This Blog Has Moved to Forrester

Please continue to follow this blogger at blogs.forrester.com/brian_hopkins. Same material, new location. See you there!



Wednesday, March 24, 2010

Dinosaurs Are Extinct for a Reason

If I asked why dinosaurs are extinct, your answer would probably have something to do with climate change and how the dino’s didn’t adapt very well. In other words, the Earth’s ecosystem changed such that it no longer supported dinosaur biology - so they went away. If I asked why your application portfolio still has dinosaurs (aging, outdated applications or useful applications on aging technology), what would the answer be? Maybe it’s because your IT ecosystem still supports them?
Here’s what I mean - 
A common technology management practice is to provide discretionary funding to application portfolios for both maintenance and small project work. How does the IT ecosystem incentivize them to spend this money? The primary reward for portfolios is successful delivery of solutions that provide hard benefits to the business (by hard I mean real dollar savings or income). When hard decisions are inevitably made regarding portfolio’s discretionary budget, what do you think those decisions do?
They move money to projects that deliver more hard benefit to their business customers. The problem is that hard benefits are, well, hard. The have a tangible impact to the company bottom-line, which results in bigger bonuses and advancement - rewards. Application maintenance, simplification and retirement has no such rewards. The result is an IT ecosystem that constantly builds new stuff and never gets rid of the old. Why are we surprised when the dinosaurs just won’t go away?
A common approach to solving this problem is the application modernization program - that is, roll up all the platform upgrade and retirements into one big ‘program’ level initiative, give it lots of visibility, associate lots of ‘benefit’ to it and just get it done. Their are two problems with this approach:
  • Nobody can believe the price tag. Here’s the deal - technology upgrade and retirement is expensive. Most business cases for new applications grossly underestimate the downstream maintenance tail incurred. If the true cost of ownership was understood, the underlying benefits would be eroded and what’s the fun in that? Again, the ecosystem rewards short term realization of hard benefit, not responsible decision making based on total cost of ownership and total return on investment.
  • Second, the benefits are dubious. In other words their is not wide spread agreement that doing all this work will really generate the savings (hard benefit.) Many in the organization treat the notion of retiring and simplifying as a way to drive down cost with a ‘nod and a wink’. When hard budgetary decisions  are made about limited resources, what is the first program that gets cut? You got it.
As as result, most application modernization programs either never get off the ground or fail to get the funding to stay ahead of the upgrade wave; applications become antiquated adding to the work as fast or faster than the program can care for them. 
Getting rid of applications dinosaurs is a major undertaking that can be accomplished according to one of two strategies:
  • First, make it a board level mandate and not benefit driven.  This works for mature organizations that realize application business cases of the past did not properly account for the support cost tail.
  • Second, change the IT ecosystem (the biology) and watch the dinosaurs disappear over time.
Since the second case is most likely, here are a few more ideas on how to make this work. The central theme is changing the incentives to drive behavior:
  • First, establish an IT cost accounting model that allocates full application support cost back to the portfolio. When I say full cost, I mean both development costs for maintenance releases and a charge-back for a portion of shared infrastructure costs. I understand that ‘charge-back’ can be a dirty word in many IT shops. I use it here purposefully to indicate that charging portfolio’s for infrastructure support costs is an accounting facility to track technology run-the-business accountability. I also understand that implementing a shared infrastructure cost model is really tough because the business sponsors of the portfolios may not willingly accept the cost accountability. This is equivalent to playing ostrich by sticking your collective head in the ground. Many organizations transfer shared infrastructure costs to an Infrastructure executive so that they are “not the portfolio’s problem” after delivery. Guess what behavior results? Under estimation of application total cost of ownership to justify delivery and resulting infrastructure bloat.
  • Second, implement a zero sum gain policy that reduces funds available for business demand as application maintenance and shared infrastructure costs grow. Once portfolio managers have to show charts that illustrate year-over-year reduction in business demand investment because of increased maintenance and support costs, behavior will change. These managers will have to adopt a simplification and maintenance cost reduction strategy to obtain the resources necessary for business demand investment in solutions with hard benefits. 
Taking these two steps aligns portfolio incentives with the goals of the Enterprise. Misalignment of portfolio’s and the enterprise is one of those big white elephants in the board room that I discuss in my post, Calling Out Pesky Pachyderms. Get rid of this elephant and change the IT ecosystem.The result? Yup - those dinosaurs go away.

BTW...I'd like to give credit to a few of my colleagues whose discussions along these lines have helped clarify my thinking - Bill Van Emberg and Joel Freiburger

No comments:

Post a Comment

Share

About Me

My photo
Brian has 21 years of engineering and technology leadership including 12 years as an IT professional. As an Enterprise Architect, Brian has been a leader in establishing Enterprise Architecture Practices in both the Financial Services and Defense industries. He has led the development and implementation of information management strategies, established architecture governance processes, and led multimillion dollar, multiyear program teams. In addition, Brian has extensive experience with web interoperability and data exchange standards established by the W3C and OASIS.