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How Sales and Marketing Teams Can Avoid Being Bitten by the Paradigm Shift in IT Spend Decisions | Gaining Altitude in the Cloud

July 15, 2013

Organizations are facing a paradigm shift in the way they envision, initiate and fund technology that drives business value. As discussed in my prior blog post, The Curveball Impact on IT Spend Decisions, a shift in influence has created two distinct buying markets within an organization. These two markets behave very differently and thus have different implications for IT vendors and service providers trying to sell into the organization.

The CIO market’s mandate is most often execution, cost reduction, quality, and compliance. The mandate for the business stakeholders market is business impact, time to market, and time to impact.

Further, CIOs typically think in terms of grand strategy — requirements definitions, detailed specifications, and structured PMOs. The new market of business stakeholders think in terms of trying before buying; they want to use a technology first to see how it works, then adjust it. This is a completely different methodology from a requirements methodology. It’s a different kind of buying.they

It’s not CAPEX; it’s OPEX.
It’s incremental steps, not the big-bang approach of a CIO.
It’s making decisions based on what’s best for a business unit instead of the CIO’s approach, which must solve tech needs for the entire organization while also driving out costs.

The two markets’ approaches and mindsets are completely opposite each other. Unfortunately, they’re both happening at the same time in organizations today, and it creates a lot of confusion

Besides the two divergent markets, sales teams must recognize that, although the mandate for today’s CIOs is increasingly tactical, no CIO worth his sale will give up the fight to influence the business constituency and drive innovation and value.

How can sales teams accommodate these two markets and sell tech to the decision makers in both camps?

Selling to the CIO market

When selling to CIOs, remember that they will want to understand the technology, require proof that it’s going to work, and want develop a rigorous implementation plan. They will also want to make sure the solution is compliant and in line with the emerging standards in the industry.

Because their mandate is to reduce costs, CIOs likely will issue an RFP and get competitive bids, so you need to expect that competitive tension.

Selling to the business stakeholders market

Selling to business stakeholders is more of a vision-leading exercise. It’s crucial to understand the stakeholder’s vision so you can share how your technology or services could either implement that visions or shape it into being a more impactful outcome.

You then need to move from vision to experimentation. Business stakeholders won’t wait for your company to build the tech solution they envision. You need to sell a technology that is already developed to the point that users can start experimenting with it, and you’ll be competing against new SaaS and cloud offers that pop up quickly and allow try-it-before-you-buy it models.

The budgeting impact

CIOs are quite happy to go through a budgeting process, and your sales approach and timing needs to fit into the budgeting rhythm.

In contrast, the business stakeholder market often won’t focus on a large budget. They want to take initial baby steps to understand the technology. You won’t need to offer them a complete entrée; you just need to focus on the next couple of steps.

When the two markets converge

Once the business stakeholders believe in the value of the technology, they will need to bring the CIO into the discussions in order to help them roll it out broadly or expand the scope. At this point, you’ll be required to recognize and meet the CIO’s agenda. You won’t meet with the CIO face to face, but as part of the sales framework, you have to be prepared to answer her questions related to cost, scale, compliance, etc.

Bottom line

Selling into the two markets with opposite mindsets and behaviors, and eventually having to deal with both of them at the same time, is a much more complicated sale than in the past. It requires more patience and highly customized communications. But the prize for your successful strategy and efforts can be very large.

The Curveball Impact on IT Spend Decisions | Gaining Altitude in the Cloud

July 12, 2013

There is an interesting new twist these days on how organizations initiate, fund, and make IT spend decisions. It’s sparked by two major trends: Nicholas Carr’s 2003 Harvard Business Review article claiming that “IT doesn’t matter” and the consumerization of IT. As a result, some organizations no longer view their CIOs as responsible for generating business value through IT decisions.

Instead, increasingly the CIO’s mandate today is to take tactical steps to reduce the cost of IT. Make it run anytime, anywhere, available when and where needed. Make sure it’s compliant and highly reliable — and cheap. The cost of IT on the balance sheet or the operating statement has been creeping up past one percent to two or three and sometimes six percent of total corporate revenues. Now the mandate is to take that down by several points, and even below one percent.

More automation, increased use of private clouds and increased role of labor arbitrage combine to lower the cost. Simplification and standardization also play a prominent role in achieving cost objectives. The mass commoditized world is overwhelming the bespoke world or customized environment, and the focus is on eliminating variations and getting to one kind of server, one kind of data center, one kind of virtualization and operating system. In addition, processes are more ITIL-based, which leads to a cheaper, more reliable, more flexible environment. And it makes it easier to interact with third-party providers.

The power of the purse

This CIO mandate is growing in importance and increasingly is more prominent in CIOs’ agendas. But it comes at the expense of their desire to drive innovation and value into the business. With the consumerization of IT, the business stakeholders are taking over decisions about IT functionality and benefits, as well as how to use IT to drive value in the organization.

They grew up with technology and don’t feel they need to collaborate and partner with IT, certainly not up front. They feel very self-confident and build their own vision of how things could change.

And IT funding has shifted to the business stakeholders along with envisioning and initiating technology decisions that drive innovation and business value. The CIO’s budget is constrained or cut, whereas the business stakeholders’ budgets are now flush; they have the power of the purse.

Traditionally, organizations (through CFOs and CIOs) controlled the introduction and allocation of technology by constraining or managing costs; the point of control was through CAPEX. But in the new world with business stakeholders driving decisions, capital isn’t needed. Business users can leverage ready-made tools that are available in the cloud and through SaaS that don’t require CAPEX and also don’t need as much, or any, IT team participation to launch — making experimentation easy.

Two completely opposite markets

These shifts in influence on delivering value and control over funding create two markets within organizations, and they behave very differently from each other. Their contrasting behaviors and mindsets pose fundamental issues and create a lot of confusion for the enterprise and for the IT vendors and service providers trying to sell into the organization.

This dramatic change from the traditional ways of governing technology and IT spend are like a curveball in baseball. Depending on the grip and hand movement, a pitcher can throw a baseball with a spin so that it swerves downward and deviates to the right or left, surprising the batter and making it difficult to hit the ball. Similarly, the two differing IT markets in today’s organizations throw a curveball at senior leadership and sales/marketing teams, necessitating developing new approaches, concepts and communication about IT initiation, allocation and spend.

For example, a central IT team used to manage through traditional IT governance “gates” such as capital allocations and compliance, which facilitated the ability to look across the organization. But a world where everyone does what’s best in their own eyes poses challenges to managing IT.

There is an upside. To the business stakeholders’ credit, it is more effective to stand up a technology, see how to use it, and then understand how to change it, rather than building an elaborate requirements document up front. It facilitates understanding the nuances, consequences and organizational challenges in a much deeper, more realistic way than can happen by developing a requirements document that is, at best, an abstract vehicle.

It also plays into the idea of agile development but also goes beyond that concept by stringing together fully formed components that already exist in the marketplace. Business stakeholders can see how the components relate and see how to benefit from them; and they can easily add to them or discard them quickly. So it turns the risks of a big planning exercise into a much more measured incremental march that facilitates fully understanding the technology before fully rolling it out.

On the downside, in a world where everyone makes decisions on what is best for their own needs, it can be challenging to scale it across an entire organization at a later point. Potentially it also can create complications for the CIO’s mandated agenda to create a low-cost, highly resilient, highly compliant factory.

It isn’t that the CIO market or the business stakeholder market is right and the other market is wrong. They’re just very different. Borrowing from the claim in the days of the Roman Empire, we’re not here to bury Caesar or to praise him; it’s just a fact that Caesar was very different from Augustus.

So, we must accommodate this new phenomenon of the two markets and celebrate the benefits this brings in terms of a deeper understanding of how to use technology and achieve faster speed to impact. It will necessitate building tools and new management structures that support the inevitability of the new divergent structure. And it will necessitate a new approach and communication strategy for selling IT. In our next blog post, we’ll provide some strategies and tips for how to succeed in hitting a home run despite facing a curveball.

Photo credit: Jason Alley

Enterprise CIO: “The Reports of My Death Are Not Greatly Exaggerated” | Gaining Altitude in the Cloud

June 5, 2013

As a humorist, American author Mark Twain would undoubtedly have been amused by this variant of his famous quote. But the demise of enterprise CIOs’ traditional role is real, (unlike the misreports of Twain’s passing), and to understand this phenomenon, we need to understand the evolving market dynamics.

Three key trends are significantly altering the shape, structure, and operations of today’s CIO office:

Cloud services: Unlike infrastructure, IT governance, and IT security teams, which are generally shared throughout an enterprise, large numbers of applications developers are normally aligned to specific businesses. Due to the complex labyrinth of multiple teams and decision centers, applications developers face substantial difficulties in fulfilling their business-based project sponsors’/budget holders’ demand for quick time to market.

To overcome these challenges, applications developers are increasingly adopting cloud-based infrastructure/platform-as-a-service (PaaS). This allows them to bypass the other IT teams, (e.g., security and infrastructure). By leveraging cloud services, applications developers no longer solely rely on enterprise IT’s infrastructure and operations to develop and test their applications. They can develop, test, and even host their applications on a cloud-based platform. This is causing challenges for the CIO’s office in terms of reduced involvement with businesses, security issues, and audit risks.
Software-as-a-Service (SaaS): Although it is part of the cloud ecosystem and has been in the marketplace for more than a decade, SaaS is treated as a different segment. The challenges with deploying enterprise software in the traditional manner, (e.g., ownership of licenses, hardware, support, upgrades, etc.), coupled with the significant time to deploy and the high rate of failure, are driving business to push the CIO’s office toward a “cloud first policy.” For simpler applications that do not require organizational support, (e.g., infrastructure, data, integration), businesses are more than willing to leverage the SaaS model. And to avoid getting embroiled into the complex labyrinth of organizational IT, businesses are also hiring contractors to perform specific IT-related tasks. Additionally, as businesses’ appetite to wait for months, even years, without knowing the possible outcomes of an enterprise software deployment is depleting fast, they are increasingly viewing SaaS as the solution.
Digitization and business-IT budgets: Although cloud services and SaaS are disrupting enterprise IT, the biggest challenge facing CIOs is the shift of technology budgets to the business. This typically includes initiatives such as big data analytics, multi-channel customer engagement, social media, CRM, and enterprise mobility. While the CIO’s office plays a role in these initiatives, it is fast losing decision-making powers. CEOs and CFOs are now inclined to spend technology dollars on business initiatives that generate growth, e.g., digitization. Therefore, in a boardroom battle for technology budgets, CIOs are increasingly losing against the businesses (e.g., chief marketing officers and chief digitization officers). The growing perception that digitization is for growth and IT is for efficient operations also works against the CIO’s office.

Despite the fact that a CIO’s office will always exist, there will be an increasing debate around its utility in its existing form. While the misalignment of business and IT has been an age-old debate, the cloud age has finally provided businesses with the ammunition required to change the game. Cloud services, next generation technologies, techno-savvy business users, and the pivotal role of technology in an organization’s growth are creating pressure on enterprise CIOs. They need to act fast to prove that Mark Twain was indeed right and stem reports of their death.

If you are a CIO or an IT manager interested in sharing your story, please reach out to me at [email protected], or directly add a comment below.

The Blind Side Blitz: How Business Users Impact Next-Generation IT Spend | Gaining Altitude in the Cloud

June 3, 2013

Seemingly out of nowhere, users hit enterprise IT spend on its blind side. Like a blitzing 265-pound football linebacker that the quarterback doesn’t see running up behind him to tackle him, business units and end users blitzed past the IT group and rapidly adopted cloud, mobile and other next-generation IT solutions wherever and whenever they could. Like the quarterback, enterprise management had a blind side and didn’t see or block the sudden force of the “consumerization of IT” coming to barrel through the sanctioned processes of purchasing IT. This blind side play changed the IT game in a profound way and has massive implications for all players.

In football, unblocked linebackers coming up on the blind side don’t just happen; several factors are necessary to create the right conditions for this disrupting phenomenon. The same is true for the recent blitz impacting enterprise IT spend.

Over the last few years, enterprises reacted to adverse and unpredictable economic conditions by reducing overhead wherever possible. This significantly constrained CIO budgets, forcing many IT departments to decrease their expenses year on year. The tactic reduced the IT group’s ability to drive change in the business and slowed the ability to respond to business needs.

Finally balance sheets improved and companies emerged from the belt-tightening period. Eager for growth, they now look favorably on business projects with strong ROI. However, IT is still slow to address new business needs, including the IT components of these initiatives. At the same time, business leaders and end users are exposed to, indeed inundated with, a new range of easy-to-access affordable, offerings that are readily available through channels other than their enterprise IT department. Voila — the right conditions for the blitz.

Implications

Let’s first consider the implications for the business stakeholders leading the blitz. Their new buying freedom combined with the easily accessible IT components creates refreshing and sorely needed agility and flexibility. Projects that, in the past, would have advanced slowly now race ahead at an ever-increasing pace.

Instead of detailed requirement documents and unending interdisciplinary team meetings, they can conceive, launch and evaluate pilots with minimal capital and time, allowing the business to experience the technology before making significant commitments. Business stakeholders’ perspective is that management’s forgiveness is easier than gaining up-front buying permission, and IT can work after deployment to address compliance issues.

Enterprise IT groups can’t deny the new reality and must lead, follow or get out of the way of the momentum and power of user-based IT buying. They cannot stand against the strong business cases for these business-driven initiatives. Many CIOs look the other way or add a team member to the program and claim victory.

Nevertheless, CIOs and top management eventually must address the complexity these solutions will add to the enterprise. We can only hope they start preparing for it more quickly than happened with the massive disruption caused by distributed computing, which took enterprise IT a decade to untangle.

The business users’ IT spending blitz also hit the blind side of IT providers, and the implications for providers are as significant as they are for consuming enterprises. Many traditional providers of IT and IT services are troubled by the fact that they are not reaping the significant growth opportunities resulting from the new spending on cloud, mobile and other next-gen IT products that other vendors are enjoying. Why not?

New game plan for IT providers

The enterprise IT market is obviously alive and well. But there are now two distinctly different markets for next-generation IT, so IT providers must change their marketing and sales tactics.

The first market segment accounts for 75 percent of the total spend and has all the traditional ROI buying characteristics. Value is tied to objectives such as as reducing enterprise cost.

To increase their share of the second segment (currently 25 percent of next-gen IT spend), enterprise IT providers must understand that the buyers’ perception of value has changed.

Although value is still wrapped in ROI, an important new criterion is whether the solution will meet the ROI objectives in a timely manner. In addition, the business stakeholder’s confidence in the solution’s success is more important than competitive pricing. These two characteristics drive business buyers to opt for pilots to learn more about the solution before they extend their commitment.

Clearly the ROI drivers differ for buyers in these two market segments. Therefore, IT providers seeking high growth must develop different marketing messages, pricing and delivery models for each segment.

Furthermore, as both segments often exist within an enterprise, it is unlikely that the same sales personnel can successfully sell to both markets.

IT providers that want to quickly move to capture the new opportunities in next-generation IT spend will be more successful if they fully understand buyers’ changed perception of value and approach the market in this fashion.

Video: Cloud Connect Silicon Valley 2013: Private, Public, Hybrid Clouds – Neal Sample | Gaining Altitude in the Cloud

April 24, 2013

Neal Sample, CIO, Enterprise Growth, for American Express. Prior to American Express, Neal served as the CTO of X.commerce, eBay’s open development and commerce platform, and he also served as Vice President of Architecture and Platform Products at eBay. Prior to eBay, Neal was a senior executive at Yahoo! where he led the Open, Social, and Participation platforms. In this video, Neal chats with Scott Bils, Everest Group’s Next Generation IT Practice Leader, about his experience implementing private, public, and hybrid clouds at three very different companies.

Video: Scott Bils Chats with Randy Bias of Cloudscaling on Dysfunctions and Value Creation in the Cloud | Gaining Altitude in the Cloud

April 23, 2013

It’s not all roses and sunshine in the cloud. There’s cloudwashing. Vendors don’t always deliver what the customer thought they were promised. Deployment fail. People get fired. Randy Bias, cloud iconoclast and Co-Founder & CTO of Cloudscaling, moderated the True Stories from the Cloud session at Cloud Connect Silicon Valley in April 2013. Neal Sample, CIO, Enterprise Growth at American Express, and Thomas Barton, Global Enterprise Architect at Novartis Pharmaceuticals shared with the audience their experiences with moving their organizations toward transformation through cloud technologies. In this video, Randy talks to Everest Group’s Scott Bils about challenges and value creation in the cloud.

How Cloud is Transforming the Call Center | Gaining Altitude in the Cloud

March 25, 2013

While the cloud is increasingly causing disruption and driving transformation in nearly all corners of today’s organizations, the call center is one of the most interesting and impactful to date.

Call center environments are comprised of a variety of systems including interactive voice response (IVRs), automatic call distributors (ACDs), and outbound dialers, conventionally provided by large technology vendors such as Avaya, Cisco, and Genesys. Traditional call center infrastructure tends to possess all the classic financial characteristics of legacy enterprise IT, e.g., significant upfront commitments, expensive customization and support, inflexibility, etc. Backend software and databases also carry the generally high price tags and requisite customization associated with standard enterprise IT platforms.

As with nearly every enterprise IT category, a new set of vendors that deliver core contact center functionality via software-as-a-service (SaaS) delivery models has emerged. These include newer market entrants such as LiveOps, EchoPass, and Five9, and legacy players, such as InContact and Siemens. Reseller agreements have also been established, e.g., Siemens resells InContact’s cloud platform.

The cost value proposition for cloud contact centers typically constitutes a no-brainer for both small and large enterprises alike. For example, usage-based pricing, movement from brick-and-mortar to work-at-home or micro call centers, altered training and retention models, and decreased capex, maintenance, and support costs all are major contributors to total cost of ownership (TCO) reduction. Moreover, in some cases cloud service providers can offer enterprises more attractive telco rates than they can obtain on their own. In addition, enterprises comfortable with voice-over-IP (VOIP) performance and reliability can unlock yet another level of value by migrating from pure voice. Taken together, cloud contact centers can reduce TCO for many enterprise call center environments by 30-50 percent.

While the cost value proposition is compelling, the most interesting part of the story is the transformative operational flexibility that cloud contact centers provide. Think agent desktop functionality provided via a browser, ease of moving agents to alternative working environments, and the relative simplicity of modifying and configuring business rules and skill profiles.

Enterprises have historically had two options: operate the call centers themselves, or outsource call center operations to a third party service provider. The cloud offers an interesting third option in which an outsourced recruitment and management model, combined with a new, cloud-based model, creates a unique combination of flexibility, control, and comparatively low non-fixed costs.

So if the cloud-based call center story is so great, why aren’t more enterprises doing it? Three big reasons:

Product cycles for call center hardware can be 10 years or longer. Thus, many enterprises are choosing to defer migration until they face an on-premise, full asset depreciation decision point. This same dynamic has slowed migration to infrastructure-as-a-service (IaaS) models in some enterprises.
No major cloud contact center provider yet provides a truly end-to-end contact center management solution. While the cloud vendors mentioned above all provide core IVR, ACD and call handling capabilities, third-party cloud provider partners must still support areas such as workforce management and scheduling. Integrating multiple cloud services may not deter early adopters, but many enterprises will prefer a more turnkey solution.
Cloud-based contact centers face the same data security and compliance questions as do other cloud services. That agents are operating in work-at-home environments where managers have less control heightens these concerns in some enterprises. While in most cases cloud vendors can address security and compliance issues, the uncertainty perceptions still exist within many buyer organizations.

Too often, the topic of cloud and enterprise transformation gets stuck in the realm of the esoteric and theoretical. Despite the above adoption inhibitors, cloud call center platforms are refreshing because they provide a clear, tangible path to real transformation.

Learn How Enterprises Are Embracing Disruption at Cloud Connect Silicon Valley 2013 | Gaining Altitude in the Cloud

March 20, 2013

2013 Enterprise Cloud Adoption Survey Thumbnail — Download the 2013 Enterprise Cloud Adoption Survey Summary Report

Saving money is nothing compared to beating your competitors to market with a better product.

This is the revelation that’s rapidly taking hold in the enterprise CIO’s office. Until very recently, most enterprise IT leaders would tell you that their primary goal in moving to cloud computing was related to cost reduction, primarily through server consolidation. Occasionally, you might find a an adventurous CIO talking about infrastructure automation and end-user provisioning.

Now, these CIOs are beginning to realize what SaaS providers figured out several years ago: the real benefit of cloud computing lies in organizational transformation, not cost compression.

This dawning realization is what’s led us to build two sessions about the practical implications of cloud disruption at Cloud Connect Silicon Valley. The event is April 2-5 at the Santa Clara Convention Center. Register with the priority code DISPEAKER for 25 percent off.

In the first of the two sessions, we will look at the tools and techniques driving the cloud disruption in the enterprise. A panel of enterprise IT leaders and cloud thought leaders will survey the tools and techniques enterprises are embracing to accelerate their time to value in cloud deployments while improving the ability of user communities to drive new streams of competitive differentiation by developing, testing, deploying and iterating applications faster than ever before.

Rather than looking at edge cases and exciting but unproven technologies, the panel will focus on cloud technologies and tools that are available, proven in production environments and ready to deploy. Randy Bias of Cloudscaling will talk about the disruption of open source projects, while Keith Shinn from Fidelity will give an example of his organization’s transformation through implementation of OpenStack. Niall Dalton from Calxeda, will talk about disruptive hardware innovations such as ARM processors.

Our goal in this first part is to give participants a high-level understanding of which tools are solid choices for their enterprise cloud deployments.

In the second of our two disruption-focused session, we’ll present new business models and case studies from enterprises who have used cloud to accomplish goals that were impossible with traditional IT organizations. We’ll take a closer look at specific examples of organizations that have embraced cloud technology AND new IT organizational protocols to unleash the creative potential of their internal users to build, launch and iterate new apps faster than ever before.

Enterprise executives who have done this will share their stories, and participants will hear how these leaders helped their organizations first understand and then embrace the agility, flexibility and dramatic time-to-market compression that cloud enables. We’ve asked Anand Palanisamy of PayPal to talk about the increased agility and development cycle compression that have helped make his company more responsive to customer needs and competitive threats.

Building sustainable competitive advantage through a transformation in business model assumptions is the real benefit goal of cloud migration. That’s why we built two sessions dedicated to the topic. Come, and hear about it for yourself, or watch for a mid-April summary of what the speakers shared about using cloud technology to align the IT service delivery process and help their organizations launch flexible new business models that drive new revenues and profitability.

A Timeout to Evaluate Our Progress on the Road to Cloud and Transformation | Gaining Altitude in the Cloud

February 11, 2013

Cloud Connect Silicon Valley is just around the corner. Once again we’re assembling a group of enterprise IT leaders and top thinkers in cloud to deliver current, unvarnished and useful information for companies mapping their strategies for organizational transformation through agile business models empowered by cloud computing.

And speaking of maps, this year’s theme for the Organizational Readiness and Business Cases track is “Time to pull over and check the map.” On our road to the cloud, enterprises have taken wrong turns, one-way streets and paid some hefty tolls. After all this exhausting traveling, where are we? So, we’re going to safely pull off to the service plaza and check the map.

The first session (Wednesday, April 3 at 9:00 am) will feature a keynote address from the IT leadership at a Fortune 500 enterprise that has made aggressive moves to push much of its workload portfolio to cloud infrastructure. Participants will learn how this enterprise made the business case for organizational transformation to cloud; what assumptions it made in building its strategy for migration; and where the organization is seeing early successes — and warning signs.

Session two (Wednesday at 3:45 pm) is called the “Cloud Witness Protection Program.” We’ll hear entertaining but serious insights from an enterprise IT executive whose identity we’re concealing. He (or she) will share with the audience hard-learned lessons and strategies for avoiding the same mistakes. A quiz session from a panel of experts will follow, digging deeper for keys as to what to look for in a cloud vendor; tough questions to ask before the contract is signed; and what terms to insist on — or walk.

The third session (Thursday at 2:30) is titled, “Disruptive Innovation in Cloud Technology and Tools.” Experts from technology providers, open source projects and enterprises will give participants a tour of new cloud technologies and tools that are available, proven in production environments and ready to deploy. Participants will leave the session armed with an understanding of which tools are the best choices for their enterprise cloud deployments.

The final session (Friday at 10:15) looks at disruption from a business models standpoint. I’ll lead a discussion with two enterprise executives who have used cloud to fundamentally disrupt organizational business models. Participants will hear how these leaders helped their organizations first understand and then embrace the agility, flexibility and dramatic time-to-market compression that cloud enables. Building sustainable competitive advantage through a transformation in business model assumptions is the goal of cloud, and this session will give participants new insights on how to help their organizations get there.

At last year’s Cloud Connect Chicago, we unveiled the results of the inaugural Enterprise Cloud Adoption Survey. Building on the success of that effort, we have launched the 2^nd Annual Cloud Adoption Survey. The survey will help us track year-to-year adoption trends and drivers. Tell us about your journey to the cloud, and you could win a complimentary conference pass to Cloud Connect Silicon Valley. Take the survey now.

Hope to see you at this year’s Cloud Connect! Register using priority code DISPEAKER for 25% off.

Application Development Productivity – You’ve Got to Be on the Indifference Curve! | Sherpas in Blue Shirts

November 6, 2012

The main indicator of productivity in application development (AD) – periodic reduction in the number of application defects per 1000 lines of code written in X man hours – has stood the test of time at a modular level, as have CMMI standard metrics against which any calculation of productivity can be benchmarked.

However, in the midst of mounting pressure to optimize discretionary IT spend, buyers have no option but to justify their spending via data that evaluates productivity at the enterprise level. CIOs must meet this requirement, while also facing the following two challenges:

First, they must simultaneously deliver increasing value and achieve year-on-year annual reduction in costs
Second, they have to contend with educated business users who may not have the patience to deal with a behemoth enterprise IT organization to get their functional needs fulfilled. Indeed, with the advent of market forces such as social media, mobility, analytics, and cloud (SMAC), business users today understand more about applications and technology than they ever did in the past

As a result, IT buyers must ignore all the ambient noise created by multiple metrics and focus only on the following two factors:

Business functions: The functionality that the business users are demanding, complete with SLAs
Application cost: The cost to acquire the applications that provide the required functions.

Fortunately for them, data indicates that “business functions versus cost” can be useful in benchmarking the productivity of any application development project. As the following image illustrates, for AD projects of specified complexity and type, a combination of the number of functions (F) in an application and the cost (C) to acquire that application can be plotted into an “indifference curve.” An indifference curve is a graph showing different bundles of two variables between which a consumer is indifferent. Basically, all points on the curve deliver the same level of utility (satisfaction) to the consumer.

Based on benchmarking data over many years, all points that form these indifference curves deliver an optimal level of productivity for the complexity specified.

This productivity benchmarking can be used to assess and optimize the productivity of AD projects. For instance, if a particular AD project, for example application 3 in the above image, falls below its indifference curve, it is delivering sub-optimal productivity. Thus, by using this method of benchmarking, a buyer can immediately raise a flag with its service provider and force it to either:

Reduce costs to achieve optimal productivity, or
Provide more functionality to align the project with productivity indifference curve

This benchmarking tool also delivers benefits to service providers. If their case in point AD project is application 1, which falls above the indifference curve, they: 1) have consumer surplus into which they can dig (i.e., buyers could be willing to more); and 2) can use the data to advertise their higher productivity performance to generate more business and differentiate themselves from their competition.

We’d love to hear your thoughts on this type of productivity benchmarking. Have you employed it? What lessons learned can you share with your peers?

Tag: CIO

The Blind Side Blitz: How Business Users Impact Next-Generation IT Spend | Gaining Altitude in the Cloud

Application Development Productivity – You’ve Got to Be on the Indifference Curve! | Sherpas in Blue Shirts

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