The races to the cloud and mobility are drastically accelerating the pace of application development, reducing it from months to weeks. Where once new and revised applications were released on a 12-18 month basis, businesses are now moving to a monthly release cycle and trying to figure out how to shorten that to a weekly timeframe. So it’s no wonder that software project failures occur, but as high as 68%?
It’s the dirty little secret of IT, not just outright failures, but projects that are delayed, said Venkat Devraj, CEO of SelectHub, in a recent interview with IT Trends & Analysis. Enterprises spend over $300 billion annually on software purchases including SaaS, third-party and internally hosted solutions but failure rates for these software projects can be as high as 68%, he said. To put that into numbers, using Forrester Research data, SelectHub said of the $542 billion to be spent on software this year, $368 billion will likely be wasted.
A less alarmist – but still troubling – view from a Project Management Institute (PMI) study found that organizations risk $135 million for every billion dollars they spend on projects. Ineffective communications is driving 56% ($75 million) of these at-risk dollars.
Prior to starting SelectHub, the developer of a PaaS designed to ease and create collaboration for the product/vendor evaluation and IT procurement process, which officially opened its doors in June, Devraj founded Stratavia, a database and application middleware automation company that was acquired by Hewlett-Packard in 2010. He stayed there for awhile as CTO – Application Automation and Chief Architect – Cloud Automation. The serial entrepreneur was also CEO at ExtraQuest Corp. where he pioneered the industry’s first full service remote database administration offering.
The main cause of this high failure rate is one of communications – or perhaps lack of — within organizations, said Devraj. It is becoming common for individual users or departments within companies to sign up for a new software or service and IT is the last to know. Without IT and other key stakeholders’ involvement and guidance, the already excessive software failure rates will continue to worsen while creating new problems for IT, he said.
Devraj decided to create SelectHub after hearing from Global 1000 customers who were seeking assistance after they bought software applications typically priced at $400,000. “I saw it was a fundamental communication and collaboration problem. Often IT was not involved, they were seen as the bottleneck.”
These organizations had budgets and decided to buy the products, and IT would be the last to know, he said. The fun started when IT then asked about things like compliance and security. The customers who bought the software would then call Devraj and say they were getting lot of pushback from IT.
“CIOs can’t push back, they want to be seen as part of solution.” It’s also hard to push back when the software is already purchased, he said.
The emergence of Shadow IT, AKA ‘cockroach technology’, the unsanctioned use of IT products and services, is a huge and growing challenge to organizations. According to a PwC survey, 50% of IT managers admit that half of their budget is wasted on managing Shadow IT.
It is one of the engines driving the growth and relevance of IT, said, Jeanne Beliveau-Dunn, VP and GM of Learning@Cisco. At the end of day people are going to consume the way they want to, she said, and IT has to deal with this new reality. “IT is no longer a closed domain. It’s now an open domain, with many people participating, not just IT staff.”
In lot of places, IT is seen as a commodity, not strategic, said Devraj, who expects IT as we know it to disappear. “Smart CIOs are going to realize that its not about control, not about centralized management. It’s about securing the right solution, it’s about enablement.
IT has to evolve, to be seen as more proactive, as a strategic resource, he said. “All the tribal knowledge… IT has it. IT may be last to know, but it is the first person to get a call from the CEO when something goes wrong.”
Under The Hood
SelectHub is a software-as-a-service offering aimed at enterprises for technology evaluation, vendor sourcing and IT procurement. It enables a streamlined and transparent technology acquisition process within the enterprise, and offers a comprehensive set of evaluation stages including preliminary research, real-time vendor communications, RFx, technical due-diligence, business case analysis and contract negotiation.
There are five stages to software acquisition, regardless of whether its through IT or Shadow IT– preliminary research, vendor communication, technical due diligence, financial due diligence, and contract negotiations – and SelectHub provides the first three for free.