Shortening Software Product Life Cycles as a Current Business Trend
Globalisation of business and workforce, combined with the latest technological advancements and new business models, have significantly strengthened market competition and, as a result, led to a trend in shortening software product life cycles. The pressure on software products time-to-market is now higher than ever, and the trend of shortening product life cycles and increasing pressure on time-to-market is only growing.
The shortening of software product life cycles drives significant changes in portfolios of ISVs, Enterprises and other software-enabled businesses, resulting in an increased number of products in a company's portfolio. At the same time, the share of earned revenue (for ISVs) or value (for Enterprises) from each of the products in the portfolio becomes lower.
Mature Products in Portfolios
As products mature faster, maintaining revenue growth targets (for ISVs) requires releasing more new products to the market, while still maintaining the older products with a mature client base. It`s the Red Queen phenomenon masterly described in Lewis Carroll's "Through the Looking-Glass" – "it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"
As a result, companies accumulate mature products with a stable customer base in their portfolios much faster than ever before. Eventually these products no longer generate enough revenue, but they remain in the portfolio, consuming a significant share of operating costs.
Instead of being used for new products and new revenues, a big share of that cost is spent on maintaining the existing mature products. Combined with the cost of ownership of mature products that were added into the portfolio as a result of acquisitions (and in many cases, those products have been built on top of a different technology stack), this problem is getting worse as companies need to maintain products with overlapping functionality built on heterogeneous technology stacks, at additional cost.
- Highly dispersed portfolio
- Products with overlapping features
- Inefficient Software Development Lifecycle (SDLC)/Application Lifecycle Management (ALM) processes
- Heterogeneous technology stack
- M&A only accelerates the trend
- Higher cost share for mature and decline segments of the portfolio
- Budget deficit for introduction and growth segments of portfolio
- Inefficiency grows faster in highly dispersed portfolios with overlapping products and heterogeneous technology stacks
At first glance, it may seem that this challenge is most relevant for ISVs, but it is also faced by Enterprises as they consume software produced by ISVs to enable/accelerate their business performance and indirectly follow the same trend.
Overall, it looks like a chronic disease – COOs and CIOs may live with it for years without noticing this dangerous trend happening within their portfolio. And as occurs with most chronic diseases that are not taken care of, the inefficiency accumulates and eventually becomes a big challenge visible to other executives as it drains more and more money to sustain a barely profitable segment of the portfolio and business.
As this phenomenon starts to threaten business agility, scalability and indirectly impede other new business development initiatives -- alongside a growing pressure from market and shareholders -- it creates a strong motivation for COOs and CIOs to look for strategies that drive optimisation of costs spent on different parts of a portfolio. Ideally, senior management would be looking at improving cost distribution between different segments of a portfolio, as well as ways of reducing the total cost of portfolio.
Portfolio Cost Optimisation through ALM and SDLC Improvement
Senior management may apply different strategies to tackle this challenge: from massive organisational restructuring and layoffs to outsourcing, consolidation of products within product lines (with subsequent modernisation), and prescriptive analytics. These strategies are typically used in parallel with each other, acting more granularly in different segments of a portfolio. But one rule remains the same over time: the more drastic the strategy, the stronger the resistance of an organisation becomes to accept "the change" that forces senior management to extend their list of options with other less painful means to reach their portfolio rationalisation goals.
One of the possible and very attractive options is SDLC (ALM) optimisation strategy. In the circumstances described above, even considerably small inefficiencies in the company's ALM and SDLC may result in wasting a significant amount of money, especially when it comes to highly dispersed and heterogeneous portfolios with numerous products. That money could have been saved and allocated for new products' development. SDLC optimisation increases organisational productivity and performance by streamlining processes, technologies, tools and teams as a single interrelated ecosystem, eventually yielding considerable and repeatable savings. On a more advanced level, COOs and CIOs may go beyond that and establish a continuous improvement framework based on meaningful metrics and dashboards that facilitate driving preventive/corrective decision making, based on real data rather than on subjective information.
Engagement and Business Value
The larger the scale of SDLC optimisation initiatives in your company, the higher the economic benefits you can expect. At the same time, the roadmap to these benefits may take more time to implement and more effort to overcome organisational resistance that may still occur on a local level. Running a small pilot is a good way to experience the difference on a smaller scale before a large-scale roll out.
SDLC optimisation projects usually undergo three consecutive phases: Assessment, Implementation and Monitoring, to ensure the comprehensiveness of the approach. The image below depicts the reference architecture of the Assessment phase and includes both qualitative and quantitative methods to identify the gaps in the three dimensions, assess their impact on target Key Performance Indicators (KPIs) and rigorously infer a set of action items in scope of the roadmap development effort to drive the improvement of the KPIs.
In addition to portfolio cost optimisation, implementing a SDLC optimisation initiative will help in reaching the quantitative results in other related areas, making a positive impact on the business and its competitive advantage:
- Increased productivity and team performance
- Reduced time-to-market and shorter release cycles
- Improved predictability and transparency
- Higher quality and improved customer satisfaction
- Risk avoidance and protection of customer investments
Shortening software product life cycles as a part of today`s market conditions has created a business momentum driving demand for simple ALM and SDLC optimisation activities, as well as more sophisticated portfolio rationalisation strategies. No matter which road your company prefers to take to correct the SDLC inefficiencies within large and disperse product portfolios, the significant cost and process optimisation of the mature part of your portfolio is a must before you start adding new products and scale your business.
Alex Chubay is the VP of Consulting at SoftServe, Inc. Alex has 14 years of experience in software development, operations management and Agile consulting.