What Do Software Analytics and Your Doctor Have in Common?

As it turns out, plenty.
Recently, the U.S. government has implemented healthcare reimbursements based on the outcome of medical treatments, rather than a traditional fee-for-service approach.   These performance-based programs are designed to improve healthcare quality while lowering treatment cost.  It’s this outcomes-based approach that Fortune 500 companies are considering as a way of reducing ADM costs while improving software quality.

The Impact of Outsourcing on ADM

Last week, Steve Hall, Partner & Managing Director at ISG (formerly TPI), presented a webinar on the topic of aligning vendor SLAs with long-term value. The discussion focused on the need to not only consider cost savings within ADM (Application Development & Maintenance), but also the importance of risk mitigation and value enhancement of vendor-client relationships.
As businesses increasingly look to shift from a “Run the Business” (RtB) model to a “Change the Business” (CtB) perspective, broader adoption of software tools to provide automated function points counts and technical insights, as well as increase application structural quality, are critical to successfully moving to the CtB model. To read more on the topic, check out Steve’s post.
We enhanced the webinar discussion with real-time polling of the attendees. Here are the polls conducted during the webinar and the corresponding responses:
With how many ADM vendors does your organization or your client work?
These findings support one of the trends Steve discussed: multi-sourcing. Organizations are increasingly segmenting their outsourcing strategy rather than using a monolithic approach. The approaches to multi-sourcing vary from functional or business unit to specialties by technology. Nonetheless, the outsourcing landscape is becoming increasingly complex and both clients and vendors must work together to coexist and delineate roles and responsibilities.
Do your outsourcing/customer SLAs include metrics on the technical quality of code being delivered?
More than half of the respondents are looking at measuring structural quality in their SLAs, but only 26% already include quality metrics as part of their formal agreements with their vendors. As the complexity of the outsourcing mix increases and vendors are asked to coexist with each other or as embedded roles within clients, quality-based SLAs can be powerful monitoring solutions that add transparency, accountability and objective assessment of work performed. Transparency is essential for organizations to create mutually beneficial environments for their internal clients and service providers.
How often do you or your clients perform code reviews on vendor-delivered code?
Although not institutionalized, the industry is holding vendor deliverables to a quality standard through manual or automated code review processes. As quality-based SLAs become more prevalent, organizations will need to find ways to enforce them.  Traditional or manual code review processes will quickly become a bottleneck and introduce subjectivity to a business process that will need to be objective and repeatable to keep pace with today’s development environment.

Top 5 ADM Sourcing Success Factors

While cost savings remains a top priority for global Application Development and Maintenance (ADM) organizations, businesses are also increasingly looking to shift from a “Run the Business” model to a “Change the Business” (CtB) perspective, whereby ADM resources are focused on enabling transformational enterprise-wide initiatives, rather than merely supporting the status quo and reacting to small enhancements.
The demands associated with a CtB approach, however, can increase the risk of higher defect rates and maintenance costs, as well as poor documentation and weak standards around performance and process measures.
Here are five key strategies to ensuring that a CtB ADM model is implemented with optimal efficiency.

Separate and manage service categories. Delineation of the major categories of ADM is essential to efficient management. As the old adage goes, you can’t manage what you can’t measure — it is imperative for organizations to understand their application support costs.  Specifically, you need to define three main categories – Maintenance, Minor Enhancement, and Project-Based Work – and manage costs of each of those categories separately. The reason is that cost drivers and performance indicators vary by category, so different actions and priorities may be required for each.
Align the retained organization with the strategy. Many ADM organizations fall into the trap of focusing on what they can do, rather than what the business needs. For a CtB strategy, that’s a recipe for disaster. Key roles and attributes to help ensure that ADM activity stays on track include liaisons whose specific role is to coordinate between business and IT leaders; program/project managers to oversee large programs; client-driven architecture; ongoing business analysis to understand and communicate business needs; service delivery managers; and business subject matter experts to work with developers and testers.
Define end-to-end Service Level Agreements. Multi-supplier environments are the norm in today’s outsourcing environment.  The multi-supplier environment provides significant advantages to clients, but also introduces complexities when trying to govern a large outsourcing arrangement or manage a large software development program.  Service Level Agreements are an effective way to incent the right behaviors in a multi-supplier environment, but they must be built to address the entire project lifecycle and clearly aligned with the responsibilities of the suppliers.
Embrace process excellence. Service Levels and quality goals are often aligned with process maturity – and more mature organizations can be contractually obligated to deliver higher quality code.  Since process adherence drives repeatability and productivity improvements, service providers should be incented to operate at CMMi Level 3 or higher, and to commit to productivity improvements.  Conduct on-going operational assessments to ensure process adherence.
Use Key Performance Indicators (KPIs) and dashboards. Gauge performance on an ongoing basis with tools such as an Earned Value Analysis (EVA) that includes a schedule and cost performance index.  To stay on top of defects, employ other quality metrics such as:

Defect injection and probability statistics for software quality
Structural Quality tools and techniques to validate the longer term supportability of the code
Regression testing, defect detection, and effective test coverage ratios to validate the functional quality of the deliverables

Editor’s Note: On February 16th, at 11 a.m. Eastern, Steve Hall will be the featured guest speaker on a webinar hosted by CAST Software on the topic of aligning vendor SLAs with long-term value.  The discussion will focus on risk mitigation and value enhancement from vendor relationships. Key points will include:

Building healthier and transparent relationships with vendors based on practical, meaningful metrics
Avoiding vendor lock-in by making sure your applications can be easily transferred and quickly understood from one team or vendor to another
Improving production support activities by focusing on application quality
Aligning metrics between vendor management and project managers

To register now for this free, online webinar, please click here.