Faster development cycles provide two clear benefits. First, shorter development cycles translate into lower costs. Second, earlier completion of revenue enhancing systems means longer periods of revenue capture. Compare the life cycles of a project in a traditional versus virtual corporation below. In this example, a typical software development cycle lasts 40 months in a traditional firm compared to 34 months in a virtual organization. That's a 10% savings in time. Also consider that in a traditional firm, the entire staff infrastructure is on the payroll through most of the cycle while in the virtual style, staff is only paid for work contracted and completed.

Source: W.S.C. Inc.

In a traditional organization, there are several layers of management able to delay or kill a project funding decision. This extends the budgeting duration by several months. In addition, out of cycle budget awards are rare, meaning that a project conceived after budgets are finalized, likely needs to wait through the entire fiscal year before funding is released. Virtual organizations typically have shallower hierarchies and tend to be focused on speed and adaptation. Funding still must be secured, and the need to guard capital is just as real, but the lack of fixed departments means there are fewer layers in place to review and reject new initiatives. Even in the case of rejection, it comes sooner, allowing new or revised concepts to come forward more quickly. So what are the downsides of organizations without a fixed infrastructure? Are they more likely to move forward with ill-conceived projects? Certainly, but the important aspect to consider is the methods by which your organization makes decisions on projects. If the process is tied intimately to the core mission of the organization, outcomes are far more likely to support growth. Streamlining the decision path can reduce the overall development cycle.

The need to completely rewrite software due to required upgrades mean that most software is optimally usable for only three to five years. To take advantage of capabilities in new development platforms requires a repeat of the processes of working with users to determine requirements and creating detailed specifications. In other words, you can either try to recreate old systems on new platforms, or start over every time. As Joseph W. Alsop, Co-Founder of Progress Software put it "the harder we run, the farther we fall behind."

Given the need to compete on platform to win business, serious attention to development is necessary to any organization's success and should be an integral part of their strategy.

A few weeks ago I attended the MIT CIO Symposium. Two topics dominating the agenda were cloud computing and social networking. Cloud computing was recognized by experienced CIOs as marketing terminology applied to the old mainframe practice of leasing computing time. Other participants saw it as a way to free their organizations from the difficulties of managing expensive and ever evolving hardware and network infrastructure. All agreed that cloud computing is here to stay and that CIOs need to pay special attention to vendor contracts in any outsourcing situation. In the end, the details of the contract control the risks and rewards of cloud computing.

Social networking was also frequently brought up as a powerful set of tools for enhancing connections across geographic and other boundaries. Generational differences in the audience segmented some of the challenges and opportunities with both concepts. More experienced CIOs hold a solid grasp of exactly what is contracted in cloud computing and the simplicity of what runs social networks. They tended to wonder what all the excitement was about. Younger attendees expressed limitless optimism for the potential of infrastructure-on-demand and frictionless communications. Combined, these evolutionary concepts do significantly ease the formation of virtual organizations.

As cloud computing and social networking become pervasive, the benefits apply to both fixed infrastructure and virtual organizations.

Opportunities have never been better for firms to outsource much of their hardware. Software development projects are usually paired with capital expenses in the form of computer hardware. The costs of new or expanded servers, networks, and workstations must be factored into any development decision. Cloud computing makes it easier and less expensive to acquire the hardware for new platforms. Also, as existing hardware nears the end of its lifecycle, the decision can be made to outsource its functionality without sacrificing reliability. Choices on scale, reliability and cost are easier too. By carefully choosing service level agreements, costs can be reduced at the expense of guaranteed up-time that may be less critical in periods of low activity and then ramped up when usage returns. While it is painful to agree to lower levels of performance, having the flexibility to pay for different levels is a great option compared to the alternative of shutting down an initiative completely. Cloud computing allows the manager to change the scale and quality of their IT infrastructure more smoothly.



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