’s ability to consume testing as a service depends on the agile and DevOps maturity of its development organization. Mature organizations can create test cases in the early application design stages and therefore can use the testing platform continuously, throughout the several releases of an application lifecycle.
Test-as-a-service is usually a platform in the cloud that allows clients to avoid upfront investments in tools and installations, which is accelerating testing service adoption. It does not eliminate the need for testing service providers and contractors to operate the platform.
Application testing and digital product certification have converged: The most popular test-as-a-service options in the cloud are used for smartphone application testing before distribution to marketplaces. Current platforms can simulate more than 500 devices, including several versions of smartphone operating systems.
Testing becoming a technology enabler: Testing is being viewed as an enabler to implementing emerging technologies. For example, for many Internet of Things (IoT) projects, service providers and clients are resorting to SIL (software in a loop) and HIL (hardware in a loop) testing approaches to test the real-world performance of connected devices.
Increasing demand for full-stack testing engineers: The desire to achieve continuous testing capability has led to greater demand for full-stack testing engineers. Such resources are expected to have knowledge across test phases. For example, a full-stack engineer might be required to perform test execution automation on Selenium, integrate it with Jenkins for continuous integration and then provision the test environments in public cloud and virtual environments.
DevSecOps: It’s worth noting that not all service providers have DevSecOps in their methodology. A key DevSecOps concept is that everyone is responsible for security, which has emerged in the last few years. DevSecOps includes developers, production teams and the testing organization. Some testing service providers do not anticipate DevSecOps’ implications. Clients contracting testing services should always remember to define what part of DevSecOps is in scope.