Tutorials, TU-14-4047 Research Note R. Terdiman

1 GartnerEntire contents 2001 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission isforbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to theaccuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the informationcontained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intendedresults. The opinions expressed herein are subject to change without , TU-14-4047R. TerdimanResearch Note16 November 2001 SLAs for Managing Applications Development OutsourcingOutsourcing deals that include applications developmentare increasingly common, but enterprises still struggle withappropriate SLAs.

2 Here, we propose metrics that can helpthem measure and manage these number of applications outsourcing deals that include newdevelopment is increasing, as enterprises become comfortablewith the model. However, few enterprises feel they have thecorrect service-level agreements (SLAs) to monitor, measure andmanage these deals. Here, we propose a base set of metrics thatenterprises can Problem: The practice of outsourcing new applicationsdevelopment efforts is slowly increasing, either as stand-alonedeals or as part of a larger applications services the various service dimensions of an applicationsdevelopment outsourcing contract ( , cost, quality, serviceproductivity, customer satisfaction and personnel) is critical to thesuccess of such deals. However, few enterprises are satisfiedthat they know how to do this effectively.

3 As a result, many of theinquiries Gartner receives regarding applications developmentoutsourcing (including major enhancements) focus on howenterprises can better measure these Proposed Solution: A more-robust set of measurements isneeded to help enterprises monitor and manage the applicationsdevelopment component of their outsourcing deals. Thesemeasurements (see Note 1) should be formalized in SLAsbetween outsourcers and clients. Although most outsourcingcontracts include comprehensive SLAs for data centeroutsourcing or desktop outsourcing deals, there are still nowidely accepted, standardized SLAs for applications SLAs for Applications Management Outsourcing Deals, TU-14-2818, we propose a set of base-level measurements thatenterprises can implement in their applications managementoutsourcing (AMO) this Research Note, we propose a similar (but not identical) setof metrics and sample service goals that enterprises can employCore TopicSourcing: Service ContractingKey IssueWhat are the best methods for developingeffective, mutually beneficial contracts withESPs?

4 Key Facts: Most enterprises feel they lack thecorrect SLAs to monitor, measure andmanage these deals. Measurements should be formalized inSLAs between outsourcers and theirclients. More-robust measurements are neededto enable enterprises to monitor andmanage the applications developmentcomponents of outsourcing deals. Applications outsourcing deals involvingnew development are 1 Definition of Selected MeasuresFunction point: An application size measurebased on the data accessed andmanipulated, as well as the processes thatdo this. This is essential as a normalizer forproductivity, quality and cost complexity: A measuredeveloped by Thomas McCabe thatquantifies the complexity of logic byexamining the number of unique pathspossible through the complexity: A measure developedby Thomas McCabe that examines thenumber of possible entry and exit points ina 2001TU-14-404716 November 20012to measure and manage their applications outsourcing deals(see Figure 1).

5 It is important to note that the proposedmeasurements may be used across enterprises; however, theactual service levels will vary widely by enterprise. The sampleservice goals listed below should be considered as a startingpoint for enterprises looking to better manage applicationsdevelopment. Enterprises should modify them to meet the needsof their particular organizations and outsourcing 1 Sample Service Levels: Development and Major EnhancementSource: Gartner ResearchFunction: Applications Performance Area: Development and Enhancement Sample Service LevelsService DimensionMeasurementSample Service Goals1. CostCost/FP by application, attribute and severity levelCost/FP of < $xPlan vs. actualAccuracy of x% on planned vs. actual costs2a. Quality FunctionalResponse times by transactionAll response requirements metDo applications meet functional requirements?

6 Defect levels/FP during warrantee period, by severityDefect levels of x per FP, 0 severity 1 defectFor enhancements, 0 increase in residual rates2b. Quality TechnicalEssential complexity<x per moduleDoes delivered productmeet specifications?Cyclomatic complexity<x per moduleDead code0 dead codeUnstructured codex% unstructured codeCompliance with installation coding standards100% compliance, ensured through inspections2c. Quality Process Defect removal rate overall, by phaseDefect removal rates of >x%How did process performduring life of the project?Defect density/FP overall, by phase introducedDefect densities of < x/FP3. Service Productivity Productivity/project, in FP/hourx FP/hour, depending on attributesCycle time/project, in FP/ day or days/FPSpecific cycle time requirementsProject attributes x% new development w/specific methods/toolsWork backlog, in FPsBacklog < x monthsProductivity/phase, in FP/hourx FP/hour in analysis/designEffort, by phasex% spent in analysis/designPlanned/actual dates, effort, FP countsx% accuracy on dates, effort, FP counts4a.

7 CustomerSatisfaction Reliability: Was the project on time?x% projects delivered on timeProject-BasedDid it meet business requirements?Scale-based opinion surveyStaff professionalism, responsiveness and availabilityScale-based opinion surveyDocumentation: Useful, clear, complete?Scale-based opinion surveyOverall satisfactionScale-based opinion survey4b. CustomerSatisfaction Reliability: Do products and services have high quality?Scale-based opinion surveyPeriodicResponsiveness: Does IT provide timely solutions?Scale-based opinion survey4c. CustomerSatisfaction Return Return: Does IT provide adequate ROI?Scale-based opinion survey, or activity-based 5. PersonnelTurnover of staff by skill level/positionTurnover <20%, 100% accessibility during availability by skill level/positionn% project mgrs. with >x years experience time to get staff by skill level/positionGet skilled C++ programmers in one monthTraining hours per FTE by tool/methodologyFive days of C++ training for programmers with one year of experienceCopyright 2001TU-14-404716 November 20013 Bottom Line: SLAs are essential to managing outsourcingdeals; applications outsourcing deals involving newdevelopments are no exception.

8 Enterprises should consider theservice elements listed above and adapt them to their KeyESPE xternal services providerFPFunction pointFTEFull-time equivalentROIR eturn on investment