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Vol. 3 No. 3 
January 2000
Issues and Answers in American Software Business: How to Succeed in the New Century
Critical Questions
Global Software Competitiveness Studies
Sponsored by the
Center for National Software
Studies (CNSS)
http://www.CNsoftware.org
Conducted by Don O’Neill
ONeillDon@aol.com
(301) 990-0377
@Copyright Don O’Neill, 2000, used by the NSC
with permission
Opening
In business, an individual can decide to be a communist who performs a day's work for no pay; an employee, a day's work for a day's pay; an entrepreneur; a day's work for a week's pay; a businessman, a day's work for a month's pay; or a robber baron; a day's work for a year's pay.
In business, an enterprise has fewer choices. It can decide to be competitive and thrive, or it can be noncompetitive and go bankrupt. The question is how does an enterprise achieve competitiveness? The value of software to the economy is not well understood. Business leaders view software as shrink wrapped commodity software for personal computers even as critical industries are increasingly dependent on custom software applications embedded within product lines and their business processes.
While the competitiveness of the industrial base is strongly and increasingly linked to software, the global competitiveness of U.S. software dependent enterprise is threatened at the foundations of its infrastructure.
Furthermore, the nature of software development is inherently experimental. It involves the collection of data, the analysis of the data, the use of the data as information in the validation of hypotheses and setting of criteria, the selection of alternative approaches and even altered hypotheses, and the reiteration of the process of experimentation.
The enterprise that will succeed in the new century is the one that understands the strategic value of software and treats it as a precious resource, that grasps the experimental nature of software development and masters the intricacies of the process of experimentation and discovery, and that successfully navigates the threats to the nation's information technology resources.
"Issues and Answers in American Software Business: How to Succeed in the New Century" outlines the prescription for success adopted by an increasing number of companies in the U.S. including the identification of strategically essential software value points; setting the direction, providing the fuel, and controlling the environment needed to achieve maturity in global software competitiveness; and the in's and out's of outsourcing.
Overview
As a serious student of global software competitiveness, I would like to share with you the approach to competitiveness which U.S. companies are adopting to propel themselves into the new century.
Americans realize some important things about competition:
- The value of software is not well understood. It is not simply a commodity on a floppy disk.
- Software is research and requires a process of experimentation. it is not simply project management, product and engineering, and process management.
- Software personnel are the most precious resource a globally competitive enterprise possesses. It is not simply a human resources task of correcting turnover through recruitment; software impacts the culture of the enterprise... profoundly.
- Controlling the customer has many faces. It is not simply satisfying and delighting.
- Controlling the competition is the preferred tactic. It is not simply competing head on head; instead it is inventing a new niche, occupying it alone, and avoiding head on head competition..
- Controlling event threats and change introduces uncertainty... where luck plays a role in the process of experimentation, and chaos is integral to competitiveness.
Software Personnel Resources... A Closer Look
The state and condition of software personnel are critical. Demand for software skills far exceeds supply. Why is this important? The global competitiveness of industries of all kinds depends on software.
There are over fifty leading indictors of global software competitiveness. Enterprise maturity in global software competitiveness involves the control of critical business factors including personnel resources and suppliers, customers and markets, competition and technology, and event threats and change. Leading indicators are associated with each factor, and these are organized by process type and sub process item. Process types include state, pre-condition, post-condition, and outcome. Sub-process items are used to further distinguish each process type and include workplace, capability, application, and outcome.
State
Certain leading indicators of personnel resources are embedded in the structure of the software industry and impact all competing enterprises. These state indicators are external structural factors whose effects operate over a long planning horizon.
Supplier bargaining power in the software industry is characterized by several factors:
- The government is engaged in a systematic process of enlarging the supplier base through immigration policy which throttles competitive wage structures and restricts supplier bargaining power.
- Programmers value technical challenge more than financial rewards and power.
- Unionization is low in the software industry even though professional association membership is high.
Other leading indicators of personnel resources are determined by enterprise decisions and impact competing enterprises more selectively. A pre-condition indicator is an internal factor whose effects operate over a short planning horizon and directly impact the software competitiveness of the enterprise.
- The workplace environment for personnel resources includes civility, commodity view, key employee status, management ignorance, and push back.
- Personnel resource capability includes software skills, personnel certification, and investment contribution.
- Resource application includes personnel overtime and off the clock effort.
- Resource outcome includes domestic outsource and offshore outsource.
A post-condition indicator is an internal result whose effects are directly under the control of the enterprise.
- The workforce environment includes employee morale and team satisfaction.
- Organization resource capability includes accountability and control, commitment management, predictable performance, and modern software engineering.
- Resource application includes software productivity and span of responsibility.
- Resource outcome includes open requisitions and personnel turnover.
An outcome is a customer or market visible result whose effects signify software global competitiveness. For personnel resources, the critical outcome is staff churn.
The Art of Customer Control
The art of customer control is critical to global software competitiveness. This discussion provides a glimpse of the leading indicators for customer factors in terms of process type and sub-process item.
State
- When customer bargaining power is high, customer control is low.
- Customer expectation is a necessary prerequisite for both customer bargaining power and customer control.
Pre-Condition and Post-Condition
A pre-condition indicator is an internal factor whose effects operate over a short planning horizon and directly impact the software competitiveness of the enterprise.
- Contesting market share requires a workplace with more than one enterprise competing for the niche.
- Knowing what the customer needs most is an essential capability for controlling the customer.
- Conforming to the requirements of the customer in practice is essential.
A post-condition indicator is an internal result whose effects are directly under the control of the enterprise.
- Price elasticity is a measure of customer control
- A financial report containing software resources and capitalization is viewed with respect by a sophisticated customer.
- Year 2000 problem anxiety increases customer control.
- Software failures erode customer control.
Outcome
An outcome is a customer or market visible result whose effects signify software global competitiveness. For the customer, the critical outcomes are customer satisfaction and value delivery as well as successful distintermediation and eliminatin of the middle man.
Controlling the Competition
Controlling the competition is critical to global software competitiveness. This discussion provides a glimpse of the leading indicators for customer factors in terms of process type and sub-process item.
This discussion provides a close look at the leading indicators of controlling competitors and their factors in terms of process type and sub-process item.
State
- While Congress has moved to reestablish export controls over high performance computers shipped to countries that have nuclear development programs.
- A 28% increase in government research in Information Technology has restored the ground lost over the past ten years and halt the erosion of the infrastructure needed to administer it.
A pre-condition indicator is an internal factor whose effects operate over a short planning horizon and directly impact the software competitiveness of the enterprise.
- The Council on Competitiveness convened a National Innovation Summit in 1998 to deepen understanding of the U.S, stake in innovation.
A post-condition indicator is an internal result whose effects are directly under the control of the enterprise.
- The Justice Department is suing to restrain Microsoft from bundling Internet Explorer and Windows 95, application and operating system.
An outcome is a customer or market visible result whose effects signify software global competitiveness. For the control of competitor, the critical outcome is setting industry standards.
Controlling Event Threats and Change
Controlling event threats and change is critical to global software competitiveness. This discussion provides a glimpse of the leading indicators for customer factors in terms of process type and sub-process item.
State
- The Microsoft antitrust case is proceeding to completion.
- The Research and Experimentation Tax Credit is composed of basic and extra tests. When answered for large software development, projects qualify as research, employing a process of experimentation, and discovering data that is technological in nature that guides the selection of alternatives.
A pre-condition indicator is an internal factor whose effects operate over a short planning horizon and directly impact the software competitiveness of the enterprise.
A post-condition indicator is an internal result whose effects are directly under the control of the enterprise.
- Capable statistical process control is obtained at level 4 of the Software Engineering Institute’s Capability Maturity Model, achieved by 6% of those assessed.
- The National Software Quality Experiment reveals that over 40% of the defects detected in software inspections resulted from lack of product traceability among code, design, specification, and requirements artifacts.
- While the criteria for defect free is 6-Sigma (3-4 defects in a million opportunities to fail), industry software practice is anchored at 3-Sigma (3-4 defects per thousand lines of code). While some software operations have attained 4-Sigma and others claimed 5-Sigma, none has reported reaching 6-Sigma.
An outcome is a customer or market visible result whose effects signify software global competitiveness. For the control of event threats and change, the critical outcome is software competitiveness.
- Alfred P. Sloan instructed, “There is no resting place for an enterprise in a competitive economy.”
Global Software Competitiveness ScenariosBeing globally competitive in software demands strategic software management:
1. Understanding that software personnel are the most precious resource.
2. Establishing relationships and forging a shared vision among all stakeholders.
3. Obtaining the deepest possible understanding of the application domain.
4. Raising the ability to improve software operations to a core competence.
There are no silver bullets. The organization must adapt its approach to its own situation. Each scenario is managed according to what is needed. Consider a few scenarios:
1. In order to succeed in a fast moving market, software people must have superior knowledge of the application domain, the target platform, the programming language, and the tools. In this scenario of high expertise, the development paradigm is centered around the activities of code and test. It is in this environment that people produce 1000 lines per day. The fast moving, continuously changing Internet applications demand different practices that are more risk-tolerant. Here the enterprise may hold its feet to the fire on time to market (schedule) and cut slack on functionality and quality... perhaps using Software Inspections to keep this in balance. This is the paradigm for rapidly changing Internet applications. Nothing else will do.
2. A new entrant to a fast moving market is at a disadvantage. Superior knowledge of the application domain is lacking. The enterprise may need to forge a shared vision with customers, users, and senior management that is innovative and unique in order to open the door for entry. Here the capability to document and prototype the requirements and specifications rapidly and incrementally and in a way that excites the client becomes the strategic skill set.
3. The paradigm for large scale backbone software systems may resemble the waterfall model but with some prototyping and incremental releases added. The large scale backbone software project benefits from the SEI CMM level 2 key process areas which are biased towards the waterfall model which is risk adverse. The enterprise is working to balance schedule, cost, function, and quality.
Conclusion
1. The Global Software Competitiveness Program is organized to promote improved reasoning abilities in software competitiveness. It identifies the leading indicators of software competitiveness and the organizing models needed to conduct assessments and plan improvements. The enterprise that advances its software competitiveness is the one that distinguishes the leading indicators it controls from those it does not, takes steps to obtain improved control over those leading indicators at risk, and positions itself to reduce the impact of events which it cannot control.
2. To control the supplier, customer, competitors, and event threats, the globally competitive enterprise must align its best capability with what the customer needs most, know what the customer needs most, set the industry standard, and achieve global software competitiveness. By the way, in the process the enterprise avoids staff churn, delivers value and achieves customer satisfaction, offers integrated bundles, and controls event threats.
3. However, there are critical factors the enterprise does not control but the government does including wage structures, supplier bargaining power, unionization, immigration, customer bargaining power, customer expectation, competitors’ actions, export controls, threat of new entrants, and tax policy. The successful enterprise must adopt the right CMM’s, apply Quality Function Deployment (QFD), produce integrated bundles, and manage risk. Furthermore, to understand current practice, the enterprise must measure and track the fifty (50) leading indicators of global software competitiveness.
4. Deming taught us that there is no substitute for profound knowledge. The best hedge against external factors that are beyond the control of the enterprise is understanding. As Mr. Dooley said,”It ain’t what you don’t know that hurts you. It’s what you know that ain’t so.” The best hedge against internal factors that are within enterprise control is understanding.
Don O’Neill Consulting # Success in the New Century