A growing skills shortage in the local software development industry is forcing companies to find a lower risk approach to new development projects. Both the time and materials as well as the fixed costs methods of contracting leave businesses exposed to unacceptable risk, and a hybrid methodology is gaining traction, especially with businesses looking for more predictability.
“In the wake of a chronic brain drain and the resulting wage inflation, local companies are trying to avoid growing their teams at the moment and are closely scrutinising risk associated with new projects. Predictability is now the goal for most business leaders but providing certainty when it comes to scoping, costs and delivery timelines is almost impossible when using current methodologies. C-level executives are exceptionally wary of time and budget overruns, which have become commonplace in the IT industry and so a new approach is required,” explains Sergio Barbosa, CIO of enterprise software development house, Global Kinetic, and CEO of its open banking platform, FutureBank.
In 2012 McKinsey and Oxford University reported that more than half of large IT projects had overrun their defined budgets by more than 45%. A decade later the firm updated its findings, and things had only gotten worse. The 2022 findings showed that just one in 200 projects reviewed had delivered the intended benefits on time and within budget. What's more, the reviewed IT projects overall had exceeded their budgets by an eye watering 75%, had overrun schedules by 46%, and had generated 39% less value than originally predicted.
The financial impact of these overruns is staggering. According to the Consortium for Information & Software Quality (CISQ), the cost of unsuccessful development projects, reached $260 billion in 2020, which represented a 46% increase since the previous estimate two years before.
“Every industry is filled with examples of how the usual time and materials or fixed costs methods are simply not cutting it. Who hasn’t heard of the 1000 percent cost and 14 year time overrun of the James Webb telescope? In a contracting economy the risk of clinging to inflexible methods is adding pressure. A new construct is needed to ensure that projects aren’t put on hold to appease board requirements for a lower-risk growth strategy,” Barbosa says.
In the local IT space, the fixed costs approach, while still widely embraced, is often a cause for relationship breakdowns.
“Scope will naturally evolve over time in relation to changing market conditions, user behaviour and innovation. Large, fixed cost projects can no longer be seen to be a viable option within the current technology landscape where responsiveness is key to gaining competitive advantage. Change is inevitable and the cost and overhead of managing that change in fixed cost projects is what creates friction that leaves both customers and employees unhappy. Unfortunately, many customers still lean toward a fixed cost approach as it provides more tangible guarantees in terms of managing cost, even though in reality they do little to guarantee return on technology investment,” shares Lorén Rose, COO at Global Kinetic.
What’s more, Rose says when clients insist on outdated methodologies, the first casualty in a project is often quality.
“Customers will often choose to compromise on quality in an effort to get to market faster, or at a lower cost, so initially most projects appear to be tracking well to time and budgets. However, the technical debt eventually accumulates, until the bulk of the development team’s efforts are spent on bug fixing and troubleshooting. This slows down the team’s ability to innovate and respond to change and leaves very little time to make traction on value adding features. Without quality there is no predictability.”
Barbosa explains that when it comes to analysing projects, the function point analysis used in the 1980s is once again immensely relevant.
“Function point estimates may not have been ideal when software was built using the waterfall methodology. However, in a world of agile development, function point estimations give the customer a clear sense of what they will be getting within a defined time frame. The expectation is managed by the customer, and they are able to prioritise the most important delivery.
“The project will almost never go over budget because you're always managing the expectation and with managed teams as a service, customers have a fixed monthly cost and fixed delivery timeline. We use techniques and tools to constantly calibrate what we are delivering based on budget and time. And with a hybrid of fixed costs and time and materials we are able to deliver the best of both methods in a way that massively reduces risk and eliminates overruns,” he explains.
One of the reasons why the more commonly used methodologies don’t work is that the developers and the clients are approaching the project with polar opposite attitudes.
“Developers can sometimes be too optimistic with their estimates. Once they have solved the problem in their minds, they believe it will be quick and easy to codify it into a software solution. Clients, on the other hand, often have an over optimistic view of the scope, but ignore the foundational features and elements needed to support the main features of a solution. Some of them have been bitten by a bad experience, or are simply just exceedingly risk averse. Combine an over optimistic view of scope and complexity with a fixed cost and you are in a lose-lose situation,” Barbosa explains.
Barbosa says that at the outset development partners must take the time required to conduct proper discovery. All parties are in a rush to get coding, but by properly defining the problem statement, parties can avoid building the wrong products. What’s more, he says that not all development needs to be a greenfield build, saying that making use of existing collateral and opting for a brownfield build could deliver faster and at a lower risk.
“In order to deliver the predictability that today’s business leaders are desperately looking for, software development providers must proactively work with their teams and clients. There must be proven and bullet-proof processes guiding decision making; there must be clear transparent quality standards and processes with accountable individuals ensuring they are met; and an environment that facilitates frequent incremental changes, based on predefined goals. Taking the best from old and new methodologies and creating a hybrid one that acknowledges the realities, hopes and concerns of both the client and the developers will result in a predictable environment that is best placed to deliver on all expectations,” Barbosa sums up.
Original Source: Predictability the new Nirvana in software development 24/05/23 09:33 | | it-online.co.za
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