White Paper
Application Management &
Modernization.
High-Quality Services for Efficient Business Processes.
1
Table of contents.
2
3
1. Introduction.
5
5
6
2. An introduction to application management.
2.1 Definition.
2.2 Application Management & Modernization services’ value proposition.
8
8
11
3. Better quality thanks to Application Management & Modernization.
15
15
17
4. Putting Application Management into practice.
19
5. Summary and outlook. 20
6. Glossary of key terms and abbreviations.
23
7. List of Figures.
24
8. References.
3.1 Project and implementation services in preparation for Application Management.
3.2 Application Management.
4.1 Application Management & Modernization at T-Systems.
4.2 Case studies.
1. Introduction.
Today, success is more dependent than ever on the entire IT environment being aligned with specific business processes, and
on that environment‘s ability to evolve over time. A comprehensive IT strategy is vital if companies are to reconcile the sometimes
conflicting imperatives of quality, flexibility and innovation. The development, operation and maintenance of applications are, in
this context, key aspects of success and cost. Ultimately, business processes need to run smoothly and efficiently.
Today‘s CIOs must perform a variety of tasks: they have to cut costs, manage innovation, play a central leadership and management
role, and contribute directly to greater competitiveness. They are often torn between the need for quality and the need to control
costs, but also need to generate business value and support business goals.
!
Companies are increasingly deploying application management:
they are looking to reduce operating costs, rationalize application
systems and improve software processes. [Galdy 2009]
The economic crisis has increased the focus on controlling and cutting spending. Despite high cost pressure, CIOs must find a
way to provide the required services in the required quality, and despite volatile markets. They have to guarantee stable, efficient
applications in conjunction with predictable, ideally falling, operating costs. Application management, i.e. the development, installation,
operation, maintenance and support of applications, must therefore meet high demands. In addition to cost savings and cost transparency,
these include the maintenance or improvement of service quality, responsiveness to process and organizational change, guaranteed
reliability and availability, as well as security of data and applications. Moreover, these requirements, that must be met with a limited
budget, are rising in number, while today’s extremely heterogeneous IT landscapes continue to grow in complexity. CIOs are only
too aware that existing solutions are difficult to expand or enhance, and it is just as difficult to secure the capital required to invest
in new resources and technologies. Moreover, it is becoming harder to recruit and retain skilled in-house staff with the ability and
flexibility to manage and maintain both existing and new applications. According to PAC, this is one of the reasons why more companies
are seeking external help for their application management activities. [PAC 2008].
Amidst all these challenges CIOs still need to look forward. According to a recent survey of CIOs, the following issues will again
take center stage from mid-2010: unlocking the business value of IT, simplifying IT and business processes, and innovation. The
focus will quickly switch from costs to growth.
Application Management & Modernization (AMM) offers a flexible, low-risk way out of this maze of challenges.
Figure 1 shows how Application Management can be regarded as a component of a more comprehensive modernization drive,
where the weighting between “cost savings” and “sales growth”, and between “technology focus” and “business focus” can vary.
The figure also shows the correlations between these dimensions and business and service-delivery processes (ITIL services) and
related aspects of ICT.
1
3
Source: Q3 2009 Global Forrester`s 2010 IT Research Agenda & Event Themes Online Survey.
Matrix comprising the business architecture mapped against modernization methods.
Efficieny
Business
Service




ICT
Potential Business Benefit
Industrialize
 Leverage shared Service Centers

Effectiveness
Consolidate
 Replace legacy or standardize highly customized process
with best practices of packaged apps (enabling
de-commission of legacy)
 Harmonize process variants (enabling instance
consolidation)
 Interface reduction by package vendor consolidation
Standardize service management
processes
Renegotiate, reallocate or insource
contracts
Leverage Global Delivery Model

Lift and Shift apps to cheaper commodity
platform
Technology Refresh of hardware and
reengineering of applications to
increase performance






Increase service management process maturity to
optimize productivity
Restructure service delivery organization to optimize
utilization
Service support reduction by ICT Consolidation
Transform
Innovation and differentiation by...
 Mobilize the Enterprise
 Increase Collaboration
 Specialize core processes
Further standardization by...
 Sourcing Net-Centric Processes (SAAS)


Harmonize technology variants in hardware and middleware 
Centralize Servers, consolidate date centers and

increase energy efficiencies
Virtualize ICT to increase utilization

Interface Reduction by SOA Intgrtn.
Introduce common service management
processes across service providers
Build SOA based Service Mgmt. Architecture
Leverage SOA/Composite Architecture
Modernize proprietary software to new
architecture
Lift and Shift apps to Net-Centric
Infrastructure (PAAS)
Impact of Change
Fig. 1
The first step is to industrialize service delivery. The focus is on a suitable sourcing strategy and vendor management. The goal
is to consider which agreements can be optimized and which services can (again, or still) be provided in-house. Consolidating
existing agreements within the context of a sourcing strategy enables potential savings to be realized. In recent years, the greatest
savings could be achieved by using a global network of services and identifying the right mix of onshore, near-shore and offshore
resources. While some very large, international corporations are able to maintain their own global delivery network, this approach
is too complex for most companies. Their best option is to partner with global service providers, who can usually help achieve
additional consolidation at ICT level. Companies benefit from process standardization and consolidation, and from a guarantee on
the part of the provider to perform certain services within defined time frames and at defined costs for contractually agreed areas.
Not only production costs, but also unit costs are reduced thanks to efficiencies in service delivery. Key aspects, such as specialist
skills and the responsibility for applications, can remain in-house, but can, when required, also be externalized. Ideally, Application
Management not only enhances the quality of processes and improves productivity, but also reduces costs for development,
enhancement, maintenance and support of applications. Application Management enables businesses to act quickly, reliably and
flexibly, while enjoying visibility into costs and services.
The application landscape offers consolidation potential, too. Redundant applications, middleware, databases, etc. can be transferred
to centralized systems, reducing the number of systems requiring AM. Measures like these can sometimes have a clear business focus,
such as the consolidation of SAP instances, because they also affect the process landscape. They help to bring down process-related
costs, although it is important to implement them in close collaboration with the user departments.
If the goal is to leverage IT to increase profitability, what is ultimately needed is a business and ICT transformation. In terms of
application management, there are further possibilities for service delivery: a key topic is the seamless integration of ITIL process
chains across multiple, global service providers – in other words, ICT supply chain integration and optimization.
This white paper focuses on the various stages of application management culminating in consolidation. It considers what Application
Management means in concrete terms, and whether these services do in fact provide suitable answers to the challenges for CIOs
described above.
The reader is initially provided with an introduction to application management (section 2) and then offered a description of service
management and Application Management (section 3), representing the central focus of the white paper. This is followed by the
case studies illustrating Application Management in practice (section 4) and a conclusion (section 5).
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2. An introduction to application management.
2.1 Definition.
Application management can be defined as a combination of project and implementation services (section 3.1), and operational
services for applications and enhancement/optimization activities (section 3.2). If an external provider takes responsibility for the
SLA-based operation of the application infrastructure, the maintenance and support of applications, and the support of users on a
long-term basis, then this can be regarded as Application Management [PAC 2008].
!
Application Management is the ITIL-based, highly systematic
maintenance and optimization of applications on the basis of
verifiable metrics and service level agreements.
The aim of Application Management is to ensure that business processes and the underlying applications run smoothly, in order
to create added value (see section 2.2.). For best results, it is advisable to consider factors such as availability, reliability, ease of
management and performance for the future application landscape during the development phase. The individual phases, including
the transition from the development of future services and the application landscape, to ongoing application operations are considered in section 3 (Figure 3, on page 8).
The delivery of Application Management & Modernization is based on the IT Infrastructure Library (ITIL), the de facto international
standard for service management. This forms the foundation for the planning, delivery and support of IT services, and features a
variety of standardized service modules for optimized service delivery. The current version is ITIL V3. According to Gartner, this version
more closely links best practices and business benefits. The activities described are based on a service lifecycle represented in five
ITIL V3 publications: Service Strategy, Service Design, Service Transition, Service Operation, and Continual Service Improvement
(CSI). Moreover, this key guide includes a description of the central service elements of Application Management (for example incident management, problem management, change management etc.). Each of these includes individual or combined processes or
activities, which, in accordance with specific company imperatives, and the abilities of the provider, can be extended or modified.
T-Systems, for example, offers modular extensions and an improvement in quality (for example by means of customer-specific key
performance indicators (KPIs), termed Services in Excellence. In addition to the most important elements of service support within
the scope of Application Management, outlined briefly below, a key role is played by availability, capacity, continuity and security.
For this reason, service processes such as availability management, capacity management, IT service continuity management and
service level management, are also integral parts of Application Management & Modernization services (see section 3.2). The most
important elements are:
Incident management: the aim of incident management is the fastest possible, transparent recovery of application functionality in
accordance with service level agreements.
Problem management: the aim of problem management is to (proactively) determine the cause of problems or potential problems,
and to find permanent solutions that prevent problems from reoccurring in order to increase service quality.
Change management: the aim of change management is to deploy standardized methods and processes to systematically manage
changes to infrastructure or services in order to minimize disruptions to service delivery. Change management always takes
account of economic considerations and business risks.
Release and deployment management: this comprises the planning, testing, communication, implementation and monitoring of
new releases within the IT service landscape, taking account of all economic and technical factors.
Request fulfillment: this process comprises service requests for new or additional services, without the existence of a concrete
problem. The purpose of service requests is usually to improve individual applications. Generally, they are a consequence of
events logged by the incident management team, including 2nd- and 3rd-level support, and problem management professionals,
who submit service requests proactively.
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The processes and issues defined in ITIL V3 (currently 26 in total) cover all Application Management requirements. However, it is
important to design services in line with customer-specific needs, and for the potential provider to consider a number of questions
prior to assuming responsibility for AMS. For example, what service is best for a particular company, and how can this service be
tailored to that company‘s preferences and imperatives. To answer this and more specific questions, a provider should create and
maintain an easy-to-understand catalogue that describes all services available within the scope of the Application Management
offering. The service catalogue can be used as a tool to create a service offering geared to the specific needs of the user organization,
generating value added in a variety of ways (see section 2.2.)
2.2 Application Management & Modernization services’ value proposition.
Application management offers the following value proposition: the guaranteed delivery of high-quality services according to clearly
defined, legally binding service level agreements. It enables organizations to master cost challenges (low cash flow, the financial
crisis, etc.) strategic challenges (e.g. the need to increase quality and transparency, the desire to concentrate on core processes)
and operational challenges (e.g. technology bottlenecks, compliance, etc.). They are described in more detail below.
Benefits of Application Management.
Savings through industrialization
Improved quality of service
Greater flexibility and improved availability
Greater transparency and predictability
More efficient use of available resources
Fig. 2
Savings – a combination of standardization and partial automation of processes leads to clear improvements in efficiency in the
operation, maintenance and support of applications. Industrialization of this kind makes costs variable rather than fixed (operating
expenditure instead of capital expenditure), and customers only have to pay for what they actually use. Services are charged according
to specific metrics within the application landscape, such as the provision of individual services, consumption of resources or
business transactions. There is no longer any need for upfront capital outlay, or for the huge expense associated with maintaining
a significant pool of human resources, improving cash flow as a result. In addition, offshoring can be leveraged in many instances,
again reducing operating costs. Moreover, greater visibility of costs translates into better cost control. By consolidating and centralizing governance tasks, there is less complexity and lower indirect expense for management of the IT environment. Application
management also becomes more predictable in terms of both costs and the services available.
Improved quality of service – implementing the best practices described in ITIL enables consistently high quality of service across
all processes and technologies, as ITIL offers proven, standardized, highly automated processes and methods. In addition, a suitable
external provider can introduce additional consulting and process skills, or at least ease the workload on in-house IT professionals.
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For example, business processes can be improved or automated, and the outsourcer can perform routine tasks, releasing internal
resources for strategic activities. Benefits are created through the standardization of services in conjunction with clearly defined
roles and responsibilities on the part of the outsourcer, governed by service level agreements (SLAs). It is vital that service levels
are measured and continuously monitored, and regular are reports provided to the customer. Sensitive data can remain within
enterprise boundaries. Moreover, highly professional IT management on the basis of ITIL offers clearly defined, highly automated
processes and transparent interdependencies. As a result, it inherently guarantees high standards of compliance.
Greater flexibility and improved availability – Application Management generally offers services that can be rapidly scaled up and
down according to fluctuating demand. Flexible sourcing (global delivery capability) is generally based on strategic partnerships.
This grants access to large, scalable teams of experts in conjunction with far lower costs and, depending on the precise SLA,
ongoing support tailored to local working hours, with no language or time-zone barriers. This results in the global delivery of consistent
services across the entire lifecycle. Moreover, the scope of the offering can usually be extended, step by step, to accommodate
additional users, sites and service activities.
Greater transparency and predictability – many potential users of Application Management are unaware of the support such services
can offer their business. Frequently, there is a lack of visibility, due to a lack of vital facts and figures. However, with the accelerating
pace of innovation and shrinking timelines, the failure of IT systems is of ever greater impact. Good Application Management therefore
makes use of powerful monitoring tools to underpin operational reliability by means of metrics and service level agreements, offering
continuous visibility in to all aspects of application management. This stable KPI- and tool-based framework (stable SLA framework)
ensures availability, stability and manageability. In addition to data relating to SLAs and KPIs (e.g. number of problems, type,
time-to-resolution and cost, etc.) pricing is generally transparent and related to actual effort/consumption, providing ongoing cost
transparency. In conjunction with improved communication and escalation processes, plus greater standardization and reproducibility
of processes, this leads to greater reliability in planning and greater, more efficient use of available resources.
!
“Freeing up resources delivers savings in conjunction with
relatively low risk.” [PAC]
More efficient use of available resources – Application Management can ease the workload on in-house IT professionals. These
can be redeployed for implementation of innovative projects, contributing to greater business success. In addition, there is no longer
a need to create or maintain dedicated service resources. Additional capacity or expertise can simply be ordered on demand.
The underlying technology is always up to date, and therefore generally at its most efficient. There is no call for high-risk capital
commitments, and there is less downtime, and improved productivity. There is less need for resources for the ongoing recruitment
and retention of in-house experts, or for coordinating temporary manpower to meet gaps in the internal skill set with regard to
applications and technologies. Application Management & Modernization offers stable knowledge management with a companyspecific knowledge repository. This can be used to minimize the loss of skills, and to create a learning organization.
When these advantages are considered in total, then it is clear that Application Management not only sharply reduces business
risk, but also opens up opportunities for profitable innovation.
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3. Better quality thanks to Application Management & Modernization.
Managing software applications is a complex task that does not end with go-live; instead, applications must be continuously
maintained, and users supported. This eats up a significant part of the IT budget, and ties up internal resources. These resources
cannot be used for developing competitive innovations. This is one of the reasons why more and more businesses are deciding
to outsource the operation of their application landscape to an external specialist [PAC 2008]. This section provides an overview
of the transfer to and subsequent operation by an external provider (application management). Section 3.1 outlines project and
implementation services required in preparation for the transition (see Figure 3). Section 3.2 describes the on-going operations
phase (on-going operations as a service), including the most important service elements, specifically Application Management.
3.1 Project and implementation services in preparation for Application Management.
An in-depth analysis of the basic conditions and potential business benefits must be carried out as the first step of any project
associated with the development and operation of applications and services. Key data and metrics on the existing application
management situation must be compiled, and a number of key questions answered. These may include: How well do my applications
support relevant business processes? Are the applications up-to-date? Are there any systems in operation that are no longer needed?
How long do change processes take? What will the applications look like in the future? What are the measurable benefits for the
business? During the analysis phase, it is helpful to have the support of a provider with experience in planning and executing
corresponding development projects.
At the outset of this analysis phase, benchmarking is performed for service costs, service quality and user satisfaction. Key data
and metrics are collected on the way applications are currently managed, and ways of bringing about improvement and implementing
best practices are identified. Once a high-level action plan has been produced, all aspects pertaining to applications and dependent
business processes must be analyzed, including user processes, service transparency and adaptability. Processes have to be
divided into two groups: core processes (such as procurement) and supporting processes (such as writing a reference for an
employee). Creating these two categories is important for the subsequent definition of KPIs and for drawing up SLAs, as availability
of people and systems typically has to be higher for core processes. Subsequently, the importance of each application for the
business is determined, and a business-driven prioritization of business processes and projects is carried out. After this, data on
all quantifiable aspects of service requirements (such as users, releases, sites, modules, systems, time-to-resolution, volume, etc.)
within the existing service environment and in SLAs is collected. Additionally, operational processes (both the processes themselves
and interfaces) and the general context are summarized. Defining core and supporting processes is also crucial for the new service
plan, including availability and resolution times. After the system scope, times of operation and service, and ITIL processes and issues
have been thoroughly evaluated, they provide the initial input for the service delivery plan for on-going operations. The evaluation of
all technical, organizational and financial requirements can also provide an overview of critical processes and problem areas at an
early stage.
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Roadmap for Application Management.
Proposal for planning/
design phase
On-going operations
Documentation of
services
Migration plan
Plan for transition and on-going operations
Proposal for on-going operations
Action plan for optimization of
processes and costs
System analysis report
High-level operations plan (service
manual)
Acceptance of
operational readiness
Collaboration model
Documentation
Transfer plan
Human resources
Transfer to external provider
with full responsibility for
SLA compliance
Escalation processes
Plan for reporting and
monitoring
KPIs
Results
Analysis
Design/planning
Consulting
On-going
operations
Pilot
Transition
Implementation
Project phase
 Analysis of processes,
organizational and financial
environment
 Analysis of systems
landscape and applications
 Identification of existing
SLAs, tools, reporting
 Development of a standard
for documentation
Activities
 In-depth analysis of service
requirements and services
 Creation of necessary
processes and organizational
and financial framework
 Analysis of human resources
 Creation of staff deployment
plan
 Planning of knowledge transfer
 Definition of service model
 Definition of sourcing model
 Definition of transition activities
 Establishment of technical
infrastructure
 Transfer of knowledge
 Definition of standards,
methods and tools
 Implementation of processes
and organizational structures
 Definition of communication
structures
 System check
 Review, transfer of responsibility
 Expansion/clearer definition/
improvement of processes and
responsibilities
 Implementation of structures for
monitoring and reporting SLA
compliance
 Introduction of risk management,
SLA management and
monitoring/controls
 Definition of quality gates
 Final knowledge assessment
Application
Management
Application
Lifecycle
Transition from project to
on-going service
Fig. 3
During the course of the project, many questions have to be answered in order to design and plan on-going operations. Some
examples: How many users call the help desk? What kind of disruptions occur, how often do they occur, and how long does it take
to resolve them? How many changes are made every day within application systems? What costs are incurred and where? How does
performance of applications compare to the competition? Once cost structures and requirement patterns have been determined, a
risk analysis is carried out, and a high-level service description (service manual) is created. This manual is used in the development
of the service level agreements. Additionally, it defines the service model, including service processes, and roles and responsibilities.
It also describes how compliance with SLAs is monitored, and includes a table with relevant KPIs and Application Management
reporting metrics. The KPIs are defined in line with business needs, taking into consideration the characteristics of business
processes supported by the outsourced applications. Therefore, to ensure that businesses fully benefit from Application Management
& Modernization, it is crucial to define the correct KPIs. The analysis should be based on the following structure (Figure 3): identify
relevant issues and the ITIL processes they require; use this information to define key performance indicators.
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Sample metrics.
Processes
ITIL definitions (examples)
KPIs
a) Maintenance, routine activities
b) User support
Incident Management
Problem Management
Ticket quantity and quality, time and resources
required, dwell time per ticket
Expansion, modifications
Change Management
Quantity, time and budget, benefits, risks,
advisory board
Projects
Change Management
Release & Deployment Mgmt.
Time and budget, follow-up costs
(ticket quantity and quality)
Service management
Service Level Management
Availability Management
Capacity Management
SLA compliance, budget, resources, KPIs,
improvement of service processes, service
strategies, innovations
Fig. 4
The results of this analysis are described in a service guide that includes all applications, processes and organizational structures
necessary for smooth operations, as well as situations where errors can occur. The guide also includes a structural description of
future service delivery, and defines the scope of service, service elements, and service levels. Since the service design serves as the
blueprint for subsequent on-going operations, it should also include a preliminary pricing model, a transition plan, and a knowledgetransfer plan. High-level plans must be developed for the following areas: resources and resource allocation; communications;
governance; and escalation.
Upon completion of the project-based consulting phase (analysis and design), a customer-specific operations plan (service manual)
with defined service level agreements on the basis of pre-defined metrics and processes should be developed. During the transition
phase, the operations plan will be verified and implemented. This is then followed by a pilot phase before going into production
(operations phase).
The transition phase is a project carried out within a set timeframe. It builds upon the analysis workshop, and ends at the start of
on-going operations. This is a highly important phase. Communication structures, processes and the exact services/activities are
analyzed, and transitioned from the current mode of operation to the future mode of operation (current state to agreed state). Defined
standards, processes and methodologies allow more effective implementation, monitoring and management of the actual services
during the transition phase.
During the transition phase, the service manual is completed, and application transfer is planned and carried out on the basis
of the draft document created during the analysis workshop. The service provider must perform several steps to ensure smooth
assumption of responsibility for ongoing management of the application landscape. For example, the provider and customer must
reach agreement on the precise scope of Application Management activities (e.g. verification of the number of trouble tickets and
other metrics), and of the transfer phases. An agreement must also be reached regarding the technical and organizational structures of
Application Management & Modernization (e.g. definition of standards, methods and tools), and collaboration processes.
The provider is also responsible for implementing the action plan developed for knowledge transfer. Testing is based on the most
recent version of the operations plan. During this phase, a system check is carried out, the operations plan finalized, Application
Management operations are implemented, and customer-specific processes established for the provision of services. Further
activities include ensuring that the operations plan has been fully implemented, establishing structures for communications,
escalation and reporting, and determining KPIs for continuous and meaningful monitoring. If necessary, these should be adjusted
during the final testing phase (pilot).
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Test or pilot operations are carried out during the final phase of transition. During this phase, operations are commenced in
accordance with the operations plan. Initially, previously-defined non-binding metrics are used in place of SLAs. All necessary
quality-control measures, including those that determine customer satisfaction, must also be established. The pilot phase’s central
task is to examine and improve the support model. Communication channels and operational processes need to be established
and tested. After additional quality gates, risk management structures, monitoring activities and SLA reporting are implemented,
acceptance and transfer of responsibility can occur. The service transition is a controlled transfer of new or modified services to an
external provider who then has operational responsibility (Application Management).
3.2 Application Management.
On-going operations, sometimes referred to as “steady state” by providers, start after the conclusion of the development and pilot
phases. When we speak of Application Management, we are actually referring to on-going operations. To ensure better understanding,
this section provides an overview of Application Management’s basic elements. It describes and explains the main service elements
and the supplementary monitoring and reporting processes of quality management.
Application Management – overview of service elements.
Application Management
AM Development
Analysis
Design
Service Level
Management
Incident Management
Problem Management
Financial
Management
Change Management
Pilot
Capacity
Management
IT Service Continuity
Management
Service
ServiceOperation
Operation
Order
OrderOptions
Options
Consulting
on demand services
Availability
Management
Transition
AMM Supplementary
Services
Service elements
Order by Ticket
Release & Deployment
Management
Application
Enhancement
Application
Retirement
Customer-specific
Services
Service Asset &
Configuration Mgmt.
Request Fulfilment
Order by Contract
Order by Request
Continious Improvement/Monitoring/Reporting
Fig. 5
Service level management is an extremely important process. This element guarantees the quality, availability and provision of the
processes required to deliver and optimize services. It comprises activities for the agreement, specification and monitoring of service
quality, and is a cyclical process geared to the continuous improvement of IT services. As a result, service-level management is the
central means of achieving the ideal balance between the quality of services and the concomitant costs.
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By specifying service levels, a company is able to directly control the degree of quality required to operate its business processes.
However, expert advice and judgment are essential because excessively high service levels lead to excessively high costs, and
excessively low service levels lead to a lack of adequate ICT support for business processes. Due to the vital role of this process,
the outsourcer needs to have proven consulting skills with regard to industry-specific needs, the customer‘s business processes
and the deployed software products. Poor understanding of the critical nature of a particular business process or of the corresponding
business benefits leads to greater problems during service provision.
Let us consider other service elements:
Financial management is closely related to (SLA) reporting. The aim is to provide visibility into all financial aspects of the service,
comparing actual costs with budgeted values, and providing management with a continuous stream of facts and figures about
the ongoing services for better decision-making.
Availability management governs the availability of services in terms of time (uptime) at defined service points. The aim is to
develop a long-term plan that describes all activities for all services and for the synchronization of all functions in order to achieve
the required availability.
The task of capacity management is to ensure that the right IT resources are available in the right quantities at all times at acceptable
cost, in according with existing and future needs.
IT service continuity management comprises the agreement and documentation of contingency plans for critical situations. The
goal is to identify and contain major disruptions within IT services without interrupting ongoing business operations.
These service elements play a major role in ensuring the availability of the core elements of Application Management that support
the business. The core AM elements also include the following processes: incident management, fulfillment management, problem
management, change management, release and deployment management, and service asset and configuration management
(see also section 2.1. Definitions). These processes are all closely interrelated, and, in conjunction with the service strategy and
the ongoing development process (continual service improvement), define all the activities within the lifecycle of an application or
application landscape:
Application Management & Modernization over the application lifecycle.
Initial Implementation
Continual Service
Improvement CSI
Application Enhancement
SD
Service Catalogue Management
Application
Development
Requirements
Optimize
vice
I
Ser
ual ent CS
n
i
t
Con rovem
Imp
SO
Operate
Event Management
Request Fulfilment
Incident Management
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Fig. 6
Design
Service
Strategy
SS
Deploy
Build
Change Management
ST
Continual Service
Improvement CSI
Service Desk
2nd Level
Problem Management
Legende:
SD = Service Design
ST = Service Transition
SO = Service Operation
Release & Deployment
Management
Application
Services
Service Asset & Configuration
Management
Application Management & Modernization supports business processes by ensuring that applications are in an ideal or at least
predefined state at all times, enabling core business activities to be performed. During the lifecycle of an application or application
landscape various incidents will be encountered that can interrupt or reduce service quality, therefore negatively impacting
business processes. For example, there could be an interruption in the availability of the database, or corrupt data in the database.
The first of these incidents would be detected by automatic monitoring mechanisms. The second example would involve the user
initially reporting the event by phone or by email to the service desk. It is the task and goal of incident management to provide the
fastest possible, transparent logging and resolution of reported incidents according to agreed service levels in order to restore
operation of the impacted application. The quicker an incident is resolved, the shorter the downtime and the greater employee
productivity. Incidents also need to be managed efficiently. For example, the categorization and prioritization of incidents in line
with their impact on business processes can significantly reduce the concomitant costs. The main focus of problem management
is to minimize the negative consequences of incidents on business processes and to avoid the repeated occurrence of known
faults. The goal is the long-term stabilization of the IT infrastructure and of IT service delivery through the permanent elimination
of root causes of problems. The problem management team performs this reactively, i.e. by identifying the cause of incidents that
have already occurred and by making proposals for the improvement or rectification of the situation, and proactively, as described
above. They are proactive since they seek to identify possible problems before they occur and secondly because they seek to anticipate
the impact of known faults on neighboring systems. Reactive activities include analyzing trouble tickets, observing general trends,
information provided by third parties, experience with workarounds and, last but not least, intuition and experience. Once a cause
has been identified it needs to be documented. This is then the basis for a standard workaround and for the development
of a solution that eliminates the underlying problem, usually taking the form of a request for change (RfC) within the change
management process. This subsequently ensures more efficient management of incidents and problems by providing the incident
management team with standard workarounds for known faults and difficulties.
Within an integrated AM approach, supplementary AMM services offer the implementation of new or optimization of existing
applications and the replacement of legacy applications. They can also provide answers to company-specific requirements and goals,
e.g. where mergers and acquisitions require the transfer of business-process-specific applications into the existing application
landscape. Here, as well, tasks are generally performed by means of requests for change within the scope of change management.
Change management employs highly standardized methods and processes to implement requested changes in a swift and controlled
manner. It is very closely linked to the ITIL continual service improvement process (CSI). Activities within the change management
process comprise the initialization and analysis of one or several requests for change and the consideration of potential interdependencies or conflicts between such changes. In addition, the change must be planned and official approval given. Prior to approval,
risks need to be considered and assessed according to the customer‘s business process, the degree of impact on the service, and
the effect on TCO (total cost of ownership). Cost is also related to defining the right approval stages (authentication levels) and
defining the urgency of a change. The changes are verified and controlled via the change management process; however, actual
execution (development) is generally performed within a separate service module, i.e. enhancement/optimization.
A collection of individual changes can be defined as a new release. A new release is considered to be a series of new or changed
configuration items that have been tested and transferred to the production environment as one. The aims of release and deployment
management are to protect the production environment and to guarantee service quality by means of formal processes and checks
prior and during the implementation of new releases. Each release is approved by means of the change management process.
The release and deployment management process is divided into two steps: release development and release deployment. While
release development focuses on planning and creating the release, release deployment is concerned with the planning and implementation of the release. Release and deployment management enables the user organization to employ tested and approved
products and components and new software in a planned manner. Standardized release and deployment management reduces
the number of incidents and problems caused by increasing the stability of the production environment, having a direct impact on
associated IT costs.
13
Service asset and configuration management identifies, defines and describes the configuration items of a given IT infrastructure
within a logical model (Configuration Management System), monitors any changes to configuration items, and documents their
status and interrelationships within a configuration management database. It ensures that detailed information is available for the
best possible deployment of available resources, and for effective monitoring. It is therefore closely linked to the change management
and monitoring processes associated with CSI.
!
You cannot manage what you cannot measure.
In accordance with the ITIL ideology, it is vital to implement a continuous improvement process for all services, either individually or
as a whole. This process is designed to increase existing quality of service and processes in an iterative manner, and can be initiated by
a variety of sources (users, management, automated processes). To this end, it is necessary to initially define and catalog precisely
measurable initial states. Measurement is a key aspect of the ongoing improvement process. The statistics required are generated
via a variety of monitoring and reporting processes. These provide an important insight into process quality, the fulfillment of
business requirements and goals, subjective user-satisfaction levels, and compliance with SLAs (SLA reporting). Depending on the
quality of information provided and the predefined KPIs, the company gains visibility into all Application Management Service processes, and therefore has an extremely effective means of planning and management. Furthermore, if all these information-gathering processes are modeled within a single tool and can be accessed via a single, effective user interface, this increases transparency and the speed of decision-making. Ideally, IT decision makers should have detailed information at all times on whether and
how productively users can work with (business-critical) applications. If performance is poor, it should be possible to identify the
cause immediately, more or less at the click of a mouse. This allows the timely identification, analysis, assessment and mitigation
of risk. Weaknesses and opportunities can be more rapidly recognized and leveraged to significantly increase long-term quality.
The continual service improvement process (CSI) and its sub-processes, such as service measurement, are therefore vital with regard
to achieving the value added described in section 2.2.
14
4. Putting Application Management into practice.
4.1 Application Management & Modernization at T-Systems.
According to market analysts, outsourcing application management can generate savings of 10 to 30 percent. This is an attractive
proposition, but all IT decision-makers pondering this move should first address the following issues:
 Can the service be tailored to the company‘s specific needs and preferences?
 Does the service ensure maximum availability?
Is the organization responsible for service delivery designed for consistent service processes, independent of the business
processes supported, and of the technologies?
 Is it possible to achieve efficiencies through the use of standardized service modules?
Is it possible to monitor and manage services on the basis of service level agreements (SLAs), therefore helping to ensure the
reliability and quality of service delivery?
 Does a right-shoring concept exist, i.e. the best possible mixture of onshore/near-shore/offshore resources?
AMS cannot be considered in isolation from the relevant processes. What is needed is comprehensive understanding of the industry in question in order to integrate the service into the existing set-up. T-Systems is technology-neutral and familiar with the requirements of key industries. As a result, Application Management can be readily tailored to specific needs. These services have been
standardized and modularized to guarantee the highest possible degree of flexibility. T-Systems is able to draw on its experience of
projects in a variety of industries from the automotive sector to telecommunications, and on the skills of a variety of partners.
T-Systems has extensive experience in Application Management & Modernization and has demonstrated its skills in a large number
of customer projects. T-Systems currently provides SAP hosting services to approximately 1.3 million users and AM to approximately 750,000. More than 5,000 experts in 25 countries are responsible for approximately 2,500 installations, comprising a wide
variety of industry-specific and SAP solutions. Close cooperation with vendors and partners enables T-Systems to respond rapidly
to customer-specific needs and to identify and leverage innovations as they emerge.
Due to its industry-specific expertise, T-Systems is recognized in many sectors as a trusted partner. T-Systems was one of the first
companies to receive worldwide certification as a global SAP Application Management provider. In addition, a strategic partnership exists with Cognizant, a global IT service player with roots in the Indian market. The two partners are able to combine their
complementary strengths in consulting and in offshore delivery. As a result, major customers in Europe and beyond have improved
access to worldwide IT services. They are able to gain cost efficiencies and benefit from the expertise available from both organizations in order to better support their core business and drive innovation. Moreover, our customers can access the supplier networks
that both service providers maintain. T-Systems is in a position to deliver Application Management to anywhere in the world to the
same consistently high quality standards. T-Systems is therefore also an ideal partner for business expansion and mergers and
acquisitions within an international context.
15
T-Systems’ global delivery capability.
10
33
3 4
5
Netherlands
Belgium
UK
France
Spain
Switzerland
Italy
Germany
Czech Rep.
Slovakia
Hungary
Austria
TwinCore PoP
Regional PoD
USA
Mexico
Brazil
Argentina
China
Japan
India
TM
Malaysia
Singapore
South Africa
Locations
m²
2004
85
75,328
2009
2009
67
95,800
Fig. 7
The analysis and design phase sees the application of the AMbition® approach, based on extensive experience in ITIL-compliant
application management for organizations of many sizes. This model employs consistent methodologies, processes and tools, and
is ideal not just for SAP and other standard applications, but also for custom software. Applications can be migrated quickly, costefficiently and easily.
!
AMbition® leads to verifiable, transparent and high-quality results
via a series of defined steps. And with each step you free up more
resources for strategic tasks, innovation and visionary goals.
T-Systems follows its customers throughout the world, growing with them and their needs. Help-desk and field-service professionals are based at sites in North, Central and South America, in many European countries, South Africa and Asia. They speak the
local languages, and understand the local cultures. Remote services are provided where it makes most sense for our customers –
taking into account security, reliability and cost-efficiency imperatives.
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4.2 Case studies.
The following references underline the modular flexibility and benefit of Application Management, and demonstrate the industryspecific expertise, technology independence and global delivery capability of T-Systems.
Application Management for the Tires Divisions of Continental AG.
T-Systems manages the engineering applications for the R&D unit of Continental‘s Tire Divisions. In other words, T-Systems is responsible for operating and maintaining business-critical CAD and PDM software. The customer did not want a predefined service
package, but a choice of modular services, plus guaranteed global availability of support for users and applications. Monthly fixed
prices grant a high degree of cost transparency, and have significantly pared back spending for the administration, maintenance
and optimization of engineering software.
The solution comprises the delivery of services in accordance with ITIL (2nd and 3rd level support) and international delivery capability for all services. Through the intelligent blend of resources (including offshoring of selected services via partner Cognizant)
and highly transparent, fixed prices for defined services in conjunction with SLAs, there have been tangible savings. Around the
globe, seven applications, with 800 users, were successfully migrated to AM.
„Profitable growth and strict cost management across all units are the basis for our business success. The T-Systems
service delivery model is a key element within this picture.“ [Elisabeth Hoeflich, CIO of Continental‘s Tires Divisions.]
IVG SAP Application Management: Application Management for SAP R/3, SAP BW, Web and SAP portal.
A long-term contract has been signed by IVG Immobilien AG, one of Europe‘s largest real-estate management companies, and
T-Systems for the delivery of comprehensive Application Management for SAP R/3, SAP BW, Web and SAP portal.
Of particular importance to the customer was a user-centric and demand-driven application management solution, in conjunction
with the enhancement, optimization and maintenance of existing applications. One of the key challenges was the fact that the
company had a European-wide organization, with a need for multi-lingual support plus cross-border operations and maintenance.
Moreover, there was considerable need for development work on a variety of SAP systems, creating a highly complex project.
One of the major reasons for contract award was T-Systems’ global delivery capability, including the availability of data centers
and service desks in the majority of European countries. Moreover, T-Systems operates a central service desk for Europe in Bonn,
Germany, employing 2nd and 3rd level support professionals who are able to provide advice and assistance in multiple languages
in accordance with ITIL. However, the contract was ultimately won on the basis of an Application Management team with in-depth
knowledge of the real-estate industry.
T-Systems delivers services tailored to the customer‘s needs on the basis of SLAs. Services, roles and responsibilities are clearly
defined, creating transparency. Responsibility for operations now lies with T-Systems, who also bears much of the risk of the outsourcing arrangement via a bonus/penalty system.
By outsourcing Application Management to T-Systems, IVG is now able to better exploit its own resources, and to focus on its core
competencies.
„Industry-specific expertise and high professionalism with regard to core systems enables us to derive the greatest possible business benefit from applications.“ [Michael Rosin, Head of ITSM, IVG.]
17
CRM: Xella Xales. Application Management. CRM Systems with standard Siebel software: sales applications for Xella.
Xella International, one of the world‘s leading makers of construction materials for walls, required a skilled, reliable partner for the
integration and operation of its existing Siebel software. A key challenge lay in the structure of processes and the ERP systems at
the individual Xella country organizations, necessitating the migration of data for more than 1,000 users from legacy systems.
Xella‘s aim was to establish uniform sales and process management for all national and international units. A particular focus was
the provision of a one-stop solution, including implementation, roll-out, user training and operation of the CRM application. As Xella
is very much an international player, services were required in 25 countries and in more than 10 languages.
A tailor-made system now meets all present requirements, with sufficient flexibility for mastering future challenges. To achieve this,
emphasis was placed on avoiding and disposing of „unnecessary baggage“ in the form of functions that served no real purpose.
The project has greatly increased transparency throughout sales activities. All relevant customer information is now available in
near real time, improving customer management. T-Systems provided a comprehensive answer to the Xella’s needs, encompassing
consulting, systems integration, and Application Management.
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5. Summary and outlook.
IT’s raison d’être is to support the smooth running of business processes. As we have seen, IT managers are currently facing some
tough challenges. Despite the growing strategic significance of IT and rising demands, increasingly complex systems must be managed with dwindling budgets. Furthermore, the development, implementation and integration of applications, and, above all, the
maintenance and operation of these complex landscapes, eat up valuable resources and prevent enterprises from concentrating
on key innovations that strengthen their competitive edge.
From mid-2010 the focus will again be on growth, making the above problems even more acute. From that time, CIOs will have to
pay greater attention to IT’s strategic business value and to the modernization of IT and business processes.
As this paper has shown, AMM is a key component of a comprehensive modernization model that combines cutting costs through
the industrialization of IT services with the creation of new value through innovation.
One way to save costs and resources, therefore, is to generate economies of scale and increase efficiencies across all services
through industrialization. IT managers must apply the proven principles of manufacturing to the delivery of IT services. That means
implementing and leveraging standardized platforms and processes, specialization, international division of labor, a high degree of
automation, certified quality management and services on demand.
As a result, enterprises benefit from high-quality, demand-driven, scalable services delivered fast and cost-efficiently – anytime
and anyplace. This white paper has demonstrated, in a simplified form, how this could work by leveraging Application Management. And we have seen the potential value that these services can generate. With this much to gain, companies cannot afford to
experiment. The quality of AM depends on the expertise and the capacity of the service provider. It is advisable for organizations to
select a provider who can demonstrate full compliance with SLAs, corporate policies and relevant legislation at all times. In light of
growing compliance, risk-management and legal requirements, this is becoming more and more important if companies want to
minimize risk. All enterprises (not just international players) must ensure their provider has the necessary global delivery capabilities and comprehensive technology and industry-specific expertise to deliver services in line with real-world business needs.
Moreover, they should make sure that they benefit from the full range of Application Management & Modernization.
A need for reliable partnerships is behind the growing demand for service integrators on the application management market.
Service integrators consolidate, coordinate and assume responsibility for the services of multiple providers, offering one face to the
customer. This applies to service delivery, KPIs and compliance and risk-management requirements. Unfortunately, however, there
are few such integrated solution concepts in the world of application management. The reality is somewhere between peer-support
and time-and-materials contracts with multiple providers. In the worst cases, a separate company is tasked for each individual
solution. Often, we see multiple-provider scenarios that do not allow the smooth provision of IT services across all processes. Many
companies have heterogeneous application landscapes and various application-management methods that are far removed from
the Application Management & Modernization approach presented in this paper.
But the future of Application Management & Modernization looks different. Worldwide access and delivery options with end-to-end
service level agreements will become standard practice – because global players need the guarantee of reliable global delivery.
When a company establishes a new subsidiary, for example, or when it comes to mergers and acquisitions, services for all types of
software, both standard and customized templates, will be cost-effectively extended to meet changed business needs. The service
provider of the future will offer a standardized transition methodology that no longer challenges the customer but provides the
support he needs and lightens his load. Providers will not only deliver consistent services worldwide, but will also take into account
local needs and cultural differences. The IT providers of tomorrow have already established strong relationships with reputable,
reliable partners today, and offer a global delivery network covering all key time zones (by means of hubs) and delivering genuine
24/7 services. The services themselves and pricing models of the future need to be more tailored to specific customer needs,
while remaining flexible and transparent. This will enable enterprises to master operational, strategic and cost challenges.
In addition, the AM provider plays a key role as a driver of modernization and innovation. This includes standardizing and consolidating
process and systems landscapes. The goal is to radically reduce complexity, improve process quality, and reduce costs still further.
19
Finally, the provider must help their customers implement innovative business models and enhance their ICT environments to take
advantage of new opportunities and increase their profitability. In short, Application Management & Modernization is a package of
groundbreaking, transformational services that every forward-looking AM provider should offer.
6. Glossary of key terms and abbreviations.
20
Term
Definition
1st-level support
First-level support, also known as the service desk, is the first and only point of contact for all incoming
requests for user support. It is referred to as a single point of contact (SPoC). First-level support staff
members are responsible for logging the request, collecting all necessary additional information, and
resolving it to the best of their ability, and as far as possible autonomously. The goal is to categorize
and resolve or provide a workaround for as many incidents as possible with the help of knowledge
databases.
2nd-level support
Second-level support aids first-level support through on-the-job training, and by handling more complex requests that cannot be resolved by first-level support. New solutions are entered into knowledge
databases, ensuring that this information is available to first-level support staff. If the issue is too complex,
and second-level support staff does not have the skills or technical resources to handle it, it is forwarded
to third-level support.
3rd-level support
Third-level support comprises specialists from the vendor. It is the highest escalation level within the
support organization.
AM
Application management.
AMS
Application Management Services.
AMM
Application Management & Modernization.
CAD (Computer
Aided Design)
Computer-aided design.
Governance
In the context of this white paper: the defined processes and rules for coordinating the delivery of
services.
Hub
A star-shaped distribution node within a network.
Incident
An event that actually or potentially interrupts service delivery or reduces service quality.
ICT
Information and communication technology.
ITIL
The IT Infrastructure Library is a collection of best practices recognized around the world as the defacto standard for service management.
21
Term
Definition
Knowledge repository
Accumulation of knowledge on a specific subject; in the context of this white paper, it refers to knowledge related to processes, applications, and a business’s interests.
KPIs
Key performance indicators.
Legacy system
An existing system that has expanded gradually and organically over time.
Joint venture
An entity formed by two or more collaborating parties for a shared business undertaking.
Outsourcing
Transferring certain tasks and organizational structures to an outside service provider.
Outtasking
Transferring individual tasks to an outside service provider while retaining process control (including
responsibility for people and assets).
PDM
Product data management comprises the administration of key information relating to the production of
goods.
R&D
Research and development.
Release
One or several authorized modifications to a system (infrastructure, application) that is tested in the
form of a collection of new or changed configuration items (CIs), and subsequently implemented in the
production system.
Request for Change
(RfC)
An RfC describes the addition, modification or removal of services, enabled or supported hardware,
networks, software, applications, systems environments, systems, desktop systems or associated
documentation.
Roadmap
Plan for further action; in the context of this white paper it refers to actions taken to improve an ICT
environment by means of AMS.
Scalability
Flexible and precise tailoring of the capacity of hardware and software solutions to the customer’s
actual needs.
Service desk
The service desk is the first point of contact for users in the event of service interruptions, for service
requests and for some types of requests for change (RfC). It is the communications platform for all types
of information for users. See 1st-level support.
Service manual
A document that describes processes and organizational structures, ensures reliable operation of an
application, and is used for resolving incidents or problems.
22
Term
Definition
Service level agreement (SLA)
A formal agreement between the customer and the IT provider about the service and the quality of
service to be delivered.
SLA reporting
Reporting of incidents covered by the SLA.
Support time
The time it takes for a request for user support to be answered or a problem to be resolved.
Ticket
Also called trouble ticket; the documentation of a call or incident within a ticket tool.
Time-to-resolution
The time it takes for a request for user support to be answered or a problem to be resolved.
TCO
Total Cost of Ownership is a metric that helps consumers and businesses estimate all costs associated
with assets (e.g. software, hardware) over the entire lifecycle.
7. List of Figures.
23
No.
Name
Fig. 1:
Matrix comprising the business architecture mapped against modernization methods.
Fig. 2:
Benefits of Application Management.
Fig. 3:
Roadmap for Application Management.
Fig. 4:
Sample metrics.
Fig. 5:
Application Management – overview of service elements.
Fig. 6:
Application Management & Modernization over the application lifecycle.
Fig. 7:
T-Systems’ global delivery capability.
8. References.
24
Source
Document
[CIO 2007]
Verbessertes IT-Service-Management mit ITIL – IT Prozesse an den Geschäftszielen ausrichten, Andreas
Schaffry, CIO Magazin, 2007
(http://www.cio.de/strategien/methoden/835936)
[CIO 2008]
ITIL V3 und Compliance: Erst Verdruss, dann Vergnügen – Gartner lobt neuen Lifecycle-Ansatz, Christiane
Pütter, CIO Magazin, 2008 (http://www.cio.de/strategien/methoden/852954)
[CIO 2009]
Application Management Gewinner der Krise, Alexander Galdy, CIO Magazin, 2009 (http://www.cio.
de/865052)
[Forrester 2008]
The Application Management Continuum Offers CIOs A Contemporary Approach To Modernization,
Phil Murphy (Forrester), July 2008
[Forrester 2009]
Forrester Umfrage Q3/2009 Global Forrester‘s 2010 IT Research Agenda & Event Themes Online Survey
(http://a964.g.akamaitech.net/f/964/714/1h/www.forrester.com/Marketing/Campaign/
BinaryContent/0,5983,2052,00.pdf)
[Gartner 2008]
Process-Centric Business Application Life Cycle Management, Pat Phelan, Gartner (ID Number:
G00162337), December 2008
[Gartner 2009]
Key Issues for Application Life Cycle Management Processes and Tools, Jim Duggan, Gartner (ID Number: G00166604), April 2009
[Hackmann 2008]
Kostendruck – Anwender entdecken das Application Management, Joachim Hackmann, Computerwoche,
November 2008
(http://www.computerwoche.de/management/it-services/1879319)
[PAC 2005]
Application Management in Deutschland, PAC, 2005
[PAC 2008]
Application Management in Europe, A Buyer’s Guide, PAC , November 2008
[Rau 2007]
Application Management Outsourcing – Einstieg in den Ausstieg, Fabian Rau, erpmanager.de, January
2007 (http://www.erpmanager.de/magazin/ artikel_1302_application_management_outsourcing.html)
[T-Systems 2009]
Service Management Handbook, T-Systems, May 2009
[Verstaen 2006]
Application Management Services: Anwendungen effizient verwalten, Jens Verstaen, AP Verlag, July 2006
(http://ap-verlag.de/Online-Artikel/20060708/)
[Zarnekow 2005]
Service-orientiertes IT-Management, Rüdiger Zarnekow et al, ITIL-Best-Practices und –Fallstudien, 2005
[Ziegler 2008]
Ohne Kennzahlen droht den Unternehmen ein Blindflug, Matthias Ziegler, itmanagement ejournal,
June 2008
AMM | January 2010
Kontakt:
T-Systems International GmbH
Market Intelligence
Holger Wächtershäuser
Hahnstraße 43d
60528 Frankfurt am Main
E-Mail: Holger.Waechtershaeuser@t-systems.com
T-Systems International GmbH
IT/ICT Solution Marketing
Stefan Spielbauer
Dachauer Str. 651
80995 München
E-Mail: AMS-Info@t-systems.com