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WHITE PAPER

ACHIEVING THE MOST ECONOMICALLY
   ADVANTAGEOUS APPS EVERY TIME

                               IAN TOMLIN


                             SEPTEMER 2010




                    www.ndmc.uk.com
WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




Contents




A New Economic Imperative .....................................................................5


The Bottom Line .............................................................................................6


New Routes to Applications Sourcing ...................................................7


The Downside of Current Sourcing Approaches ................................8


Situational Applications Insourcing ..................................................... 10


Known Roadblocks..................................................................................... 11


Technology to Empower Process Improvement ............................. 14


Evidence of Results .................................................................................... 16


Qualifying the ROI ...................................................................................... 18


Contact information .................................................................................. 19




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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




How do organizations achieve IT procurement savings and
drive through more process efficiency savings by delivering
better information systems in challenging times?

This document describes current business software sourcing
options and exposes their sub-optimal performance and
then describes an alternative approach to meeting the
majority of demands for business software applications at
the lowest and most economically advantageous cost.




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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




A New Economic Imperative

For decades, well established large organizations with robust
business models have enjoyed budgets of relative plenty. But the
economic meltdown of 2009 has led to a new economic reality.

The role of IT in organizations has not changed fundamentally – even in a
recession organizations need information systems to fuel process
improvements, creative innovation, growth and front-line customer
services – but what has changed fundamentally is the size of budgets,
and probably forever. The world of corporate IT facing a permanent
change in its funding.

To achieve significant cost reductions whilst avoiding direct impact on
front-line services and growth, organizations must re-visit how they
operate IT and procure services. In this new paradigm, no longer are
today’s norms of IT procurement affordable or sustainable.

While norms of procurement behaviour change over time, in this new
economic climate, business decision makers are under pressure to inject
innovation into procurement approaches and to take marginally more
risk where the promise of step-change rewards exists.

Nowhere is the potential for rewards greater or more achievable than in
the supply of business software applications; souring innovation in
information systems to improve the efficiency of processes and inject
new ways of engaging with customers and finding new markets.




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The Bottom Line

The total cost of IT for organizations should not exceed 1% of
income. For many organizations, a target outline cost for IT in the
order of 0.5% is achievable.

Sophisticated organizations that have already thoughtfully engineered
the IT function like easyjet are today achieving IT operating costs below
1% of total revenues. This compares to the majority of organizations
whose IT costs can range from 1.5% to 6% of income. easyJet is profiting
from moving to cloud computing and adopting Software as a Service
solutions for utility applications like email, calendaring and office
software.

Yet, even more can be achieved through more radical approaches to IT
procurement without significantly increasing risk.

And for organizations that face more extreme changes to compliance
and market conditions, more can be done to deliver adaptive, better-fit
IT to proportionately more IT users.

The potential of IT to create competitive advantage, boost customer
service performance and streamline business processes to create
operational excellence has taken a knock over the last two decades – but
the potential still exists for IT to do just that.

Isn’t it time that your technology made a difference to competitive
advantage?




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New Routes to Applications Sourcing

When software applications are demanded, the cogs of sourcing
a solution start turning. The consideration given to sourcing
options is often limited by ‘norms of understanding’ and ‘norms
of behaviour’ that are no longer valid.

Instead of considering ‘How can we exploit or enrich our existing
technologies, or deliver this software application ourselves’, thoughts
quickly move to options of procuring a ready-made application solution,
outsourcing a custom development or fully outsourcing processes.
Ready-built software applications
The procurement of ready-built software applications that boilerplate
specific business disciplines, processes or technology components (such
as geo-spatial mapping, knowledge management, business process
workflow, mobile etc.) is seen to offer a lower risk procurement strategy
than the alternative of development.
Software as a Service
This is the procurement of software delivered as a service via the Web.
The argument for ‘SaaS’ software solutions is that organizations don’t
need to buy or maintain software in order to use it; neither do they need
to pay for or support the hosting environment. SaaS also means that
organizations can turn off systems at any time.
Development outsourcing
This is the procurement of custom systems by paying a third party to
develop them. The argument for software development outsourcing is
that it offsets potential risk of project failure by placing IT applications
design into the hands of professionals.
Process outsourcing
This is the outsourcing of entire business processes to third parties.
Process outsourcers will promote arguments of economies of scale,
systems leadership and process expertise to prospective customers.
Perhaps a more politically sensitive issue is the reality of offshore
outsourcing where third party suppliers are able to manage processes for
less primarily because of lower labour costs in countries overseas. IT is
frequently seen as a key component of the process outsourcing offer that
means purchasers no longer need to burden themselves with worrying
about which system to install and operate as the process outsourcer will
provision its own systems as part of the agreement.
These procurement vehicles may be well understood, but they’re not
the ONLY options open to buyers. There are today more
economically advantageous options through insourcing that have
fewer constraints on organizational agility and growth thanks to
recent innovations in the science of computing.



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The Downside of Current Sourcing Approaches

Whilst these procurement approaches are understood to offer
robust and sometimes compelling commercial reasons for adoption,
there are many good reasons why following this course isn’t the best
option for software procurements. Here are a few reasons why not.

Inflated procurement process costs
If a new procurement process is instigated for every new software
application requirement, large or small, costs of procurement inevitably
spiral. This is the reality for many organizations that have lost all in-house
capability to author applications.
Inflated buy prices
When organizations tender for ready-made systems, they run into the
economic reality that every software company specializing in a particular
genre of software will expect to charge in the range of £24k to £60k for
their system plus maintenance and upgrade fees in excess of 15% of
software value. This is because the cost to suppliers of responding to a
procurement, providing customer support, paying salespeople
commission, contributing to the running costs of the business etc.
demand that a certain level of income per sale is achieved.
Poor fit IT systems
When organizations buy off-the-shelf software they often find the ‘fit’ of
systems is not ideal for their organizational size and software features
need to be customized at extra cost to suit their business needs.
Rigid, inflexible IT systems
Ready-made software applications include proprietary logic, technology
components (i.e. database, workflow, report tools etc.) and contract
restrictions that prohibit adaptation. Vendors are normally reluctant to
allow their customers free access to their own data on their systems
without purchasing proprietary report writers or data connector APIs.
Creation of silos
Outsourcing software development, MIS functions or complete processes
creates cultural and operational silos as staff loyalties and values adapt to
their new employer. Purchases of shrink-wrapped software lead to
unmanageable portfolios of IT components that all work differently,
producing systems that don’t talk to one another.
Growth in grey sourcing
As outsourcing contracts age, requests for change and adaptation that
are constrained by contractual arrangements, are frequently addressed
by staff directly rather than being assigned to contractors. This creates a
‘grey sourcing’ expense hidden within operating budgets.




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                                Spiralling software maintenance costs
A summary of the                Suppliers of software applications will charge for support. Typically the
procurement options:            cost of maintenance contracts far exceeds their benefit but their
                                provision is necessary if organizations wish to enjoy support.
Ready-built software            Inflated version upgrade costs
    High procurement           Organizations are frequently required to upgrade systems not because
       process costs
                                they desperately need new features but because they want to avoid
    Inflated buy prices
                                operating outmoded systems that are no longer supported by
    Too many supplier
                                suppliers.
       relations
    Over-size/poor fit         Loss of contractual bargaining power
       software                 Organizations are sometimes held to ransom by IT suppliers because
    Creation of data silos     they’ve invested so much time and money into a particular third party
    Increased integration      IT system that the cost and risk of change is too great to contemplate.
       costs
                                Creation of an ‘IT lottery’
Software as a Service           There can never enough shrink-wrapped solutions to meet every
     Poor data                 unique need for IT. The nature of innovation and process
       management               improvement is that there is always another process to serve as
     Inability to              organizations adapt and grow. The absence of sufficient budgets and
       customize/adapt          suitable IT tools creates a lottery for fit-for-purpose systems between
Development outsourcing         department managers.
    Inflated buy prices        Throwing baby out with the bath water
    Slower delivery            Organizations that have outsourced their development, IT function or
Process outsourcing             processes often lose control over their ability to adapt as contracts
     Cultural and              and conflicts of interest inhibit an organizations ability to respond to
        operational silos       industry and market changes.
     Growth in grey            Too many supplier relationships
        sourcing
                                Some organizations have in excess of 50 software supplier
(All)                           relationships owing to their strategy to procure ready-built software
           Poor adaptability   for each and every discipline or core business process. This leads to
           Poor support for    high maintenance ands upgrade costs and excessive supplier liaison
            innovation          costs.
                                Sub-optimal information systems
                                A long tail of demand exists for software applications, unsupported
                                due to a lack of resources and budgets. Senior officers, middle-
                                managers and creatives charged with innovation in the organization -
                                and whose roles demand that they use information in different ways
                                to build insights, collaborate with communities, share ideas and evolve
                                better strategies – find they lack the access to information and
                                systems needed to discharge their roles.




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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




                                   Situational Applications Insourcing
Situational Applications
Insourcing
                                   SITUATIONAL APPLICATIONS are software applications
Benefits:
                                   demanded by organizations to improve business processes in
                                   respond to new business situations. They represent the
   Project complexity and
                                   MAJORITY of emerging demands for software ‘systems’
    risk is removed by
    creating applications          beyond the core components of Financial and Enterprise
    during workshops and           Resource Planning (ERP) systems.
    iteratively adapting
    applications to best fit       Situational Applications Insourcing describes an insourcing
    the use case.                  approach for provisioning of new applications where the delivery
   No programming skills          of applications is met by ‘super business analysts’ embedded into
    and competencies are           change teams that respond to new requirements for software
    needed.                        applications as they emerge.
   No dependencies exist
    for middle-ware software
                                   Before engaging a procurement process or custom coding
    or third party tools in        development, the majority of ‘systems’ requirements are
    areas such as business         considered for internal delivery by business analysts embedded
    intelligence, geo-spatial      into change management teams (and motivated through targeted
    intelligence, forms and        remuneration packages to improve the process areas they serve).
    database design etc.           Situational Applications Development is predicated on the
   New applications are           existence of integrated software platforms that business analysts
    created without
                                   can use themselves to create applications to support
    additional software costs
                                   improvements in business processes without having to create
   No costs associated with
                                   custom code or acquire tools and skills that would necessitate an
    browser compatibility
                                   ‘IT project’.
    testing, applications re-
    working, de-bugging or         This approach places focus and rewards on process improvement
    performance tuning is          and business outcomes rather than the technology componentry.
    incurred.
   No version upgrades or         Situational Applications Insourcing offers a practical alternative to
    maintenance costs are          custom coding, software procurement or outsourcing.
    incurred in relation to the
    applications developed.




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Known Roadblocks

A series of ‘road blocks’ have prohibited innovation in IT
procurement approaches for software applications. Thanks to recent
developments in code-free real-time applications authoring, these
roadblocks have now largely been overcome.

Norms of IT buying behaviour
Problem: There is a widely held view in business IT procurement circles
that ready-built software represents a lower risk than custom-built
software. This is mainly because buyers presume projects will require
custom programming. Furthermore, IT buyers are pressured to consider
outsourcing as a means of offsetting cost without being able to monetize
the ‘downside’ of outsourcing strategies, or consider alternative
insourcing strategies.
   IT buyers must look beyond accepted sourcing approaches if they are
    to achieve step-change cost and efficiency benefits made possible by
    new innovations in computing.

Overcoming limitations of Web browsers
Problem: Until very recently it wasn’t possible to provide assurances to
corporate IT buyers over the performance, security and usability of
applications delivered via web browsers owing to the limitations of
operating systems platforms and browsers. The presumption continues
to pervade that applications installed on a client or server internally are
somehow ‘better’.
   Recent events in the development of web-based computing such as
    increased competition in the web browser market resulting from
    Google’s entry, market acceptance of AJAX technology, the release of
    HTML 5, the launch by Microsoft of Active Server Pages (ASP) 3.5 etc.
    have collectively made possible the design, deployment and
    operation of Rich Internet applications in a client server architecture
    that perform just as well as (if not better than) pre-installed desktop
    and server software.

Project cost and complexity resulting from programming
Problem: It is presumed that custom applications can only be developed
by programming.
   New innovative (so-called ‘agile’) software like Encanvas Secure&Live
    enable the design, deployment and operation of sophisticated Rich
    Internet Business Applications without the need for custom
    programming. Applications are developed by business analysts
    working closely with stakeholders and users. Applications are
    designed in workshop environments without the need to
    programme.



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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time



Use of multiple development tools
Problem: It is presumed that new applications developments will require
multiple separate technology components to discharge the varied
functions of a business application – such as database, workflow
software, intranet and content management software, reporting and
dashboarding (business intelligence) software, mobile computing
software, geo-spatial information and mapping software etc. For each of
these software tools, unique IT competencies are needed, leading to
large project teams and complex projects.
   New agile software development platforms like Encanvas adopt an
    approach similar to LEGO® whereby building blocks of technology
    are ready-made so that applications designers can create new
    applications with all of the necessary features supplied ‘out-of-the-
    box’ without custom programming.

Dependence on middleware
Problem: When data is held in different systems and in different formats,
it has been traditionally very difficult to acquire and return data to and
from new software applications. Another presumption therefore exists
that it’s not possible to easily acquire and return data to different
systems at the same time, or robustly govern the security and
organization of data.
   The advent of enterprise mashup technology and services oriented
    computing has overcome these obstacles. It means that new
    applications can be rapidly created that re-use data that exists in
    internal systems or is accessible via the web without compromising
    security or systems resilience. Products like Encanvas include
    sophisticated data acquisition, data transformation, data aggregation,
    data query design and database creation features thereby removing
    any dependency for middleware tools to exist.

Software development project complexity
Problem: Decades of failed IT projects have convinced IT buyers that
custom software applications are high risk. IT projects often fail as the
result of several associated factors that combine to create complexity:
    1. Organizations have been traditionally required to use many tools
       to develop software applications.
    2. Use of multiple tools demands multiple competencies; therefore
       the number of people required for projects swell.
    3. Communications between project outcome specifiers and
       deliverers break down. Applications are programmed ‘offline’ in
       backrooms against a design specification that must be authored
       at a time when it’s difficult (if not impossible) to envision the end
       solution and whether it will deliver an ROI.
    4. The need for programming (particularly in the area of logic
       scripts and user interface appearance) leads to large volumes of
       custom code that is non re-usable yet must be tested for cross-
       browser compatibility, security, server performance and


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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time



       resilience. This results in a major cost overhead for testing and
       debugging on any custom project.
    5. Owing to poor communications between project sponsors and
       deliverers, it’s common for large amounts of re-working and
       editing of applications to be required amounting to as much as
       15% of project total costs.

In simple terms, demands for custom programming and large number of
tools results in project process complexity and poor collaboration
between project sponsors and delivers resulting in high project cost, long
delivery timeframes, unpredictable ROIs and high risks.
   The solution to these challenges is to adopt agile design software
    that business analysts can use to deliver applications without needing
    to resort to programming and complex IT projects.




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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time




Technology to Empower Process Improvement

The internal delivery of situational applications by designers
embedded into change teams presumes the existence of
development tools designers can master to build, deploy and
support robust applications by themselves - without custom coding
- in order to embed IT expertise into change teams.

To adopt Situational Applications Insourcing three things must happen:

    1. The IT function needs to be re-designed to embed IT expertise
       into change management teams.
    2. Software must be installed that can be mastered by business
       analysts, giving them the ability to design and deploy new
       software applications without requiring large programming
       teams.
    3. IT procurement practises must adapt to consider situational
       applications delivery before more costly procurement
       approaches.

These three key steps are described in more detail here:

1. Installing tools
Provision of an integrated applications platform that supports design,
deployment and delivery of situational application means that analysts
are able perform both design and delivery roles. This bleed of the IT
function into change teams dramatically reduces the number of people
engaged in IT projects and the level of expertise required of candidates.
It dramatically reduces dependencies on internal programming teams
and outside consultants. Organizations like Volkswagen Group have for
several years adopted Process Improvement Managers as part of change
teams. These individuals are expert IT professionals (traditionally business
analysts or IT project programme managers) and possess both an
understanding of business processes and technology. Motivated by
remuneration plans associated with process improvement targets and
achievements, the focus of process improvement managers is to instigate
and deliver perpetual improvement in core business processes, rather
than simply ‘build applications’.

2. Installing a software platform that business analysts can use
For situational applications delivery to be successful, analysts require a
common tool-set (computing platform) that can design, deploy and
operate potentially hundreds of secure and live portal spaces containing
hundreds of applications without creating a burden on IT resources or
creating performance, security and systems resilience issues.



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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time



The economics of the platform must enable applications to be designed
and then discarded, modified or sustained without high costs to
encourage innovation and the creative use of IT.

It’s important that business software applications can be iteratively
designed in virtual real-time by analysts working in workshop
environments without requiring programming teams or advanced IT
programming skills; or the need to work with multiple technology tools
that would demand too high a level of skills and competencies for any
single person to master application design. It’s important that the
selected software application platform delivers Rich Internet experiences
and levels of collaboration now expected of modern applications – a
benchmark standard that is guided by the quality of applications offered
to consumers by both Apple and Google.

3. IT procurement practises must adapt
Unless IT procurement practises adapt, possibilities for insourcing
through situational applications delivery can never be achieved as
successive applications requirements are packaged into boxes for
procurement without consideration being given to alternative sourcing
approaches.

Encanvas Secure&Live is an example of a purpose-built technology
platform to support situational applications delivery by analysts.
Encanvas adopts technology architecture similar in ethos to LEGO®,
employing ready-made building blocks of technology by a single person
with a single skills-set to author applications that install new ways of
capturing, analyzing, presenting and sharing information. No
programming skills are required to use the software.           All of the
components found in Encanvas are built in the same way – including
design elements for business intelligence, mapping, social networking
and collaboration etc. – so one person can ably deliver cradle-to-grave
software applications without exhaustive knowledge of traditional IT
competencies.


Encanvas is designed purposely to meet the requirements of
business analysts. For this reason, it includes technology advances
that overcome the roadblocks that surface when moving towards
situational applications delivery. The software platform includes an
inclusive security model and a unique user and group security
architecture that embraces incumbent identity management
directories and builds new federated security structures.




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Evidence of Results

Moving to situational applications delivery for business applications
is a proven formula for rapid ROI in the creation of cost-effective,
low risk projects as evidenced by these examples kindly provided by
Encanvas Inc.

Ernst & Young
The senior partners of one of the largest and most successful
professional services firms were finding it extremely difficult to evidence
their supplier credentials for new projects owning to weaknesses in their
IT systems. Whilst much was known about past projects, clients and staff
expertise, none of this information was in a single place. As a
consequence, much manual work was involved in bringing together
evidentiary content for inclusion into bids.
In the full knowledge that no off-the-shelf solution existed, and with
many varied expectations being outlined by the many country leads, the
project lead for the international Power and Energy Knowledge Center
elected to use Encanvas to work iteratively with business analysts to
develop a solution. Over a period of 6-weeks a series of forms and data
structures were designed that aggregated data and presented a ‘single
page view’ of past Ernst & Young projects. With the advantage of
iterative development, the system was seen to offer a best-fit solution
after 12-weeks of User Acceptance Testing and was later adopted as an
enterprise system.
Transport for London
In 2003, the world’s largest metropolitan transport authority, responsible
for both the strategic planning and provision of transport services for
London found itself challenged to meet new compliance requirements as
the result of the 2004 Traffic Management Act. The lack of coordination
of road works undertaken by street works undertakers including its own
activities and those of the 33 London boroughs meant there was an
unnecessary frequency of disruptive works across the region. Seldom did
on organization take advantage of work being undertaken by another to
minimize congestion.
It was recognized that a cross-industry partnership working portal was
needed that could capture the relevant details of proposed works,
accurately plot them and then make the proposed works available for
viewing to all interested parties in a secure environment to enable
coordination and arbitration processes that would ensure the most
efficient implementation of the proposed works.
Having proven that, by using Encanvas, it was possible to edit maps (plot
road works) and store spatial data in one integral record, the application
was built and deployed as a secure extranet in 6.5 man-days during an
elapse period of 12-weeks.


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Canon Europe Ltd
New compliancy procedures required by its Japanese parent meant that
the European marketing headquarters operation of Canon Business
Solutions was given a 6-week deadline to formalize the way it managed
license distribution of the utility software tools it provided with its
hardware. An administrative system was needed to monitor the
distribution of software utilities across Europe with 100% traceability and
full statistical analysis capabilities. From concept to completion, the
internal team used Encanvas to develop and deploy a solution in less
than 2-weeks.
Sponsor comments - ‘Against a very tight deadline, we’ve achieved the
delivery of a sustainable compliance management solution that
minimizes administrative overheads placed on the team.’
West Sussex County Council
At the introduction of the Traffic Management Act in 2004, WSCC
identified the current information management of the Council was
unworkable if all aspects of the new legislation were to be met. Engineers
were required to reference six different systems to build a picture of
planning considerations – and even then mistakes could be easily made.
The project team identified the sources of data from across the
department and mapped out requirements. Samples of each of the data
sources were gathered and a ‘start-point’ proof of concept was
developed. This was presented to a workshop of users and stakeholders
who spent a day discussing the format and operation of the system. The
systems design was completed during workshops and a fully functioning
system was deployed in 2 days.
Sponsor comments - ‘It is via Encanvas that we were able to demonstrate
regionally what true GIS coordination was about, before any of the later
industry systems.’
West Midlands ‘Matisse’ Project (telent ltd)
The Transport Authority for the West Midlands (UK) operating a transport
and travel incident management and information system covering urban,
suburban and countryside road and street networks, inter-urban
expressways, public bus transport network, train information, parking,
cycle routes, freight and delivery routes. The existing traffic information
system consumed the annual budget on maintenance alone leaving no
resources for improvement. This meant that new users and uses couldn’t
be accommodated although a new legislative was leading to demand for
richer, more accessible information.
Using Encanvas, the system was re-developed as a client-server solution
able to support no-client browser use. The application included geo-
mapping of data, data entry/update forms and reports. Encanvas was
chosen as it presented the most economically advantageous option,
providing the fastest application time to market and lowest operational
overhead for customer. Other rewards included affordable economics,
reduced project risk, sustainability and adaptability.



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Qualifying the ROI

To measure the ROI advantages of insourcing made possible by
situational applications delivery you don’t need to expose your
organization to high risk or costs.
Trial implementations from software platform suppliers like Encanvas
mean that organizations can affordably trial situational applications
delivery by simply equipping one or two business analysts with the skills
and tools they need to develop applications on-demand.
Vendors like Encanvas provide introductory programmes combining
training, coaching and software provisioning to equip organizations with
the know-how and tools to move to situational applications delivery as a
sustainable model for supporting systems modernization and process
improvement.
The Encanvas AgileWorkshop offering consists of the following:
Introduction to Situational Applications Delivery
1-day Workshop
Training for Developers
3-day training (normally onsite)
Coaching and Knowledge Transfer
Including the provisioning of knowledge transfer for business analysts
and IT departments
3-days of consulting time
Platform Supply and Installation
Supplied on 21-day trial




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Contact information

About the Author




Previously holding a series of Sales and Marketing Management and
Directorship positions in the European IT industry, in 2002 Ian Tomlin co-
founded the International Management Consultancy NDMC Ltd whose
portfolio of clients includes some of the world’s largest public and private
sector organizations.

With Nick Lawrie he co-authored ‘Agilization’, a guide to regenerating
competitiveness for Western World companies. Ian Tomlin has authored
several other business books and hundreds of articles on business
strategy, IT and organizational design including ‘Cloud Coffee House’, a
guide to the impact of cloud social networking on business and ‘Social
Operating Systems’, an exploration into the next generation of enterprise
computing platform.


About NDMC Ltd

NDMC is a management consultancy that specializes in helping
organizations to establish stretch strategies and build organizations with
the means to become serial stretchers. We help organizations to create
customer value and engineer a step-change in performance using a
blend of methods and tools that create agility in operational capabilities.
For further information please visit www.ndmc.uk.com.

NDMC Ltd
(Americas) +1 201 777 3398
(Europe) +44 1865 596151

All information of whatever kind and which is contained in this documentation shall
be called for the purposes of this project ‘Confidential Information’ and remains the
property of NDMC Ltd. All trademarks and trade names used within this document
are acknowledged as belonging to their respective owners.




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White paper achieving the most economically advantageous applications solution every time

  • 1. WHITE PAPER ACHIEVING THE MOST ECONOMICALLY ADVANTAGEOUS APPS EVERY TIME IAN TOMLIN SEPTEMER 2010 www.ndmc.uk.com
  • 2. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time 2
  • 3. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Contents A New Economic Imperative .....................................................................5 The Bottom Line .............................................................................................6 New Routes to Applications Sourcing ...................................................7 The Downside of Current Sourcing Approaches ................................8 Situational Applications Insourcing ..................................................... 10 Known Roadblocks..................................................................................... 11 Technology to Empower Process Improvement ............................. 14 Evidence of Results .................................................................................... 16 Qualifying the ROI ...................................................................................... 18 Contact information .................................................................................. 19 3
  • 4. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time How do organizations achieve IT procurement savings and drive through more process efficiency savings by delivering better information systems in challenging times? This document describes current business software sourcing options and exposes their sub-optimal performance and then describes an alternative approach to meeting the majority of demands for business software applications at the lowest and most economically advantageous cost. 4
  • 5. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time A New Economic Imperative For decades, well established large organizations with robust business models have enjoyed budgets of relative plenty. But the economic meltdown of 2009 has led to a new economic reality. The role of IT in organizations has not changed fundamentally – even in a recession organizations need information systems to fuel process improvements, creative innovation, growth and front-line customer services – but what has changed fundamentally is the size of budgets, and probably forever. The world of corporate IT facing a permanent change in its funding. To achieve significant cost reductions whilst avoiding direct impact on front-line services and growth, organizations must re-visit how they operate IT and procure services. In this new paradigm, no longer are today’s norms of IT procurement affordable or sustainable. While norms of procurement behaviour change over time, in this new economic climate, business decision makers are under pressure to inject innovation into procurement approaches and to take marginally more risk where the promise of step-change rewards exists. Nowhere is the potential for rewards greater or more achievable than in the supply of business software applications; souring innovation in information systems to improve the efficiency of processes and inject new ways of engaging with customers and finding new markets. 5
  • 6. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time The Bottom Line The total cost of IT for organizations should not exceed 1% of income. For many organizations, a target outline cost for IT in the order of 0.5% is achievable. Sophisticated organizations that have already thoughtfully engineered the IT function like easyjet are today achieving IT operating costs below 1% of total revenues. This compares to the majority of organizations whose IT costs can range from 1.5% to 6% of income. easyJet is profiting from moving to cloud computing and adopting Software as a Service solutions for utility applications like email, calendaring and office software. Yet, even more can be achieved through more radical approaches to IT procurement without significantly increasing risk. And for organizations that face more extreme changes to compliance and market conditions, more can be done to deliver adaptive, better-fit IT to proportionately more IT users. The potential of IT to create competitive advantage, boost customer service performance and streamline business processes to create operational excellence has taken a knock over the last two decades – but the potential still exists for IT to do just that. Isn’t it time that your technology made a difference to competitive advantage? 6
  • 7. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time New Routes to Applications Sourcing When software applications are demanded, the cogs of sourcing a solution start turning. The consideration given to sourcing options is often limited by ‘norms of understanding’ and ‘norms of behaviour’ that are no longer valid. Instead of considering ‘How can we exploit or enrich our existing technologies, or deliver this software application ourselves’, thoughts quickly move to options of procuring a ready-made application solution, outsourcing a custom development or fully outsourcing processes. Ready-built software applications The procurement of ready-built software applications that boilerplate specific business disciplines, processes or technology components (such as geo-spatial mapping, knowledge management, business process workflow, mobile etc.) is seen to offer a lower risk procurement strategy than the alternative of development. Software as a Service This is the procurement of software delivered as a service via the Web. The argument for ‘SaaS’ software solutions is that organizations don’t need to buy or maintain software in order to use it; neither do they need to pay for or support the hosting environment. SaaS also means that organizations can turn off systems at any time. Development outsourcing This is the procurement of custom systems by paying a third party to develop them. The argument for software development outsourcing is that it offsets potential risk of project failure by placing IT applications design into the hands of professionals. Process outsourcing This is the outsourcing of entire business processes to third parties. Process outsourcers will promote arguments of economies of scale, systems leadership and process expertise to prospective customers. Perhaps a more politically sensitive issue is the reality of offshore outsourcing where third party suppliers are able to manage processes for less primarily because of lower labour costs in countries overseas. IT is frequently seen as a key component of the process outsourcing offer that means purchasers no longer need to burden themselves with worrying about which system to install and operate as the process outsourcer will provision its own systems as part of the agreement. These procurement vehicles may be well understood, but they’re not the ONLY options open to buyers. There are today more economically advantageous options through insourcing that have fewer constraints on organizational agility and growth thanks to recent innovations in the science of computing. 7
  • 8. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time The Downside of Current Sourcing Approaches Whilst these procurement approaches are understood to offer robust and sometimes compelling commercial reasons for adoption, there are many good reasons why following this course isn’t the best option for software procurements. Here are a few reasons why not. Inflated procurement process costs If a new procurement process is instigated for every new software application requirement, large or small, costs of procurement inevitably spiral. This is the reality for many organizations that have lost all in-house capability to author applications. Inflated buy prices When organizations tender for ready-made systems, they run into the economic reality that every software company specializing in a particular genre of software will expect to charge in the range of £24k to £60k for their system plus maintenance and upgrade fees in excess of 15% of software value. This is because the cost to suppliers of responding to a procurement, providing customer support, paying salespeople commission, contributing to the running costs of the business etc. demand that a certain level of income per sale is achieved. Poor fit IT systems When organizations buy off-the-shelf software they often find the ‘fit’ of systems is not ideal for their organizational size and software features need to be customized at extra cost to suit their business needs. Rigid, inflexible IT systems Ready-made software applications include proprietary logic, technology components (i.e. database, workflow, report tools etc.) and contract restrictions that prohibit adaptation. Vendors are normally reluctant to allow their customers free access to their own data on their systems without purchasing proprietary report writers or data connector APIs. Creation of silos Outsourcing software development, MIS functions or complete processes creates cultural and operational silos as staff loyalties and values adapt to their new employer. Purchases of shrink-wrapped software lead to unmanageable portfolios of IT components that all work differently, producing systems that don’t talk to one another. Growth in grey sourcing As outsourcing contracts age, requests for change and adaptation that are constrained by contractual arrangements, are frequently addressed by staff directly rather than being assigned to contractors. This creates a ‘grey sourcing’ expense hidden within operating budgets. 8
  • 9. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Spiralling software maintenance costs A summary of the Suppliers of software applications will charge for support. Typically the procurement options: cost of maintenance contracts far exceeds their benefit but their provision is necessary if organizations wish to enjoy support. Ready-built software Inflated version upgrade costs  High procurement Organizations are frequently required to upgrade systems not because process costs they desperately need new features but because they want to avoid  Inflated buy prices operating outmoded systems that are no longer supported by  Too many supplier suppliers. relations  Over-size/poor fit Loss of contractual bargaining power software Organizations are sometimes held to ransom by IT suppliers because  Creation of data silos they’ve invested so much time and money into a particular third party  Increased integration IT system that the cost and risk of change is too great to contemplate. costs Creation of an ‘IT lottery’ Software as a Service There can never enough shrink-wrapped solutions to meet every  Poor data unique need for IT. The nature of innovation and process management improvement is that there is always another process to serve as  Inability to organizations adapt and grow. The absence of sufficient budgets and customize/adapt suitable IT tools creates a lottery for fit-for-purpose systems between Development outsourcing department managers.  Inflated buy prices Throwing baby out with the bath water  Slower delivery Organizations that have outsourced their development, IT function or Process outsourcing processes often lose control over their ability to adapt as contracts  Cultural and and conflicts of interest inhibit an organizations ability to respond to operational silos industry and market changes.  Growth in grey Too many supplier relationships sourcing Some organizations have in excess of 50 software supplier (All) relationships owing to their strategy to procure ready-built software  Poor adaptability for each and every discipline or core business process. This leads to  Poor support for high maintenance ands upgrade costs and excessive supplier liaison innovation costs. Sub-optimal information systems A long tail of demand exists for software applications, unsupported due to a lack of resources and budgets. Senior officers, middle- managers and creatives charged with innovation in the organization - and whose roles demand that they use information in different ways to build insights, collaborate with communities, share ideas and evolve better strategies – find they lack the access to information and systems needed to discharge their roles. 9
  • 10. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Situational Applications Insourcing Situational Applications Insourcing SITUATIONAL APPLICATIONS are software applications Benefits: demanded by organizations to improve business processes in respond to new business situations. They represent the  Project complexity and MAJORITY of emerging demands for software ‘systems’ risk is removed by creating applications beyond the core components of Financial and Enterprise during workshops and Resource Planning (ERP) systems. iteratively adapting applications to best fit Situational Applications Insourcing describes an insourcing the use case. approach for provisioning of new applications where the delivery  No programming skills of applications is met by ‘super business analysts’ embedded into and competencies are change teams that respond to new requirements for software needed. applications as they emerge.  No dependencies exist for middle-ware software Before engaging a procurement process or custom coding or third party tools in development, the majority of ‘systems’ requirements are areas such as business considered for internal delivery by business analysts embedded intelligence, geo-spatial into change management teams (and motivated through targeted intelligence, forms and remuneration packages to improve the process areas they serve). database design etc. Situational Applications Development is predicated on the  New applications are existence of integrated software platforms that business analysts created without can use themselves to create applications to support additional software costs improvements in business processes without having to create  No costs associated with custom code or acquire tools and skills that would necessitate an browser compatibility ‘IT project’. testing, applications re- working, de-bugging or This approach places focus and rewards on process improvement performance tuning is and business outcomes rather than the technology componentry. incurred.  No version upgrades or Situational Applications Insourcing offers a practical alternative to maintenance costs are custom coding, software procurement or outsourcing. incurred in relation to the applications developed. 10
  • 11. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Known Roadblocks A series of ‘road blocks’ have prohibited innovation in IT procurement approaches for software applications. Thanks to recent developments in code-free real-time applications authoring, these roadblocks have now largely been overcome. Norms of IT buying behaviour Problem: There is a widely held view in business IT procurement circles that ready-built software represents a lower risk than custom-built software. This is mainly because buyers presume projects will require custom programming. Furthermore, IT buyers are pressured to consider outsourcing as a means of offsetting cost without being able to monetize the ‘downside’ of outsourcing strategies, or consider alternative insourcing strategies.  IT buyers must look beyond accepted sourcing approaches if they are to achieve step-change cost and efficiency benefits made possible by new innovations in computing. Overcoming limitations of Web browsers Problem: Until very recently it wasn’t possible to provide assurances to corporate IT buyers over the performance, security and usability of applications delivered via web browsers owing to the limitations of operating systems platforms and browsers. The presumption continues to pervade that applications installed on a client or server internally are somehow ‘better’.  Recent events in the development of web-based computing such as increased competition in the web browser market resulting from Google’s entry, market acceptance of AJAX technology, the release of HTML 5, the launch by Microsoft of Active Server Pages (ASP) 3.5 etc. have collectively made possible the design, deployment and operation of Rich Internet applications in a client server architecture that perform just as well as (if not better than) pre-installed desktop and server software. Project cost and complexity resulting from programming Problem: It is presumed that custom applications can only be developed by programming.  New innovative (so-called ‘agile’) software like Encanvas Secure&Live enable the design, deployment and operation of sophisticated Rich Internet Business Applications without the need for custom programming. Applications are developed by business analysts working closely with stakeholders and users. Applications are designed in workshop environments without the need to programme. 11
  • 12. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Use of multiple development tools Problem: It is presumed that new applications developments will require multiple separate technology components to discharge the varied functions of a business application – such as database, workflow software, intranet and content management software, reporting and dashboarding (business intelligence) software, mobile computing software, geo-spatial information and mapping software etc. For each of these software tools, unique IT competencies are needed, leading to large project teams and complex projects.  New agile software development platforms like Encanvas adopt an approach similar to LEGO® whereby building blocks of technology are ready-made so that applications designers can create new applications with all of the necessary features supplied ‘out-of-the- box’ without custom programming. Dependence on middleware Problem: When data is held in different systems and in different formats, it has been traditionally very difficult to acquire and return data to and from new software applications. Another presumption therefore exists that it’s not possible to easily acquire and return data to different systems at the same time, or robustly govern the security and organization of data.  The advent of enterprise mashup technology and services oriented computing has overcome these obstacles. It means that new applications can be rapidly created that re-use data that exists in internal systems or is accessible via the web without compromising security or systems resilience. Products like Encanvas include sophisticated data acquisition, data transformation, data aggregation, data query design and database creation features thereby removing any dependency for middleware tools to exist. Software development project complexity Problem: Decades of failed IT projects have convinced IT buyers that custom software applications are high risk. IT projects often fail as the result of several associated factors that combine to create complexity: 1. Organizations have been traditionally required to use many tools to develop software applications. 2. Use of multiple tools demands multiple competencies; therefore the number of people required for projects swell. 3. Communications between project outcome specifiers and deliverers break down. Applications are programmed ‘offline’ in backrooms against a design specification that must be authored at a time when it’s difficult (if not impossible) to envision the end solution and whether it will deliver an ROI. 4. The need for programming (particularly in the area of logic scripts and user interface appearance) leads to large volumes of custom code that is non re-usable yet must be tested for cross- browser compatibility, security, server performance and 12
  • 13. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time resilience. This results in a major cost overhead for testing and debugging on any custom project. 5. Owing to poor communications between project sponsors and deliverers, it’s common for large amounts of re-working and editing of applications to be required amounting to as much as 15% of project total costs. In simple terms, demands for custom programming and large number of tools results in project process complexity and poor collaboration between project sponsors and delivers resulting in high project cost, long delivery timeframes, unpredictable ROIs and high risks.  The solution to these challenges is to adopt agile design software that business analysts can use to deliver applications without needing to resort to programming and complex IT projects. 13
  • 14. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Technology to Empower Process Improvement The internal delivery of situational applications by designers embedded into change teams presumes the existence of development tools designers can master to build, deploy and support robust applications by themselves - without custom coding - in order to embed IT expertise into change teams. To adopt Situational Applications Insourcing three things must happen: 1. The IT function needs to be re-designed to embed IT expertise into change management teams. 2. Software must be installed that can be mastered by business analysts, giving them the ability to design and deploy new software applications without requiring large programming teams. 3. IT procurement practises must adapt to consider situational applications delivery before more costly procurement approaches. These three key steps are described in more detail here: 1. Installing tools Provision of an integrated applications platform that supports design, deployment and delivery of situational application means that analysts are able perform both design and delivery roles. This bleed of the IT function into change teams dramatically reduces the number of people engaged in IT projects and the level of expertise required of candidates. It dramatically reduces dependencies on internal programming teams and outside consultants. Organizations like Volkswagen Group have for several years adopted Process Improvement Managers as part of change teams. These individuals are expert IT professionals (traditionally business analysts or IT project programme managers) and possess both an understanding of business processes and technology. Motivated by remuneration plans associated with process improvement targets and achievements, the focus of process improvement managers is to instigate and deliver perpetual improvement in core business processes, rather than simply ‘build applications’. 2. Installing a software platform that business analysts can use For situational applications delivery to be successful, analysts require a common tool-set (computing platform) that can design, deploy and operate potentially hundreds of secure and live portal spaces containing hundreds of applications without creating a burden on IT resources or creating performance, security and systems resilience issues. 14
  • 15. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time The economics of the platform must enable applications to be designed and then discarded, modified or sustained without high costs to encourage innovation and the creative use of IT. It’s important that business software applications can be iteratively designed in virtual real-time by analysts working in workshop environments without requiring programming teams or advanced IT programming skills; or the need to work with multiple technology tools that would demand too high a level of skills and competencies for any single person to master application design. It’s important that the selected software application platform delivers Rich Internet experiences and levels of collaboration now expected of modern applications – a benchmark standard that is guided by the quality of applications offered to consumers by both Apple and Google. 3. IT procurement practises must adapt Unless IT procurement practises adapt, possibilities for insourcing through situational applications delivery can never be achieved as successive applications requirements are packaged into boxes for procurement without consideration being given to alternative sourcing approaches. Encanvas Secure&Live is an example of a purpose-built technology platform to support situational applications delivery by analysts. Encanvas adopts technology architecture similar in ethos to LEGO®, employing ready-made building blocks of technology by a single person with a single skills-set to author applications that install new ways of capturing, analyzing, presenting and sharing information. No programming skills are required to use the software. All of the components found in Encanvas are built in the same way – including design elements for business intelligence, mapping, social networking and collaboration etc. – so one person can ably deliver cradle-to-grave software applications without exhaustive knowledge of traditional IT competencies. Encanvas is designed purposely to meet the requirements of business analysts. For this reason, it includes technology advances that overcome the roadblocks that surface when moving towards situational applications delivery. The software platform includes an inclusive security model and a unique user and group security architecture that embraces incumbent identity management directories and builds new federated security structures. 15
  • 16. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Evidence of Results Moving to situational applications delivery for business applications is a proven formula for rapid ROI in the creation of cost-effective, low risk projects as evidenced by these examples kindly provided by Encanvas Inc. Ernst & Young The senior partners of one of the largest and most successful professional services firms were finding it extremely difficult to evidence their supplier credentials for new projects owning to weaknesses in their IT systems. Whilst much was known about past projects, clients and staff expertise, none of this information was in a single place. As a consequence, much manual work was involved in bringing together evidentiary content for inclusion into bids. In the full knowledge that no off-the-shelf solution existed, and with many varied expectations being outlined by the many country leads, the project lead for the international Power and Energy Knowledge Center elected to use Encanvas to work iteratively with business analysts to develop a solution. Over a period of 6-weeks a series of forms and data structures were designed that aggregated data and presented a ‘single page view’ of past Ernst & Young projects. With the advantage of iterative development, the system was seen to offer a best-fit solution after 12-weeks of User Acceptance Testing and was later adopted as an enterprise system. Transport for London In 2003, the world’s largest metropolitan transport authority, responsible for both the strategic planning and provision of transport services for London found itself challenged to meet new compliance requirements as the result of the 2004 Traffic Management Act. The lack of coordination of road works undertaken by street works undertakers including its own activities and those of the 33 London boroughs meant there was an unnecessary frequency of disruptive works across the region. Seldom did on organization take advantage of work being undertaken by another to minimize congestion. It was recognized that a cross-industry partnership working portal was needed that could capture the relevant details of proposed works, accurately plot them and then make the proposed works available for viewing to all interested parties in a secure environment to enable coordination and arbitration processes that would ensure the most efficient implementation of the proposed works. Having proven that, by using Encanvas, it was possible to edit maps (plot road works) and store spatial data in one integral record, the application was built and deployed as a secure extranet in 6.5 man-days during an elapse period of 12-weeks. 16
  • 17. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Canon Europe Ltd New compliancy procedures required by its Japanese parent meant that the European marketing headquarters operation of Canon Business Solutions was given a 6-week deadline to formalize the way it managed license distribution of the utility software tools it provided with its hardware. An administrative system was needed to monitor the distribution of software utilities across Europe with 100% traceability and full statistical analysis capabilities. From concept to completion, the internal team used Encanvas to develop and deploy a solution in less than 2-weeks. Sponsor comments - ‘Against a very tight deadline, we’ve achieved the delivery of a sustainable compliance management solution that minimizes administrative overheads placed on the team.’ West Sussex County Council At the introduction of the Traffic Management Act in 2004, WSCC identified the current information management of the Council was unworkable if all aspects of the new legislation were to be met. Engineers were required to reference six different systems to build a picture of planning considerations – and even then mistakes could be easily made. The project team identified the sources of data from across the department and mapped out requirements. Samples of each of the data sources were gathered and a ‘start-point’ proof of concept was developed. This was presented to a workshop of users and stakeholders who spent a day discussing the format and operation of the system. The systems design was completed during workshops and a fully functioning system was deployed in 2 days. Sponsor comments - ‘It is via Encanvas that we were able to demonstrate regionally what true GIS coordination was about, before any of the later industry systems.’ West Midlands ‘Matisse’ Project (telent ltd) The Transport Authority for the West Midlands (UK) operating a transport and travel incident management and information system covering urban, suburban and countryside road and street networks, inter-urban expressways, public bus transport network, train information, parking, cycle routes, freight and delivery routes. The existing traffic information system consumed the annual budget on maintenance alone leaving no resources for improvement. This meant that new users and uses couldn’t be accommodated although a new legislative was leading to demand for richer, more accessible information. Using Encanvas, the system was re-developed as a client-server solution able to support no-client browser use. The application included geo- mapping of data, data entry/update forms and reports. Encanvas was chosen as it presented the most economically advantageous option, providing the fastest application time to market and lowest operational overhead for customer. Other rewards included affordable economics, reduced project risk, sustainability and adaptability. 17
  • 18. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Qualifying the ROI To measure the ROI advantages of insourcing made possible by situational applications delivery you don’t need to expose your organization to high risk or costs. Trial implementations from software platform suppliers like Encanvas mean that organizations can affordably trial situational applications delivery by simply equipping one or two business analysts with the skills and tools they need to develop applications on-demand. Vendors like Encanvas provide introductory programmes combining training, coaching and software provisioning to equip organizations with the know-how and tools to move to situational applications delivery as a sustainable model for supporting systems modernization and process improvement. The Encanvas AgileWorkshop offering consists of the following: Introduction to Situational Applications Delivery 1-day Workshop Training for Developers 3-day training (normally onsite) Coaching and Knowledge Transfer Including the provisioning of knowledge transfer for business analysts and IT departments 3-days of consulting time Platform Supply and Installation Supplied on 21-day trial 18
  • 19. WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time Contact information About the Author Previously holding a series of Sales and Marketing Management and Directorship positions in the European IT industry, in 2002 Ian Tomlin co- founded the International Management Consultancy NDMC Ltd whose portfolio of clients includes some of the world’s largest public and private sector organizations. With Nick Lawrie he co-authored ‘Agilization’, a guide to regenerating competitiveness for Western World companies. Ian Tomlin has authored several other business books and hundreds of articles on business strategy, IT and organizational design including ‘Cloud Coffee House’, a guide to the impact of cloud social networking on business and ‘Social Operating Systems’, an exploration into the next generation of enterprise computing platform. About NDMC Ltd NDMC is a management consultancy that specializes in helping organizations to establish stretch strategies and build organizations with the means to become serial stretchers. We help organizations to create customer value and engineer a step-change in performance using a blend of methods and tools that create agility in operational capabilities. For further information please visit www.ndmc.uk.com. NDMC Ltd (Americas) +1 201 777 3398 (Europe) +44 1865 596151 All information of whatever kind and which is contained in this documentation shall be called for the purposes of this project ‘Confidential Information’ and remains the property of NDMC Ltd. All trademarks and trade names used within this document are acknowledged as belonging to their respective owners. 19