Galorath Keynote ISPA March 2011
Today my conference presentation involved understanding and estimating value in software and IT systems as well as total ownership costs. It still amazes me how so many software and IT leaders do not want to think in terms of Return on Investment but just want to build things that seem to be good ideas. If we would build what has the most value IT could become a profit center. Key points were:
- Estimation is a key portion of business decision making
- Value must be considered in addition to cost
- Data doesn’t have to be perfect to be useful
- Estimators taking some responsibility for business value analysis can make a major improvement in business
I have included entire PowerPoint presentation here.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
$500 Billion IT Debt For Deferred Maintenance
Gartner Group has reported that the IT Debt is about $ 500 Billion, the cost of deferred maintenance with that number heading toward $1 Trillion over the next 5 years.
Gartner’s Andy Kyte defines IT Debt as “the cost of clearing the backlog of maintenance that would be required to bring the corporate applications portfolio to a fully supported current release state.”
In its most simple form IT Debt could mean upgrading software from Windows XP to Win 7. In enterprise IT Debt could involve upgrades in ERP, business intelligence software or middleware.
The maintenance backlog has built up as a result of tight tech budgets over the last decade, cost-cutting measures or simply because the enterprise did not feel compelled to upgrade its application portfolio.
“Over the last decade, CIOs have frequently seen IT budgets held tight or even reduced. The bulk of the budget cut has fallen disproportionately on maintenance activities — the upgrades that keep the application portfolio up-to-date and fully supported. There is little problem if this is done in one year or even in two years, but year after year of deferred maintenance means that the application portfolio risks would be getting dangerously out of date,” said Andy Kyte.
The Gartner analysts said IT leaders should produce an annual report on the status of the application portfolio detailing the portfolio status, including:
- Number of applications in use
- Number of applications acquired
- Number of applications decommissioned
- Current and projected costs of operating, sustaining or improving
Technical Debt From An Application Viewpoint
Cast Software, makers of a very interesting static analysis tool, define technical debt a bit differently.
Technical Debt in an application is the cost of fixing the problems in that application that put the business at serious risk. Technical Debt includes only those problems that are highly likely to cause severe business disruption; it does not include all problems, just the most serious ones.
Based on this definition, they estimate that the Technical Debt of an average-sized application of 374,000 lines of code is $1,055,000.
Note: Technical debt chart from Ronald E. Jeffries
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Evaluating the Benefits of Service Oriented Architecture: SEER in support of SOA Implementation Decisions
Galorath’s Dr. Denton Tarbet has been studying the estimation and analysis of service oriented architectures for some time. He provided this post regarding SOA. For further information, please email us.
SOA is often considered to be a means to provide IT services at lower cost. However, consideration should be given to what is meant by “cost” in the migration to an SOA for any organization.
For proper consideration of cost tradeoffs we consider the value to the customer, i.e. does the migration to SOA really provide a benefit to the stakeholders for the system? To consider that, first consider that SOA is not a process but it is an architecture. Relying on common understandings of architecture related to buildings, it is not sufficient to say the architecture is the blueprints, the drawings, the physical structure. What made many of Frank Lloyd Wright’s buildings so great was that he considered the architecture to include the total of the building within its specific environment. As an example, Wright’s Fallingwater: http://www.greatbuildings.com/buildings/Fallingwater.html
With that concept in mind, an SOA approach must consider its environment, i.e. the customers and how the resulting services will be used.
Within SOA the concept of service should be based on customer value. So the “service” in SOA isn’t really about technology, objects, interfaces, granularity, messaging, reuse, product stacks, standards, platforms, openness or almost anything else. It’s about mapping business processes to a software implementation that facilitates stakeholder outcomes and value. To effect that end, we rely on a solid estimation from SEER-SEM and SEER for IT to develop the effort, schedule and risk to provide the basis for tradeoffs to provide the best Return on Investment (ROI). See additional:
Common Misconceptions About Service-Oriented Architecture – Crosstalk, Nov 2007
http://www.xml.com/pub/a/ws/2003/09/30/soa.html
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Data Center Consolidation: Avoiding Surprises and Returning Business Value
We see many organizations, papers, vendors, etc. discussing data center consolidation. Wonderful projections and claims are being provided by vendors. But many Data Center Consolidation decisions are not being made on solid, objective cost analysis. Studies show that about 21% use consultants, and about 17% use ROI calculators from vendors. Hopefully these analyses provide accurate costs and savings.
But there is another way…
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Repeatable, credible & risk oriented
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Documented analysis using sound estimation process
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Application of SEER-IT for cost, schedule, risk analysis
Galorath’s approach is to first model the as-is approach in a fully justified approach, then to estimate the to-be approach. Full risk analysis is performed as well, ensuring you understand the range of probabilities.
If you are interested in a viable estimate including cost, headcount, schedule, and risk of data center consolidation, contact Galorath. Everything from software assets to hardware assets, facility assets, and real estate assets are analyzed. People, power and other analyses are included. Additionally, the cost of shutting down the legacy must be included in a complete analysis. These could be substantial.
The following example shows nearly $100 million in savings over 7 years at a cost of $33 million.
To discuss this analysis or to get started on data center consolidation analysis, contact Galorath, worldwide.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Estimating Best Practices
The following are the bullet points from Dan’s paper on estimating best practices. Using these best practices can increase project success dramatically.
- Decide Why You Want An Estimate
- Map Estimation Goals To Estimate Process Maturity & Develop Plan To Achieve The Maturity
- Have A Documented, Repeatable Estimation Process
- Evaluate Total Ownership Cost; Not Just Development
- Estimate A Range And Pick A Point For The Plan
- Re-estimate The Program When It Changes
- Avoid Death Marches: Programs With Unachievable Schedules Are Likely To Fail And Drain Morale
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
IT Project Failure Warning Signs
This list was adapted from ITBusinessEdge
Lack of governance: Project criteria, roles, processes & outcomes not used or accepted by management. Not understanding project risk.
Internal politics: Territorial fights. Its not my job, or “they” messed up.
Communication issues between the business and IT: IT talking with the business stakeholders about bandwidth and blobs rather than end user oriented benefits.
Unclear expectations: Bad estimates and ambiguous expectations.
Lack of fact based analysis: Plans not based on facts but on opinions. Studies have shown, for example, that projects of any magnitude can’t produce a viable estimate without a model like SEER.
Lack of input from users: IT may know how to do it but users probably know what they need better.
Changes in project without re-planning
Unplanned changes in key personnel
Unrealistic schedules: Projects on death marches.
Unanticipated operations costs: These must be estimated well up-front
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Cost To Recover from an IT Business Interruption
Aberdeen group published some interesting information regarding the time and cost to recover from business interruptions. This is the time to recover 90% of functionality. I recommend getting the complete report. They found that best in class recovered 6.5 times faster than laggards and had an average cost of $72,000 versus laggards with an average cost of $2,880,000.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Live From UK Williams Formula 1: Ford Motor Company Europe Uses SEER for Software and IT
This morning Ford Motor Company’s European operation presented their development process, how estimating is improving their developments and how they tie IT infrastructure and IT services into the estimate with SEER to see the complete costs, make trade-offs and produce successful solutions. They have several gates where estimates are required and a lessons learned post mortem. In an excellent talk the speaker pointed out that even when the requirements are known, there is requirements growth. This is modeled with the SEER “requirements volatility” parameter.
The presentation will be available at www.galorath.com in the next few days.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Estimating the Cost & Schedule of Packaged Software Deployments
Packages (such as ERP systems, payroll systems, etc) can be great cost savings to organizations, offloading most of the development and maintenance. But they are not a panacea and many deployments fail. About two thirds of the cost of a large package deployment is not the software itself, but the IT infrastructure and other services. SEER for IT covers all those other two thirds of the cost along with SEER for Software (SEER-SEM) which handles all the software development and COTS cognition associated with such a program. Thus a complete package deployment can be estimated, planned and controlled.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Churn Rate For On-Demand (Software as a Service) Solutions
From an email I received from Frontrange Solutions looking at tradeoffs of internal versus SaaS.
“Though many are jumping on the on-demand bandwagon, many are also jumping off. Churn rates for on-demand are as high as 30 percent while renewal rates with on-premise software stand in the 80 percent range. There must be a reason an increasing number of organizations that tried on-demand applications have returned to an on-premise solution. For reasons such as:
- total cost of ownership
- ease of customization
- control of data
- process automation options
- user-interface
- disaster recovery
What this doesn’t seem to show is whether those who drop out of SaaS go to an internal solution or just stop doing that SaaS function. This needs more study.
After the recent disaster where the building where we host our mission critical applications (with its backup generators, etc) was without electricity for two days, we are actually investigating getting our email and other functions out onto a data center ourselves. It is more expensive since we have already invested in infrastructure and IT services. But it may be worthwhile for disaster recovery. Of course the questions of what if the data center has a disaster itself, how do we keep long term backups, etc. are still unanswered.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page, call us at +1 310 414-3222 or click a button below to ask sales questions, sign up for our free library or schedule a demo.
Project Prediction Infographic
