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TRENDS REPORT

Trends in IT Value

INTRODUCTION
IT executives throughout the world have been searching for The Standish Group defines trends as the current

SPECIAL RE POR T
that elusive Holy Grail, known as the value of IT. However, like general direction of a technology, methodology,
beauty, the value of IT is in the eye of the beholder. Also like business practice, and/or technique. It is a barometer
beauty, the perception of value tends to fade over time without of the overall activity in relationship to other
proper maintenance. In many corners of the IT environment activities. It is not a compilation of all IT activities,
the value of IT has increased exponentially, and continues to but the ones with the highest priority. Throughout this
bring users and stakeholders greater and greater benefits. The paper and other Standish trends research notes you
Trends in IT Value report is not designed to quantify or even will see the word “driver.” A driver, the way we define
identify the value of IT, but to show the trends and drivers that it, could be a government mandate, a market-driven
have been steadily increasing the value of IT over time. event, a business fad, a new discovery, or a vendor-led
initiative.
We have identified the 10 most important drivers of IT value;
each driver is made up of three elements. The first driver is The Trends in IT Value report is based on DARTS
lowering the infrastructure cost, which comprises: cheaper (Demand Assessment Requirements Tracking
basic cost, data center consolidation, and eco-computing. The Studies), the CHAOS project (private acronym),
second driver, increasing application functionality or features, CENTS (Comparative Economic Normalization
is made up of cost, optimization, and return on investment. Technology Study), and other research instruments.
The third driver, reducing the cost of downtime, encompasses All research participants must satisfy a qualification
cost per minute, cost per event, and cost per transaction for process and join our Standish User Research Forum
a given application or environment. Maintaining suitable (SURF). All data and information in this report should
risk, the fourth driver, consists of fewer moving parts, be considered Standish opinion and the reader bears
incremental adoption, and a vertical stack. And the fifth all risk in the use of this opinion. For a more in-depth
driver, commoditization, includes hardware, applications, and view of many of the drivers in this report, please
services. see our trends reports on readiness, open source,
optimization, SOA, and service delivery, plus the
The sixth driver for IT value is higher readiness, and CHAOS Report.
this includes central control, active-active processing,
and application quality assurance. Seventh, the project
management leadership driver, comprises optimization,
iterative processes, and best practices. The three elements DRIVERS FOR IT VALUE
for the eighth driver, service-oriented architecture (SOA), are
increased business agility, business process management, and Lowering the Infrastructure Cost. . . . . . . . . . . 2
investment reuse. The ninth driver, service delivery, includes Increasing Application Features. . . . . . . . . . . . 3
choice, cost, and time. Finally, the vendor consolidation driver
is made up of bundle buying, open source, and single-source Reducing the Cost of Downtime. . . . . . . . . . . . 4
support. These 10 drivers and their associated elements are Maintaining Suitable Risk . . . . . . . . . . . . . . . . 5
increasing the value of IT.
Commoditization. . . . . . . . . . . . . . . . . . . . . . . 6
STANDISH DEFINITION
Higher Readiness . . . . . . . . . . . . . . . . . . . . . . 7
“Value” is real or perceived worth, usefulness, or
importance of a given activity or service. One way to look Project Management Leadership . . . . . . . . . . . 8
at information technology services value is to consider SOA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
the cost of the IT service versus the cost of providing
the service manually. Another way to look at IT value Service Delivery . . . . . . . . . . . . . . . . . . . . . . 10
is to consider the benefits of the service provided that Vendor Consolidation. . . . . . . . . . . . . . . . . . . 11
would be impossible to accomplish without IT.

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any circumstances be
retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 1
Driver 1: Lowering the Infrastructure Cost
The Standish Group estimates that the average stated electrical output of computer systems, cooling and
yearly goal to optimize IT infrastructure and facilities heating, lighting, etc., for the data center as well as
cost reductions is 10%. In order to accomplish this goal an other computing equipment and peripherals throughout
organization needs to consider the current cost structure the company. Reducing cost may include consolidating
and examine ways to improve each and every category. applications to eliminate equipment, switching to more
The Standish Group TCO model breaks costs into three efficient equipment, or managing shutdown and start-up
segments or elements: basic cost, application cost, and cost operations. Most organizations are just at the beginning
of downtime. Lowering the infrastructure cost driver for IT stages of green programs to reduce cost.
SPECIAL REPORT: Trends in IT Value

value comprises three elements: cheaper basic cost, data


Standish Definition: “Infrastructure” is the underlying
center consolidation, and eco-computing.
base of systems that an application(s) runs on top of. It
Basic cost is the cost an organization incurs in order to consists of the basic facilities, services, and installations
operate and maintain a computer installation. Basic costs needed for the functioning of a computer system or a
include the cost to lease or depreciate hardware, server- complex of computer systems. Infrastructure costs
related software lease, depreciation, and/or monthly license are made up of hardware, operating and management
fees for operating system software, utilities, management, software, operational staff, maintenance and space,
and other software related to the operation of a server. electricity, air conditioning, security, and other
In our TCO model this is labeled “Software Cost.” It does computer room-related costs.
not include database or middleware that is charged to the
application cost. The basic cost also includes operational IBM ZSERIES SYSPLEX VS. HP INTEGRITY NONSTOP
costs (labeled “Manpower Cost”) and the cost of vendor Basic Cost ($000) IBM Z9 HP-INS-16X Difference
maintenance fees to both fix the hardware and support the
Hardware Cost 640 810 -27%
software (“Maintenance Cost”). Other basic costs include
Software Cost 524 314 40%
floor space, electricity, air conditioning, security, and other
Manpower Cost 1,437 547 62%
computer room-related costs. Much effort is spent trying to
Maintenance Cost 301 237 21%
reduce these costs. IT organizations are looking to lower
Other Cost 637 419 34%
their infrastructure cost by purchasing lower-cost hardware,
Total Basic Cost 3,539 2,327 34%
consolidating the data center, centralizing management,
Application Cost ($000)
and eco-computing (“green computing”).
Basic Cost 3,539 2,327 34%
Our research shows almost 60% of IT departments have Software Infrastructure 1,309 397 70%
already or plan to centralize and restructure their internal Database & Systems
1,147 1,075 6%
IT infrastructure, pooling resources to offer on-demand Administration

capacity for important applications as well as to lower cost. Application Maintenance 1,959 1,719 12%

Organizations across the globe have cut millions of dollars Other Cost 395 450 -14%

from their IT budgets by closing and consolidating data Total Operating Cost 8,349 5,968 29%

centers, reducing servers, and centrally controlling opera- Cost of Downtime 55 39 29%
tions. Blades and server complexes have reduced space re- Cost, Including Downtime 8,404 6,007 29%
quirements while improving disaster recovery capabilities. The above table shows the breakdown of the annual total cost
From our research almost two-thirds of organizations use of ownership for three banking applications: ATM, POS, and
outside or industry benchmarks to optimize their service- EFT doing 200 transactions per second at peak and 80 TPS off-
peak. In this table we show basic cost, application cost, and the
level agreements (SLAs) and cost structure.
cost of downtime of both systems, complete with the necessary
software to operate typical applications. The cost of hardware
Eco-computing is about making environmentally
and software is annual, based on a three-year operating lease.
responsible decisions when it comes to the purchase, use, The data is from the VirtualADVISOR cost estimating system.
and disposal of electronic equipment. Cost in reference to Picking the right system for the right application can increase
green computing is typically gathered by measuring the the value of IT by lowering overall costs.

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any
circumstances be retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved.
2
Driver 2: Increasing Application Features
IT organizations are always looking for ways to save retirement. Almost 90% of organizations
or free up money to improve their value. Computer can justify new funds or divert funds for
hardware has and continues to respond to this challenge an application that shows a good ROI.
by offering higher and higher performing systems at
Standish Definition: “Increasing application

SPECIAL REPORT: Trends in IT Value


lower and lower prices. Gordon Moore’s Law states that
processor performance will double every two years with features” is defined as improving the revenue and benefits
corresponding price deductions. Commercial software, of an application, as well as lowering the total operational
on the other hand, continues to climb in price to fill the cost of a given application. This improvement could be
hardware savings void. Of late, the open source movement the result of increased performance, additional features/
has brought some relief. The driver of increasing functions, a cost reduction program, a consolidation
application features is made up of three elements: cost, program, better vendor negotiations, or better price
optimization, and return on investment (ROI). performance. It also may include the reduction in
downtime cost as a result of an improved readiness
Application cost is the cost an organization incurs in program.
order to operate and maintain an application on top of the
basic cost. The cost of software infrastructure includes
the lease, depreciation, and/or monthly license fees for
database, middleware, and application-related manage- COST OF PROCESSING A CASH WITHDRAWAL
ment software. Database and system administration
costs include the cost of personnel to manage the data-
bases and systems. The cost of application maintenance
includes packaged software maintenance fees and inter- 1968
nal personnel costs. Other costs include all other costs not
accounted for in any other categories. The application cost 1978
category is often not part of a cost reduction program, but
cost savings can be great within these areas. 1988

Optimization is a complete approach that, when fully 1998


implemented, covers systems, people, processes,
applications and data – in other words, the whole IT
2008
organization. The goal is to provide the best value for
the highest level of service and function. IT optimization
comprises procedures used to make systems, applications,
The above chart shows the average cost of
processes, and people as effective and functional as
processing a cash withdrawal over the last
possible, at the best possible value with the least possible
four decades, taking into account inflation. The
risk. Application optimization could include refactoring,
estimates for an ATM transaction for 1998 and
tuning, and other performance techniques. Our research
2008 are from the VirtualADVISOR cost estimating
shows that almost half of all IT organizations tie staff
system, 1988 is based on past TCO analysis, and
evaluations and bonuses to application optimization.
estimates for 1968 and 1978 are based on historical
ROI is a performance measurement used to evaluate documents and The Standish Group’s estimate with
the efficiency of an application compared with various the technology available at that time.
other applications or activities. To calculate ROI, take the
return of an application and divide by its cost; the result is
expressed as a percentage or ratio. If an application does
not have a positive ROI, or if there are other items with a
higher ROI, then the application should be considered for

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any circumstances be
retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 3
Driver 3: Reducing the Cost of Downtime
There is only one way to reduce the cost of downtime these three sources we are able to estimate the cost
and that is to reduce downtime. In March 2008 Netflix, a of downtime for a given application, platform, and
consumer service provider that rents DVD movies by mail, environment.
experienced an 18-hour system outage. This outage cost
Standish Definition: “Cost of downtime” is what it
them $3 million in lost movie fees, but that was only the
costs the organization when an outage occurs. These
tip of the iceberg. In addition to lost rental revenue, Netflix
costs include the cost to bring the system back to an
could have permanently lost 1% of their customers, which
operational state. Costs also may include staff cost to
could easily equal another $10 million over the next three
SPECIAL REPORT: Trends in IT Value

make up for the loss in production during the outage,


years. However, they lost 7% of their equity or $100 million
as well as direct and indirect lost revenue, including
in lost equity for their shareholders, which makes all other
the cost to replace clients lost due to the outage. Many
numbers pale. This one event cost Netflix $100,000 a minute.
organizations either don’t consider the cost of downtime
Every month we collect thousands of downtime events over
or give minor importance in their TCO analysis.
2,000 platforms. Besides individual engagements, we have
three ways we calculate the cost of downtime: cost per
minute, cost per event, and cost per transaction.

Cost per minute: The Standish Group collects data on the COST OF DOWNTIME
cost per minute of downtime by application. We have 50
main applications that we constantly study, and a number Application Name Cost/Minute
of others that come and go. For example, the average
e-commerce application costs $12,000 per minute of Trading (securities) $73,000
downtime, while a trading application is $73,000 per minute. HLR $29,300
From the downtime data we know the minutes of outage for ERP $14,800
a given environment. We just have to multiply the number Order Processing $13,300
of minutes by the cost per minute and we get a ballpark E-Commerce $12,600
cost of downtime. We also have to look at when the outages
Supply Chain $11,500
occur. If they occur at peak time they have a larger impact
EFT $6,200
and are much more expensive than off-peak.
POS $4,700
Cost per event: The Standish Group collects data on the cost ATM $3,600
of downtime by event. We look at many different events over
E-Mail $1,900
the course of a year, such as the number of application bugs,
operator errors, etc. Each event type has an average cost.
The above table shows the average cost of a
For example, operator error has an average cost of $2,000,
minute of downtime by some of the most popular
while an application bug is 25 times the operator error at
applications. These costs are derived from custom-
$50,000 per event. We then multiply the cost of each event
er, survey data, and case data. The cost of a minute
by the number of events in each category and get another
of downtime will vary by production load, peak
look at the cost of downtime. Here we have to also look at
versus off-peak, and other factors.
when the events occur. If they occur at peak time they are
much more expensive than off-peak.

Cost per lost transaction: The Standish Group collects the


cost breakdown of a given application, such as the cost to
recover, lost internal production, lost revenue, interchange
fees, fines from agencies, or the cost to get back a new or
old customer. We have a default cost of a lost transaction
for each application in our VirtualADVISOR System. Using

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any
circumstances be retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved.
4
Driver 4: Maintaining Suitable Risk
Risk is everywhere – throughout the organization. You addition, there is cooperation among a
cannot eliminate it and it might be harmful to minimize it. vendor’s internal product line groups to
The challenge is to maintain a suitable risk that provides fix a problem versus the blame game
the most progress and benefits. In the development of new that can go on when multiple vendors

SPECIAL REPORT: Trends in IT Value


software we have outlined in our CHAOS research the 100 are involved.
best practices to build and develop software. Regarding
the risk of operational failure, we have outlined several Standish Definition: “Risk” means a threat to the
techniques in our IT readiness report. In creating and organization, installation, and project success. The threat
maintaining IT value the suitable risk driver is made up of can be physical, poor estimating, financial, or political. In
three elements: fewer moving parts, incremental adoption, quantitative terms, risk is the probability of an undesired
and a vertical stack outcome. First, risk should be considered by the types of
events, such as a key person leaving the project before
In terms of downtime, the more elements that go into the its resolution. Second, risk should be concerned with the
operation of an application, the greater the opportunity probability of occurrence; for example, there is only a
for something to break. Fewer moving parts means less 10% chance that a key person will leave before the project
opportunity for things to break. We call these moving is completed.
parts “downtime triggers.” Everything that goes into the
operation of an application is a potential downtime trigger.
Each trigger should be weighted against the progress and
benefit that trigger brings to the smooth operation of the CHAOS PROJECT RESOLUTION
application. This is also true in projects – the less you do,
Èä¯
the greater the chance it will get it done.
xä¯
A little while ago a Standish Group executive met with a
{ä¯
former CEO of very successful software company. This
CEO was and still is a great supporter of the work being Îä¯
done at CHAOS University on project failure. For the last Óä¯
few years the CEO has been working on getting a new start-
£ä¯
up off the ground. The CEO had a great and wonderful
vision, and many IT executives thought that vision would ä¯
be a panacea for them and their organizations. However,
he could not get the company off the ground. He then
remembered our work on keeping projects small and
cut out a small piece of the software. His sales started
climbing. Time and time again, the “big bang” has proven The above chart shows the results of project
to be a big failure. Incremental adoptions and an iterative resolution over the last decade. This data is from
project and process do much better. our CHAOS Research project on project success
and failure and covers more than 60,000 projects.
Having a vertical stack improves both cost and quality. A
vertical stack is an infrastructure built and maintained by a
single supplier, such as the operating system, middleware,
and database technology. There are many examples of
this type of vertical stack, from vendors such as IBM,
Microsoft, and HP. The reason a vertical stack lowers risk
is that all the software is naturally integrated. As it turns
out, the majority of software errors occur between the
integration points rather than in the main body code. In

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any circumstances be
retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 5
Driver 5: Commoditization
The IT industry’s pattern for standards has remained fairly of this technology is ease of service. IT is no longer held
consistent: Proprietary technologies are developed, de hostage for a day or days waiting for parts or a service
facto standards emerge that lead the way to sanctioned technician.
industry standards, then comes the commoditization of Standish Definition: “Commoditization of IT” is having
products. Commoditization means the price of the product physical products or services of the same type that
and vendor margins are no longer dictated by cost, but are interchangeable, such as server boards or servers
supply and demand. This usually means the pressure is on themselves, and maintenance of those servers. The price
vendors to lower prices as they improve their manufacturing of the commodity is subject to the rules of supply and
SPECIAL REPORT: Trends in IT Value

operations. The commoditization driver for IT value is made demand. This is true of personal computers, printers,
up of three elements: hardware, applications, and services. software products, network products, and many IT
The first personal computer was delivered with 256K of RAM products and services.
and two floppy disk drives for a price of nearly $5,000. No
one could imagine that these devices would revolutionize HP INTEGRITY NONSTOP VS. HP NONSTOP BLADES
IT in business, but they also changed people’s lives around
HP iNS
the world. You can now purchase the components to set Basic Cost ($000) HP-INS16X Blades Difference

up a wireless network router and a PC or laptop with one Hardware Cost 810 420 48%
thousand times the capability for fewer than a thousand Software Cost 314 240 24%
dollars – and the store will give you an HP printer for free! Manpower Cost 547 547 0%
Hardware commoditization has led to organizations just Maintenance 237 168 29%
putting in more hardware to solve performance issues. Other Cost 419 356 15%
Our research shows that fewer than 20% of organizations Total Basic Cost 2,327 1,731 26%
routinely tune their servers for performance. Like PCs, Application Cost ($000)
mainframes that once cost millions of dollars have also been Basic Cost 2,327 1,731 26%
replaced by their little brothers and sisters. Most have been Software Infrastructure 397 301 24%
replaced with significantly more powerful, smaller, and less Database & Systems
1,075 1,075 0%
expensive servers that are filling data centers worldwide and Administration
running many types of applications more efficiently. With Application Maintenance 1,719 1,719 0%
the commoditization of all this hardware, IT organizations Other Cost 450 450 0%
are now deploying applications faster and better than their Total Operating Cost 5,968 5,276 12%
predecessors. Additionally, virtualization has allowed for Cost of Downtime 39 45 -5%
the processing of many applications on one box for more Cost, Including Downtime 6,007 5,321 11%
efficient utilization of these commodity servers.
The above table shows the breakdown of the
While most organizations have given up tuning, we see that annual total cost of ownership for three banking
almost 80% of organizations employ load testing to optimize applications: ATM, POS, and EFT doing about
server availability all or some of the time. System availability 200 transactions per second at peak and 80 of-
has become a key component for measuring the success peak. In this table we show basic cost, application
cost, and the cost of downtime of both systems,
of an IT organization. The days of 92% to 95% availability
complete with the necessary software to operate
have given way to the five nines, or 99.999% availability. these typical applications. The cost of hardware
These new generations of servers driving the numbers up and software is annual, based on a three-year
not only are the components of good quality, but they allow operating lease. The HP Integrity NonStop data is
for the quick swapping of components like hot-swappable from the VirtualADVISOR cost estimating system;
drives, CPU, RAM, etc. This makes these servers even more HP NonStop Blade System data is based on our
estimates. This table clearly shows the dramatic
desirable for IT operations personnel. The acceptance of
effect commodity hardware can have on the value
blade and component modulation makes implementation of an application.
and service extremely efficient and cost effective. The result

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any
6 circumstances be retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved.
Driver 6: Higher Readiness
Increasing IT and business readiness is an important An application quality assurance process
component of maintaining the value of IT. IT readiness is essential for the implementation of
goes beyond disaster recovery, high availability, and new applications or upgrading existing
business continuity planning (BCP). Readiness is not applications to ensure readiness.
about planning. Rather, it is being prepared for disasters by Our CENTS data clearly shows that

SPECIAL REPORT: Trends in IT Value


having active processes that continue before, during, and application “bugs” are the leading cause
after any type of failure. A readiness program is justified of application downtime. Applications
in terms of ROI when the projected cost of downtime should be written so application bugs do
exceeds the added cost of the program over the lifetime not cause cascading failures that bring down
of an operation. The higher readiness driver for IT value is multiple application instances.
made up of three elements: central control, active-active
processing, and application quality assurance. Standish Definition: “Readiness” programs are based
on a comprehensive approach that means “never hav-
Central operations control has greatly reduced the number ing to say you’re sorry.” When fully implemented, the
of incidents of operator error. For many years operator program covers systems, people, processes, applica-
error was the leading cause of downtime incidents by a tions, data, and interdependencies (such as vendors). It
wide margin. Our same research, however, shows that from is enterprise-wide and covers not just IT, but business
a time-of-outage standpoint operator error only equates to operations as well to ensure no interruptions. A readi-
about 6% of downtime. We have concluded that operator ness program should cover natural disasters, man-made
error incidents have minor effect on downtime, and
disasters, and run-of-the-mill mishaps and mischief.
recovery from these incidents has been swift. Downtime
charged to operator error rose slightly over the last few
years, indicating that when an operator makes a mistake
UPTIME BY PLATFORM
it has a greater effect on the systems and applications.
However, our last results show improvement in this area
System $ DT $000
as well. In general, central operations control is increasing
Peak
readiness.
HP Integrity NonStop 99.983% $39
About a third of the SURF organizations consider it IBM Z/9 Sysplex 99.980% $55
important when purchasing an application package that
LINTEL 99.902% $226
the design allows for the software Versions N and N+1
IBM pSeries 99.899% $233
of a module to be deployed simultaneously. In an active-
active environment it is very important that applications HP Integrity 99.894% $244
be synchronized; otherwise, this could cause an outage or Sun Fire Server 99.850% $346
bad data to be introduced into the environment. One way WINTEL Servers 99.818% $420
to improve application availability is to provide another Other Servers 99.874% $291
mechanism that enables processes running on two or
more different computing resources to checkpoint or
The above chart shows the percent of yearly system
share application state information between them. When
uptime and the cost of downtime for the three
application state information is duplicated across two
banking applications by major system platform. The
computing resources, a failure may be recovered from
data is from the VirtualADVISOR cost estimating
instantly and transparently. Also, the rest of the software system and the monthly CENTS survey. It is based
and data stack should be synchronized, including files, on more than 100,000 downtime events during the
utilities, and management software. The last level of 2007 calendar year. The data presented is the
synchronicity is hardware. To ensure a comprehensive average of systems that run mission-critical
active-active environment, the hardware systems must applications and deploy high-availability
mirror each other. technology.

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retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 7
Driver 7: Project Management Leadership
When looking at project management leadership in the the project management environment. We call this a
context of IT value, there are two questions IT management healthcheck. A healthcheck on a project management
needs to answer: Are you working on the right things, ecosystem can spot problem areas well in advance of
and are you doing them in the right way? The project serious consequences.
leadership driver for IT value is made up of three elements:
Standish Definition: “Project management leadership”
optimization, iterative processes, and best practices.
goes well beyond the basic project management skills
As we’ve learned in our workshops, doing the right thing as outlined in PMI’s PMBOK. The starting point for
SPECIAL REPORT: Trends in IT Value

is often very hard – sometimes you keep a project or a project management leadership is qualified project
requirement; sometimes you don’t. Organizations need to management professional (PMPs). Organizations
consider cost, risk, and gain collectively in their decision- that want to be leaders in the profession of project
making. Every project and requirement should have a management invest corporate resources in education,
cost, risk, and gain element. By optimizing on the high training, and research and development. Project
gain, while considering risk for projects and requirements, management leadership advances the profession
an IT organization can maximize value. This is a difficult and creates an environment where such expertise is
problem, especially with a mix of hundreds of projects and recognized, valued, and rewarded. Project management
thousands of requirements. Layer on top all the competing leadership means knowing how to communicate bad
constraints, and it becomes almost impossible. The Standish news along with the good, and having the sense to
Group has had a team of professionals working on a system know when a project should be killed.
to automate this process and aid IT executives and PMs in
the decision-making.
PMI CERTIFICATION
In the early ‘90s Standish Group published the iterative
development process to help answer the question, Are you 40
doing it the right way? Since then, iterative has become the 38%
35
basic foundation of multiple agile types of methodologies,
such as Extreme Programming (XP), Scrum, and Rational 30
29%
Unified Process (RUP). The iterative process has five basic 25
components: baseline, requirements, development, testing,
and deployment. Once you have decided to go forward 20 21%

with a project and you are going to use an agile method, 15 16%
the baseline is the beginning of the process, or step zero.
10 11%
After the baseline has gone through the requirements,
development, testing, and deployment steps, then you 5
circle back to the requirements, development, testing, and 0
deployment steps again and again until the project is done. 2007 2006 2005 2004 2003

Best practices are doing the right things the right way. In
The above chart shows the results from 2003 to 2007
The Standish Group’s CHAOS Knowledge Center (CKC)
when we asked SURF members, “Do you require
we outline the 10 most important lessons for project
your project managers to have PMI certification or
management best practices, with consideration for the 10
the equivalent?” The data shows that the percent of
factors for success. We further break down these factors or
organizations that require their project managers
lessons into 10 points each to create the 100 most important
to have PMI certification or the equivalent is on the
project management leadership best practices. In order to
rise.
help organizations focus on the highest-value opportunity
areas we have developed a benchmark and assessment
product. This product looks at both individual projects and

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any
8 circumstances be retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved.
Driver 8: SOA
The implementation of a service-oriented architecture Standish Definition: “SOA” is a business
(SOA) can offer many benefits to organizations as they work strategy to achieve business agility
toward increasing IT value. The SOA driver for IT value through the ability to recognize, precisely
is made up of three elements: increased business agility, document, store, categorize, discover,
business process management, and investment reuse. and make more efficient the organization’s

SPECIAL REPORT: Trends in IT Value


business processes. SOA depends on business process
Increased business agility means much more than being
management and modeling. SOA is not a technology; it
able to deliver new business services quickly. It’s also
ensuring ease in making these changes. Inflexible IT is not a service bus; it is not the new “object technology”
architectures can hold a company back by not allowing – though software can help implement the strategy.
for the evolution of the underlying services as well as the Done right, SOA can achieve efficiencies both within
applications. This is where the magic of SOA, which is much organizations and across enterprise lines.
more than being able to reuse services, can really come
into play. SOA is about being able to adapt those services, REASONS FOR SOA
discover them, categorize them, and be able to continually 35
enhance their efficiency – thereby automatically bringing 35%
30
about change to the business applications, users, and
business partners who interact with them. The majority 25
23%
of organizations believe that an integration solution for 20
disparate applications and increased responsiveness to 15 17%
business requirements are the leading SOA objectives. 10
9%
5 7%
Business experts want new services/changes to existing 6% 3%

services delivered quickly to meet market demands, 0


often putting overtaxed IT departments on the defensive Integration solution for disparate applications: 35%
through implementation issues. These two opposing views, Increase responsiveness to business requirements: 23%
Faster development: 17%
coupled with knowledge gaps on both sides, compound Expose information or functionality to customers,
the problem. A solid business process management partners, or suppliers: 9%
(BPM) system is designed to allow the business to adjust Automate business processes: 7%
to changes in business processes without the need to be Lower operational costs: 6%
Keep corporate software infrastructure in
overly dependent on IT involvement. BPM typically is said line with new technologies: 3%
to comprise three steps: modeling the business processes,
deployment into the overall architecture, and analysis.
SOA can provide a strong framework for delivering
SOA PAYBACK
new business requirements. When we asked DARTS
respondents their opinion on the importance of modeling 32% 41%
when planning an SOA project, an overwhelming majority
(81%) cited modeling as critical to important.
1 year: 5%
Reuse is certainly not a new concept in the world of 2 years: 32%
5% 3 years: 41%
software, and the push toward reuse has been successful. 22%
4 or more years: 22%
Our DARTS survey asked IT executives, “How would
you rate the speed in delivering application features and
functions compared with four years ago?” Almost 80% of The first chart shows the results when companies
companies stated they are delivering faster to much faster that have completed, or are planning a SOA project,
than four years ago. But SOA is really not a technology were asked about the primary objective they hoped
solution; it’s a strategy. SOA relies on BPM and modeling to achieve. As shown, we see that a large majority
to initiate reuse at a higher level – the ability to define, revolve around the core principles of increasing
analyze, and reuse business processes. Competitive business agility. The second chart shows the results
advantage is sought through repeatable and predictable when DARTS participants were asked to describe,
processes and compliance execution. So SOA is not only on average, how many years they would expect it to
about reuse, but also about process optimization. take for an SOA project to be fully paid back.

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retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 9
Driver 9: Service Delivery
Service delivery providers in the form of consultants, ing resources that are available to deliver new projects
contractors, software as a service (SaaS) vendors, hosting on anticipated time lines, managing multiple projects,
companies, outsourcing firms, etc., are an integral and etc., takes time and, as CHAOS research tells us, time is
important part of the information technology landscape. the enemy of all projects.
The reasons for their use are many, and vary depending on
the company and situation. Whatever the reasons, though, Standish Definition: “Service delivery” is the use
it’s clear that service delivery companies are not a passing of different delivery methods from various types of
fad, nor are they a passé resource. The market continues organizations bundled into relevant groups for the
SPECIAL REPORT: Trends in IT Value

to prosper, change, and support the enterprises it serves. convenience of customers and stakeholders. These
The service delivery driver for IT value is made up of three methods may be internal services, software as a service
elements: choice, cost, and time. (SaaS), outsourcing, contracting, and consulting.
Services may be performed in a combination of different
When considering a broader use of outside service provid- methods or as a single delivery method.
ers, ask yourself these questions: What are the core services
that our business offers? How can we best focus our inter-
nal IT efforts on these core services? What skill sets do we
have in-house to focus on these core services? What are the COST PER TRANSACTION
risks versus rewards for using external service providers?
What are the political gains and challenges for using exter- IBM Z9
HP NSI
nal providers? How can we best work with external provid- HP NSB
ers? Once you’ve determined the areas that will work best
for using external providers and have outlined the optimal
way to contract with them to gain advantage, the next step
is to determine the type of resources you will need, how
long will you need them, and how you will choose them.
This will obviously vary depending on the project or appli-
cation, so review all of your options and try to determine
where you will see the best value and easiest working re-
lationship.

Saving money using outside service delivery channels is


probably the most often-cited reason for going with off-
shore outsourcing organizations – the allure of getting billed
a small fraction of U.S. prices is not easily overlooked. Oth-
er service delivery methods can also show impressive cost The above bar chart shows the per-transaction cost
comparisons. One company we interviewed had done an in- of ownership for the three banking applications
ternal analysis to determine whether they should use inter- depicted in Drivers 1 and 5. While the systems are
nal or external resources; they found the average estimated doing 200 transactions per second at peak and 80
hourly savings at 3-to-1. The latest DARTS findings tell us TPS off-peak, the total of transactions per year is
that when it comes to IT spending, internal services are the half a billion. In this chart we show the cost per
preferred method (79%). However, most organizations do transaction for the basic cost and TCO, which is
hire out some portion of their IT services. basic cost, application cost and downtime cost. All
systems are complete with the necessary software
As always, time goes hand in hand with money when con- to operate this typical application.
sidering the benefits of service delivery partners. But time
can also stand on its own as a reason to look outside the
company for help. Training employees for new skills, find-

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Driver 10: Vendor Consolidation
In the past there were many vendors or suppliers sup- Standish Definition: “Vendor consolidation”
porting IT organizations. Now, the days of having multiple is the reduction in the number of
vendors for different key software products are nearly vendors used and the standardization
over. Previously, IT organizations would purchase special- around a limited number of vendors
ty software such as budget, general ledger, inventory, plan- that provide products and services to the

SPECIAL REPORT: Trends in IT Value


ning, order entry, and numerous other applications. With organization. Such standardization can help
the acquisition and consolidation of software companies in the support of technology products and provide for
came the integration of these specialty modules and the larger discounts on all products. Of course, single sourcing
bundling of software that we now call customer relation- also has drawbacks and therefore most organizations will
ship management (CRM), enterprise resource planning usually have a second source.
(ERP), and supply chain management (SCM). The ven-
dor consolidation driver for IT value is made up of three
elements: bundle buying, open source, and single-source
support.

Bundle buying means having the ability to buy multiple


types of products from a single vendor and getting discounts IT Spending 2%
on all the products from that vendor. Like the software
vendors, hardware vendors have gone through the same
5%
type of merger/transition, which allows for purchasing
bundles of hardware such as switches, routers, firewalls,
Internal Personnel: 79% 13%
storage devices, and servers. Examples are Compaq, External Service Provider: 13%
Digital, Tandem, and HP; today an IT organization goes to 79%
Software as a Service
and deals with just HP. HP, like some other firms, offers (SaaS) Provider: 5%
the user the ability to buy divergent products with a Other: 2%

discount on the collection. The more the organization


purchases, the greater the discount.
Savings by Outsourcing
Open source has done so much for IT. Linux is a classic
example of a successful open source operating system. 5% 26%
Globally, open source is on the increase, with a community
6%
of millions of participants. IT executives believe open
source products offer greater security, quality, and
reliability at reduced or no initial cost. Our five-year study 35%
35%
None: 26%
of open source shows that average IT organizations are Less than 10%: 35% 29%
saving 6% of their overall IT budget using open source 10% to 20%: 29%
Over 20%: 6%
technology. This savings comes from many parts of the
N/A: 5%
IT organization, including development, operations, and
support. Also, demand for open source office productivity
solutions such as OpenOffice has grown in the last five
years by 28%. The first chart shows the results when we asked
IT is the benefactor of both vendor consolidation and DARTS respondents to estimate the percentage of
open source. Many vendors are offering to support the their overall IT spending related to service delivery
full stack of software or hardware coming from different options, including internal personnel, external
organizations. There are fewer vendors to deal with on service providers, SaaS providers, and others.
a day-to-day basis. The finger-pointing that occurred The second chart shows the results when we asked
whenever there was a problem is nearly nonexistent now. DARTS respondents to estimate the percentage of
The consolidation of vendors has created standardization
savings they achieved from their overall IT budget
of capabilities, from being able to swap CPUs, RAM,
through the use of outsourcing providers.
disks, and other components, to the advent of “blade”
technology.

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any circumstances be
retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved. 11
Trends in IT Value

The Standish Group defines trends as the current general direction of a technology, methodology, business practice, and/or
technique. It is a barometer of the overall activity in relationship to other activities. It is not a compilation of all IT activities,
but the ones with the highest priority. Throughout this paper and other Standish trends research notes you will see the
word “driver.” A driver, the way we define it, could be a government mandate, a market-driven event, a business fad, a new
discovery, or a vendor-led initiative.

The Trends in IT Value report is based on DARTS (Demand Assessment Requirements Tracking Studies), the CHAOS project
(private acronym), CENTS (Comparative Economic Normalization Technology Study), and other research instruments. All
research participants must satisfy a qualification process and join our Standish User Research Forum (SURF). All data and
information in this report should be considered Standish opinion and the reader bears all risk in the use of this opinion.
For a more in-depth view of many of the drivers in this report, please see our trends reports on readiness, open source,
optimization, SOA, and service delivery, plus the CHAOS Report.

SUMMARY
The 10 drivers of IT value and their 30 elements in combination are ever-increasing the value of IT. Lowering the
infrastructure cost will continue to be a trend. Organizations will continue offering greater and greater application
functionality. Downtime will continue to decrease as more reliable technology increases availability. Risk will not
be eliminated, but embraced to ensure progress. Commoditization is the river that will continue to flow without
stop. IT organizations will increase their state of readiness through active-active processing and application quality
assurance. Project management leadership will bring in more successful projects on time and on budget, thus
increasing their value. Service-oriented architecture will increase business agility and return on investments.
IT organizations are now avoiding the “Big Bang” approach which historically has resulted in failure and are
applying an “Agile” high-gain, low-risk method. Service delivery will allow for greater freedom of choice, and vendor
consolidation will help the purchasing efforts of IT organizations.

The value of IT is measured in the services it delivers, how it adds to the benefits of the organization, and the
degree of satisfaction of their clients and users. Investments in technology continue to provide superior returns
as they are compared to many other investments. However, not all IT projects and investments are equal and
organizations need to consider the benefits gained against each investment as it is compared to other IT and
organizational investments.

In real estate, many professionals value home and land property, but the true value of any home is what a buyer
will pay for it. In IT, the value is more complex and sometimes hard to quantify. But like the value of education,
we would be lost without it. For 50-plus years IT organizations have been offering their stakeholders greater and
greater services. It seems almost inconceivable that many of these services are only half a century old. We take
for granted wireless Internet access at Starbucks or the telephone call in the middle of the Amazon Jungle. We
assume that we can get money from our bank at midnight or at any airport in a foreign country. So, what is the true
value that you place on many of the IT services provided when they are not there when you most need them?

The Standish Group International, Inc.


60 State Street, Suite 700
Boston, MA 02109
P: (508) 760-3600
www.standishgroup.com

Copyright © 2008 The Trends in IT Value report is protected by copyright and is the sole property of The Standish Group International, Incorporated. It may not under any
12 circumstances be retransmitted in any form, repackaged in any way, or resold through any media. All rights reserved.

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