OVUM. Douglas Hayward

Overall, they reported demand as relatively strong, particularly in the UK, where Aspire (the HMRC outsourcing mega-deal) and the new Metropolitan Police deal are driving AM demand. Excluding Inland Revenue and the Met, though, demand in the UK is 'more steady than growing'.

Comment:

Capgemini is experiencing many of the same trends as its competitors, including strong demand for ERP-related consulting and systems-integration, but accompanied by continued price pressure driven in part by the move of much delivery work to cheaper offshore locations. In AM specifically, Adams and Clegg report increased client demand for shorter contracts, often let within multivendor procurement frameworks, and for contracts that allow for the level of AM services to be adjusted on the hoof, in line with changes in the client's business. The latter demand obviously favours those vendors with good change-control capabilities and a flexible attitude to customer needs.

We think businesses are once again looking on IT as a tool to generate competitive advantage or at least to improve their customer service and corporate agility. This shift to what we call the 'Growth Agenda' mentality increases pressure on CIOs to shift budget spend from 'run' activities (such as AM) towards 'enhance' activities (such as new application development).

That means that for vendors the pressure is on to make AM more efficient, and to link it more closely to business-value creation. The former is more easily do-able, and we see vendors, including Capgemini, doing their best to 'industrialise' AM services by standardising processes and toolsets, and making better use of global sourcing.

But taking AM up the value stack is a little harder. Like most competitors, Capgemini is moving its AM focus towards more value-added services such as application-portfolio management. Our line is that application-portfolio management is more an aspiration than a reality for most players, partly because most organisations want to play divide-and-rule with their application portfolios, partly because application-portfolio management is very different from simple AM. It's more like classic outsourcing, with clients expecting a more proactive and strategic approach.

This should play well to the strengths of consulting/outsourcer hybrids such as Capgemini, IBM, Accenture and Atos Origin. Capgemini is starting to offer a governance role in overseeing the customer's estate, overseeing managing AM vendors on behalf of the client. This does not sound like a long-term role, but may be a sensible way into the world of application-portfolio management for both Capgemini and its customers.