5 Ways to Optimize Application Sourcing Costs in an AI-Enabled Market
Application sourcing —software, support, labor and managed services — presents a prime opportunity to reduce spend and improve value realization.
Advisory
You can’t manage what you don’t measure.
Benchmarking Services
You can’t manage what you don’t measure.
The Industry’s Deepest Benchmark Database and Strongest Methodology
We have +15 years' experience helping enterprise clients compare defined services to the market.
We have the data and know-how to help you benchmark cost, quality and productivity across all functional areas of business and IT, including:
- IT Infrastructure Services
- Application Services
- Software/Hardware
- Telecom/Network
- Cloud (IaaS)
- Digital
- F&A, Procurement, & HR
Find out the right benchmarking services for your needs and strategic objectives.
Click on what you want to benchmark to learn more:
Price
Staffing rates, contract pricing and competitiveness
Cost
Total cost of ownership (TCO) and industry benchmarks
Performance
SLAs, user experience and provider relationships
Contract
Price, terms and conditions
ISG Benchmarks Address Your Questions
Staffing
Are total staffing levels and staffing utilization right for each functional area?
Service Delivery
How do our level of assets compare? Are we providing the right service levels to users?
Spend
Are we spending the right amount of money in total, and by major functional area?
Leading Practices
Where are the variances from leading practices?
Performance Gaps
Why and where are there gaps? How do we drive sustainable improvement?
Meaningful Savings
What are the high impact, high ROI changes we can make in the immediate term?
Service Source
Are there services currently provided in-house that should be outsourced, or vice versa?
Intelligent Simplification
What complexity or constraints could be alleviated through automation or simplification?
Price Benchmarking
Outsourcing contracts become uncompetitive over time, but it’s difficult to know when it will happen – or by how much.
Whether you want to benchmark your outsourcing contracts’ price, compare your internal service delivery cost to the market or both, ISG gives you at-a-glance visibility into price competitiveness via a single-pane dashboard, plus access to deep dives into real-time IT industry market price intelligence.
- Rate Card Assessments: Assesses labor rates found in time and material (T&M) agreements.
- Market Assessment: Assesses pricing found in outsourcing contracts, typically at the tower level.
- Contract Benchmark: Benchmarks pricing, performance and quality found in outsourcing contracts at a detailed level.
- Tripartite Contract Benchmark: Formal benchmark executed by both parties to a contract (client and provider), often as part of the benchmarking clause in master services agreement (MSA).
In addition to the above project based price benchmarking services, you can also monitor the price competitiveness of your contracts in real time using using the ISG Probenchmark® price monitoring service.
Acting on timely, accurate and actionable price data allows enterprises to more quickly respond to changes in market prices and make more strategic decisions regarding their IT services.
Cost Benchmarking
To get a complete picture of your landscape, you need to understand your service quality and personnel productivity, potential efficiencies and gaps, user satisfaction, and how all these elements relate to cost and compare to the market.
We offer a holistic benchmarking solution that gives real-time, online dashboard visibility into the three key components of performance:
- Understanding where your costs and performance stand today
- Establishing goals to resolve opportunities
- Tracking progress on achieving optimization
By comparing your spend, staffing allocations and performance across the enterprise, we help you identify opportunities to improve your financial and operational performance.
TCO Benchmark: Compares your total cost of ownership against industry standards of cost, quality and productivity for a variety of IT products and services.
Industry Benchmark: Compares costs against industry metrics, such as IT spend as a percent of revenue.
Get real-time access to cost benchmarking data with ISG Inform™.
Contract Benchmarking
Build a defense against the risks of fixed-price long-term contracts. Compare your contract price, terms and conditions to the market and know when your contract falls out of favor.
The terms and conditions of your contracts set guidelines of acceptable behavior, but they are evolving entities – and you need to manage that evolution. A commitment to benchmarking your contracts is a commitment to progress and improvement.
An ISG contract terms and conditions assessment can:
- Increase savings by reducing contract cycle times
- Decrease risk by helping you rely on audit trails and accurate benchmarking data
- Leverage baseline data and peer and industry performance comparisons to improve contract lifecycle management
- Establish goals for cost reduction, enter new markets and enhance supplier relationships
- Define new contracts with the latest trends in terms and conditions.
Performance Benchmarking
KPIs and SLAs are essential for tracking performance in terms of achieving strategic goals and making decisions. In the best of cases, KPIs can serve as an early warning system to let you know when you are heading off course and where
action might be needed.
An ISG performance benchmark compares your performance against industry peers and leaders and gives you a cost-effective approach to share, compare, improve, and transform internal functions and processes.
SLA Benchmark
assesses service levels against the market, including both performance levels and structure
User Experience Benchmark
measures the impact of technology on users, including customer satisfaction
Featured Insights
ISG Research
ISG is a leader in proprietary research, advisory consulting and executive event services focused on market trends and disruptive technologies.
Get the insight and guidance you need to accelerate growth and create more value.
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Reimagining insurance services: The convergence of intelligence, ecosystems and experience
The global insurance industry is at a pivotal juncture, driven by economic volatility, evolving policyholder expectations, regulatory changes and potential AI innovations. Insurers are navigating a landscape that demands agility, personalization and operational excellence. The increasing number of digital-native consumers, climate-related risks and cybersecurity threats are reshaping traditional business models, compelling insurers to rethink their enterprise designs and core strategies.
Research
AI is being integrated into almost all public cloud engagements to improve productivity and efficiency
Public cloud platforms form the core of enterprise AI ecosystems, offering the scalability, elasticity and specialized infrastructure needed to train and deploy large models efficiently. ISG research shows that combining on-premises control with cloudbased acceleration enables organizations to integrate AI-powered intelligence into existing workflows and streamline their operations. Enterprises have been able to reduce development complexity, accelerate time to value and scale innovations from predictive analytics to autonomous operations by leveraging cloud-native AI services, pretrained models and GPU-optimized instances.
Research
Digital engineering is vital for insurers to modernize operations and exceed policyholders’ expectations
Digital engineering has become the core capability that helps incumbent insurance enterprises modernize legacy systems, accelerate innovation and deliver seamless policyholder experiences across multiple channels. As these enterprises face growing competition from insurtech, neo insurers and digital insurers, shifting policyholder expectations and increasing regulatory complexities, digital engineering services offer the technical architecture, development expertise and operational frameworks needed to transform outdated monolithic systems into flexible, cloud-native, API-driven ecosystems. This change goes beyond technology; it involves fundamental shifts in how insurance organizations design, develop, deploy and maintain digital tools that are increasingly essential for staying competitive.
Research
Insurance firms that utilize GenAI and Agentic AI reap cost, speed, and experience benefits, thereby building strong competitive advantages.
The insurance industry is facing its most significant technological transformation since the onset of digitization. GenAI and Agentic AI fundamentally reimagine the way insurance carriers, brokers and managing general agents (MGAs) operate, engage with customers, assess risk and deliver value. These technologies have matured from experimentation stage into production-ready platforms, reshaping the insurance competitive landscape.
Research
Incumbent insurance enterprises must leverage innovative GCC models to thrive amid economic challenges
Amid economic volatility, ongoing inflation, talent shortage, technological changes and rising competition, incumbent insurance enterprises encounter unprecedented challenges that demand both cost optimization and capability growth. In this environment, providers offer models such as build-operatetransfer (BOT), build-own-operate-transfer (BOOT), build-operate-transform and transfer (BOTT), capability center as a service (CaaS) or global capability centers (GCCs) as distinctive solutions. These models represent structured approaches, delivering both short-term and operational gains alongside long-term strategic benefits, effectively addressing the complex, and sometimes conflicting, needs of insurers.
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Frequently Asked Questions
Q1. Why are benchmarks important?
Benchmarks ground strategy in reality by showing how you compare to peers on cost and performance. Used well, benchmarks reveal outliers to investigate and areas for improvement without pushing you to chase the lowest price or sacrifice quality.
Q2. How can benchmarks accelerate savings opportunities?
Benchmarks reveal market-competitive rates and terms, letting you renegotiate with current providers instead of running a full RFP. That shortens time-to-value and reduces disruption while giving you the confidence that you’re paying a fair, defensible price.
Q3. What’s the advantage of a total cost of ownership (TCO) benchmark over a price benchmark?
A TCO benchmark looks at the whole solution, design, volumes, service levels, operating model and efficiency levers, so you spot bigger, more sustainable savings. Price-only benchmarks compare line items and can miss structural changes that lower overall cost.
Q4. Are benchmarks the same for different products and services?
No, benchmarks work best for fungible offerings with multiple suppliers. For proprietary products (e.g., software), pricing is shaped by bundles and SKU choices, so optimizing the bill of materials and total cost of ownership matters as much as discount level.
Contact the ISG Benchmarking Team
