White paper achieving the most economically advantageous applications solution every time

www.ndmc.uk.com

ACHIEVING THE MOST ECONOMICALLY

ADVANTAGEOUS APPS EVERY TIME

IAN TOMLIN

SEPTEMER 2010

WHITE PAPER

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WHITE PAPER | Achieving the Most Economically Advantageous Apps Every Time

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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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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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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

Suppliers of software applications will charge for support. Typically the

cost of maintenance contracts far exceeds their benefit but their

provision is necessary if organizations wish to enjoy support.

Inflated version upgrade costs

Organizations are frequently required to upgrade systems not because

they desperately need new features but because they want to avoid

operating outmoded systems that are no longer supported by

suppliers.

Loss of contractual bargaining power

Organizations are sometimes held to ransom by IT suppliers because

they’ve invested so much time and money into a particular third party

IT system that the cost and risk of change is too great to contemplate.

Creation of an ‘IT lottery’

There can never enough shrink-wrapped solutions to meet every

unique need for IT. The nature of innovation and process

improvement is that there is always another process to serve as

organizations adapt and grow. The absence of sufficient budgets and

suitable IT tools creates a lottery for fit-for-purpose systems between

department managers.

Throwing baby out with the bath water

Organizations that have outsourced their development, IT function or

processes often lose control over their ability to adapt as contracts

and conflicts of interest inhibit an organizations ability to respond to

industry and market changes.

Too many supplier relationships

Some organizations have in excess of 50 software supplier

relationships owing to their strategy to procure ready-built software

for each and every discipline or core business process. This leads to

high maintenance ands upgrade costs and excessive supplier liaison

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.

A summary of the

procurement options:

Ready-built software

High procurement

process costs

Inflated buy prices

Too many supplier

relations

Over-size/poor fit

software

Creation of data silos

Increased integration

costs

Software as a Service

Poor data

management

Inability to

customize/adapt

Development outsourcing

Inflated buy prices

Slower delivery

Process outsourcing

Cultural and

operational silos

Growth in grey

sourcing

(All)

Poor adaptability

Poor support for

innovation

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Situational Applications Insourcing

SITUATIONAL APPLICATIONS are software applications

demanded by organizations to improve business processes in

respond to new business situations. They represent the

MAJORITY of emerging demands for software ‘systems’

beyond the core components of Financial and Enterprise

Resource Planning (ERP) systems.

describes an insourcing Situational Applications Insourcing

approach for provisioning of new applications where the delivery

of applications is met by ‘super business analysts’ embedded into

change teams that respond to new requirements for software

applications as they emerge.

Before engaging a procurement process or custom coding

development, the majority of ‘systems’ requirements are

considered for internal delivery by business analysts embedded

into change management teams (and motivated through targeted

remuneration packages to improve the process areas they serve).

Situational Applications Development is predicated on the

existence of integrated software platforms that business analysts

can use themselves to create applications to support

improvements in business processes without having to create

custom code or acquire tools and skills that would necessitate an

‘IT project’.

This approach places focus and rewards on process improvement

and business outcomes rather than the technology componentry.

Situational Applications Insourcing offers a practical alternative to

custom coding, software procurement or outsourcing.

Situational Applications

Insourcing

Benefits:

Project complexity and

risk is removed by

creating applications

during workshops and

iteratively adapting

applications to best fit

the use case.

No programming skills

and competencies are

needed.

No dependencies exist

for middle-ware software

or third party tools in

areas such as business

intelligence, geo-spatial

intelligence, forms and

database design etc.

New applications are

created without

additional software costs

No costs associated with

browser compatibility

testing, applications re-

working, de-bugging or

performance tuning is

incurred.

No version upgrades or

maintenance costs are

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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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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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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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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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.

White paper achieving the most economically advantageous applications solution every time

Business

advantageous apps

advantageous cost

sophisticated organizations

arecession organizations

business processes

utility applications

procurement approaches

white paperachieving