In years gone by, CIOs outsourced software development to save money. Apart from software companies, no business saw software development as truly strategic.
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Even the influx of mobile apps did not shift the balance. In many cases, line-of-business managers simply worked directly with app developers to target the growing masses of customers choosing to contact the business via their smartphones and tablets.
As McKinsey noted in its Competing in a digital world: Four lessons from the software industry article, from 2013, many businesses have come to think of software like electricity: something that can be wired in and mostly forgotten about.
Being considered non-strategic, it meant it was often seen as a cost centre that had to be managed down.
“We caused ourselves to be commoditised and we were not able to see a future where all of the data and information came together, or how it was connected to drive the next level of industrial revolution,” said GE CIO Jim Fowler at the company’s Minds + Machines conference in November 2016.
GE is one of the largest companies in the world, and over the past three years it has been building a digital business powered by a software platform called Predix to provide telemetry-powered predictive analytics for the industrial internet.
Uber, or, at least, the Uber effect, is the reason for going down this route. A company that owns no physical assets can turn an existing business process on its head, and create value in a way traditional businesses are unable to, thanks to smart software.
The car industry and the rail industry are among the growing number of asset-intensive industry sectors, looking at digital disruption and how software-powered initiatives can revolutionise their respective businesses.
French train operator SNCF, for instance, is using big data systems to capture telematics data.
“We can anticipate breakdown and model predictive maintenance. This means the train operator can identify a faulty signal component, which could be fixed before failure,” said Vincent Mazarguil, director of asset management at SNCF.
One of the challenges such companies face in the digital era is no longer being in a position to set standards.
When Computer Weekly visited Volvo’s headquarters in Sweden in September 2016, the carmaker’s director of business development and strategy for consumer IT, Jonas Rönnkvist, said car firms are at a disadvantage in the connected world because they cannot dictate standards and interoperability.
“We face Google and Apple, as well as startups, so we are not top of the food chain,” he said.
The other problem is that CIOs are finding they will not be given a budget to invest in software-driven digital initiatives.
“No one has revenue growth to transform to a digital business. CIOs must now optimise IT and business to fund spending on digital projects,” said Gartner research vice-president John-David Lovelock. As an example, he said the savings from legacy system optimisation and enhancements could be redirected to fund digital initiatives.
Computer Weekly spoke to a US buildings manufacturer, which used the $500,000 savings on its Oracle 11i maintenance fee to fund the development of in-house coded e-commerce system for the building industry. The software has added over $60m to the bottom line in additional building material sales.
During Computer Weekly’s 50th anniversary event in September 2016, there was a panel discussion exploring the future of software development.
Technology breakthroughs are making it easier for IT teams to test new ideas by developing code in a way that means it does not affect critical systems. Technology such as Docker containers enable developers to create code able to run in their own secure space. This, along with the ability to have short feedback loops, helps businesses adapt faster. Such technology forms the basis of the cultural shift that companies of all sizes need to enable developer teams to deliver software quickly, according to Kingsley Davis, a partner at Underscore Consulting.
One of the other ways IT departments are working around budget constraints is by making tactical and strategic use of open source software. From a tactical perspective, open source in the enterprise is charged in a totally different way to commercial software. Rather than pay licences, it is charged based on enterprise support, which can be more cost-effective than commercial software contracts.
From a strategic perspective, open source is a rich source of innovation. In May 2016, Computer Weekly visited JP Morgan’s Glasgow development centre. The investment bank is a big user of open source, and has actively contributed code back to the open source community.
“We need a symbiotic relationship,” said JP Morgan’s chief development officer, Stephen Flaherty, at the time. “There are a lot of challenges with the tools and we have done a lot of work to make sure everything is very robust from a cyber perspective.”
Facebook’s philosophy is to make its code open source. “As soon as something has been developed, I see a lot of excitement about how we can make it open source,” said the company’s developer Marjori Pomarole.
Sharing code using a repository such as GitHub enables different software development teams in a company to coordinate and share ideas across the business, breaking down silos, and helping to foster skills and improve code quality.
Arguably, this is one of the best practices CIOs in traditional businesses can learn from the software industry. As we head into 2017, there is set to be an explosion of new software-driven initiatives. Internal IT will need to be at the centre of this innovation, developing code to power new business initiatives.
During Computer Weekly’s 50th anniversary event, we held a panel discussion at Skills Matter in London to look into how enterprise software is changing.
JP Morgan’s chief development officer, Stephen Flaherty, heads a team of developers in Glasgow, one of the bank’s strategic hubs.
Mobile computing, mobile sensor networks and deep learning are behind French rail operator SNCF’s efficiency drive.
Car firms are becoming more tech savvy, but connected cars open up a whole new set of challenges.
Open source is not just about free code. It also offers a way to collaborate and share best practices.
The open source initiative will help to drive adoption of the Erlang functional programming language among enterprise developers.
Imagine if your boss was a CEO pioneering a digital revolution in a company over 120 years old, connecting industrial machines to the internet.
IT spending has increased slightly, but not enough to fuel major digital transformations, says Gartner.
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The business wants IT to innovate, but CIOs find their budgets are frozen. Who you gonna call?