Face it, software really IS different

Face it, software really IS different

This is the second of a planned series of short articles for executives of software-intensive businesses (SIBs).

In That Sinking Software Feeling, I explained how SIBs lose business momentum due to unsustainable software development, grounded in mistaken beliefs.
This article addresses one common mistaken belief, “It’s all just computer stuff; software is no different.”
The IT Pyramid
I was first a software developer and then a sales engineer for a major, regional IT services firm. Most of our business involved infrastructure (networking, hosting, servers, and storage) and off-the-shelf software. We application developers often felt like misfits. Now I know why, and the reasons are really important to my clients, the executives of SIBs.

I’ve been drawing this picture of the IT space on napkins and whiteboards for five years. It’s all too easy for a business person to say, “It’s all just computer stuff; it’s IT’s problem,” but that’s a mistaken belief. The value proposition, definition of needs, and mode of acquisition varies tremendously between the typical Infrastructure of most businesses and the Differentiating Applications that make a SIB.

  • Infrastructure exists to run applications and connect the business with the outside world.
  • Infrastructure value is realized by delivering required capacity and reliability at low total cost of ownership (TCO).
  • Infrastructure requirements are typically unambiguous and stable—they can be easily turned into a Service-Level Agreement (SLA).
  • Infrastructure is assembled from off-the-shelf components from a few major vendors.

Business and technical people don’t need to collaborate very much. A Cisco expert can upgrade and maintain a Cisco-based network without knowing much about the business. Business people don’t have to understand infrastructure very well to use it and oversee its management, and they certainly don’t have to be involved in its implementation.
Utility applications

  • Utility applications are tools common to many businesses, and are used by people to communicate and perform common business tasks.
  • Utility application value is realized when they are provided at a reasonable TCO and people use them. Business “power users” realize additional value by using the applications to their full extent and share their knowledge.
  • Utility application functionality can be complex, but the basic requirements and features are fairly stable.
  • Utility applications are typically licensed from third parties and used as-is, perhaps after initial configuration by the vendor.

Though more collaboration is needed between business and technical people, especially during selection and implementation, the separation is still fairly distinct.
Many businesses’ IT needs are completely met with appropriate and well-run infrastructure and utility applications. It’s the words, numbers, and media the people work with using the technology that makes such firms special, not the technology itself.
Differentiating applications
Software-Intensive Businesses (SIBs) are those with a point on their pyramid, highlighted in bright red on the diagram. They have differentiating applications.

  • Differentiating applications confer, by their existence, a direct competitive advantage.
  • Differentiating application value is realized when software provides (and people use) capability that competitors do not have; TCO must still be managed but is not the primary determinant of value.
  • Differentiating application functionality and requirements tend to be emergent and volatile — shaped by changing business strategy, technology capability, and customer input.
  • Differentiating applications must be created, not licensed from third parties (if you could, so could your competition)

It isn’t the class of application per se that makes it a Differentiating Application—it’s how it is acquired and how it delivers value. I’ve shown ERP and CRM as borderline differentiators, and for some firms they still are. But, as application classes, these are acquiring utility attributes, and an increasing number of firms treat them that way and are better off for it.
What makes an application clearly a Differentiating Application, and a business a Software-Intensive Business, is software created explicitly as a part of the firm’s product or service offering, by an ongoing collaborating between business and software people. Just because a developer is skilled in Microsoft technologies (for example), doesn’t alone make them immediately able to maintain and enhance the value of a differentiating app created with Microsoft technologies. They must also learn that particular business in some detail. Likewise, the business people must understand the capabilities and constraints of the software-development process if they are to provide effective management and leadership.
Differentiating Applications and the combined business-technical teams around them never seem to “finish.” Far from being frustrated, savvy SIB executives are delighted, as long as the value is increasing, too.
The differences from the bottom to the top of the pyramid can confound even IT management, not to mention business executives. Differentiating Applications really are different. It’s not “all just computer stuff,” to be left to IT to handle.
Successful business people know how to manage costs, and those skills transfer relatively well to the vendors and staff at the bottom of the pyramid. But if they apply the same hands-off, cost-focused approach to the creation of Differentiating Applications, they will be surprised and frustrated by the results.
A similar surprise often awaits the IT manager who is an expert at acquiring and maintaining infrastructure and utility applications and is then, reasonably, asked by the business to oversee a custom software development effort.
The lack of appreciation that “software is different” is a mistaken belief that has landed executives of Software-Intensive Businesses and even their IT managers in trouble. Value is realized through business benefits based on specific capabilities, not reduction in TCO of the technology.
The way differentiating software delivers value, and how it therefore must be implemented and managed, will be explored in the next uFunctional article for Software-Intensive Businesses.

Robert Merrill is the Principal of uFunctional, LLC, which provides services to software-intensive businesses in Greater Madison.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.
WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.