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Reducing the Software Value Gap

Reducing the Software Value Gap, illustration

Credit: Michelangelus

The software value gap is the unexploited potential of an IT division to increase the value of the overall organization. In today's dynamic business environment, most companies depend on value creation from software solutions delivered by IT.a These solutions are crucial for day-to-day running, controlling, and growing the business, as well as complying with regulatory requirements. In many cases, the availability of suitable software solutions is a prerequisite for launching new business initiatives and innovation.

In most companies demand for software solutions and functionality exceeds the IT budget (or capacity of the related human resources) for development and maintenance by up to 500%, especially when accounting for the "hidden queue" of software solutions.9 This occurs since even the most prosperous companies cannot afford to allocate unlimited resources to IT, as it would adversely affect the value of the overall organization.b Corporate boards and top executives decide periodically on an affordable IT budget, meaning business needs are only partially met. Moreover, the eventual software delivery flow is too small, late, and expensive. The software value gap is particularly disturbing in major industries (such as financial services, telecommunications, insurance, airlines, health care, and Internet retail), as well as in governmental agencies.


Howard Golden

While this article is focused on the larger projects, another approach is needed to integrate IT solutions into organizations: Training of certain users in certain technical areas and training of IT personnel in user subject areas. In general, the users and IT don't understand each other's concerns well enough to communicate effectively. With training, the communication wall can be lowered.

For example, in finance functions, most users are familiar with spreadsheet-based processes, which are generally labor-intensive, not repeatable and poorly controlled. While IT provides ERP systems to manage essential transactions, finance organizations often get little help in improving their spreadsheet-based processes. Yet this is where considerable benefits can be achieved in financial organizational performance.

I believe that IT organizations should make the effort to provide users with tools to move from spreadsheet-based processes to repeatable processes driven by scripts and using data directly from organization databases or easily traceable to the databases. IT should provide training in using these tools, and user organizations should be responsible for developing users who use the tools effectively to improve the organizations' processes. These steps will encourage an organic process of continuous improvement.

In some cases, these steps will lead to recognition of larger needs that can be met by the authors' complete-kit methodology and the willingness to develop such kits. Unless user organizations train some of their staff in the potential of IT tools, they will be unprepared to create the complete kits required to make the authors' methodology successful.

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