IBM Software

Rational

July 2011

Five tips for improving the ROIof your software investments

2 Five tips for improving the ROI of your software investments

Figure 1: To get the most out of software investments, it’s essential todeliver products to the marketplace faster, at point A, so you can breakeven faster, at point B, and maximize your return on investment. Oncecompetition enters the marketplace at point C, returns begin to erode, butmore agile companies are already working on the next release.

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It’s estimated that companies may waste billions of dollarsannually developing software products that ultimately under-perform. That’s because it’s not always easy to know whichsoftware and products to invest in, which ones will bring thegreatest value to the business. Identifying software investmentsthat satisfy customer or end-user needs while delivering valueto the business can be tricky. Plus, many companies lack thevisibility they need to make the right decisions, such as whento abandon a project or how to select the right time for deliv-ery to the marketplace.

According to a recent study by IBM, “The Enterprise of theFuture establishes processes and structures that promote inno-vation and transformation. It actively manages a portfolio ofinvestments, protecting and supporting the fledgling ideas,while systematically weeding out the weak ones.”1

Effective execution of a software project is just as critical as the selection of the investment itself in achieving value tothe business. This requires accurate, timely and actionableinformation to properly evaluate and measure the performanceof a project—determining project success or failure. To helpimprove the return on investment (ROI) of your softwareinvestments, IBM recommends the following tips.

Develop a value-driven process forevaluating software investmentsInvestment proposals come from many directions, with differ-ent levels of value. Decisions on what proposals to pursue areoften fraught with personal opinion and conjecture and tooseldom based on objective criteria such as value to the busi-ness, risk or strategic alignment.

When making software investment decisions, it’s important to look at objective information that reflects a number of per-spectives that are truly relevant to your specific business andindustry. These perspectives can come from market researchdata or from a variety of stakeholders, including your cus-tomers, your marketing department, your partners or analysts.Basically, you need to harness the wisdom of the crowd in its many forms. This information can give you insight intowhat the marketplace demands and how the marketplace ischanging so you can identify opportunities and determine andprioritize which software investments will deliver the mostvalue to the business.

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Figure 2: Weighing the benefits of an investment versus its costs can helpyou make the best portfolio decisions possible.

An invaluable process for improved investment decision mak-ing is performing a cost-benefit or trade-off analysis. Often,there’s simply too much information, on too many options, toprocess using static documentation such as spreadsheets. Byusing a portfolio management solution to aid with decisionmaking, you can capture and visualize all of the factorsinvolved, sort through the complexity and volume of relevantinformation, and avoid mistakes and omissions across thepotential opportunities. Such solutions can also help you cen-tralize the information you need to get to the decision-makingstate more quickly. When information is consolidated in a sin-gle repository, you can automate input collection and analysisto focus teams’ efforts on determining the objectives andscope of the potential investment. And you can then weigh thebenefits versus the costs to help ensure that you’re evaluatinginvestments based on the level of value delivered to your business. Automated tools can also help you quickly and easilymake adjustments to portfolio priorities and in-flight projectsas marketplace conditions or customer needs change.

Create a roadmap to the vision and setthe right expectationsBy analyzing and then determining the software investmentsthat bring the most value to the business, you can then createa comprehensive roadmap to deliver against strategic initia-tives at the right time. The roadmap is much more than a listof goals; it’s a shared vision for the business, and it helps topull the business together for cooperative action, aligninginvestments with business goals and objectives in a way thatteams can see the activities that will help make the future areality. Having this defined direction keeps teams on track andsets the right expectations.

The roadmap can help ensure that your investments are bothvaluable and achievable in terms of budget, resources andtimeframe. It can also help your business and individual teamsstay on track to deliver the expected results by enabling themto watch for resource spikes and track dependencies betweencapabilities. Of course, customer needs and marketplacedemands are constantly changing, so roadmaps must be flexi-ble and allow you to shift investment priorities quickly andeasily so the entire organization can follow along.

Because it’s based on objective data, the roadmap can helpyour teams understand what is expected of them and what theorganization’s business goals are. It can provide a visual repre-sentation of the resources that are required for the invest-ments you need, the ultimate goals and what the costs will be.Bringing everyone to consensus helps set the right expecta-tions for the immediate future and minimize surprises.

4 Five tips for improving the ROI of your software investments

Figure 3: Hardwire the connection between strategy and execution, tohelp ensure that teams receive clear communication of priorities and leadership understands the reality of delivery progress.

Strengthen and optimize project executionAchieving a return on investment requires a delicate balanceof many factors. Projects can easily fail to achieve their pro-jected returns by exceeding budget, missing schedules or fail-ing to deliver the required scope. After you’ve selected theright software investments, it’s critical to execute the projectsuccessfully and keep it aligned with the roadmap.

To make sure you’re executing your projects as effectively aspossible you need visibility into all aspects of your projects.Business and project perspectives needs to be incorporatedinto the software development life cycle and the progress dataneeds to be rolled back into the portfolio view. The deliveryteam will not only be an active part of the solution, they willalso be provided with better information to help them con-strain their options and ultimately deliver a project that isclosely aligned with the business objectives.

By continually evaluating and validating costs, project scope,benefits, and risks, project managers can stay on top of theproject status, allocate resources appropriately, and establishrealistic schedules, keeping the entire team synchronized withstrategic objectives.

Solutions that tightly couple project planning with develop-ment activities can help you gain the visibility needed forimproved decision making and team collaboration. By improv-ing team collaboration, coordination and communication, youhelp unify teams and facilitate greater transparency into proj-ects and tasks across the various disciplines throughout theproject lifecycle. This visibility also enables project managersto take corrective actions earlier in the project life cycle.

Continually evaluate the performance ofyour investmentsThere’s nearly always pressure to do more with less anddeliver software products to the marketplace sooner. Sostreamlining and maturing business processes is an importantstep. Lack of timely and relevant information about theprogress and status of projects and processes can lead to poorperformance and missed business goals. That’s why businessleaders must continually assess performance to help ensure that they are indeed achieving the expected businessresults—and take quick corrective measures to existingprocesses if necessary. It’s virtually impossible to improveprocesses if you don’t have the right information about whereproblems exist.

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Figure 4: Greater visibility enables you to stay on top of project statusesmore easily, so you can identify problems or potential issues as early aspossible, before they become serious problems.

To improve software and systems development and deliverycapabilities, teams must have the ability to assess performanceand track progress as well as identify and manage risk.Increased enterprise visibility and transparency attained usingperformance measurement and management solutions canhelp you spot problems before they affect projects. Havingaccess to real-time, role-based, contextual data can help teams stay on top of project health and status more easily,identify problems earlier, and take corrective action as soon as possible.

Focus on today, but plan for tomorrowA highly competitive marketplace puts more pressure on com-panies to deliver innovation. Beating your competition to themarketplace can provide a serious margin advantage when

launching new services and products. That’s why it’s essentialto drive innovation by not only optimizing what you havetoday but also planning for bigger changes tomorrow. In virtually every industry, companies need to make rapid,value-driven decisions to remain competitive while definingpotential offerings that may be one or several years away. Even if you are first to develop an innovative new product orservice, it’s likely just a matter of time before you face competition and commoditization—and therefore decliningprofitability—so you need a continual process of innovationthat delivers a sustainable competitive advantage. It’s critical tofind every possible edge so you can deliver a steady stream ofnew and in-demand products. Portfolio management solutionscan help you use scenarios and feedback loops to predict andtrack upcoming trends and technologies so that teams candetermine which products or projects to launch, in whichmarketplace or segment—knowing that these products orprojects will change in the future. These solutions can alsohelp you create long-term plans to determine which strategicand innovative investments to focus on today to deliver thecritical competitive advantage you need.

Understanding your organization’s position in relation to the competition and the market perception is also importantin order to keep the correct focus. With the support of theportfolio management solution, organizations can conductwin/loss or feature/function comparisons to understand anddetermine where strengths and weaknesses exist. The portfoliomanagement solution also creates possibilities to engage abroader customer community to help ensure that the productroadmap increases the competitive position and continues toserve the installed base. Customer understanding and interac-tion is and will be highly important for success.

6 Five tips for improving the ROI of your software investments

Transform the way you define and delivervalue with IBM Rational solutionsIBM Rational® software includes product, portfolio, projectand performance management solutions that can transformthe way you define and deliver value. IBM solutions can helpyou gain insight into costs and performance through distinc-tive roadmapping and planning capabilities. The solutions also

give you visibility across the application lifecycle, projects,portfolios, products and geographical boundaries. And theyenable you to measure and improve project outcomes by usingbest practice guidance and measurements that support tradi-tional or agile methodologies, leading to a significant returnon your investment.

If you need to … IBM offers … Which can help you …

Develop a value-driven process for evaluating investments

Create a roadmap and set the right expectations

Strengthen and optimize project execution

IBM Rational Focal Point™ software

Rational Focal Point software

IBM Rational Team Concert software

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Choose which proposals to pursue using objective dataEvaluate, compare and visualize potential portfolios againstestablished criteriaCollect stakeholder input in a single interface and perform cost-benefit analysesDevelop what-if scenarios using input from different stakeholders

Generate an optimized roadmap based on business visionIdentify when change is needed and evaluate trade-offsAssess the effect of change to determine the optimal solutions

Improve productivity of teams and quality of work withcollaboration and integrationAddress problems and bottlenecks before they endanger theprojectConnect strategy with delivery by integrating the solutionLeverage a flexible and customizable process and best practicefor more successful project executionImprove quality and predictability of development iterations

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If you need to … IBM offers … Which can help you …

Continually evaluate the performance of your softwareinvestments

Focus on today but plan fortomorrow

IBM Rational Insight software

Rational Focal Point software

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Obtain greater visibility into and control over risks, status andtrends, allowing for corrective actions when necessary andhelping teams choose the right course to successAutomate collection, measurement and analysis of real-time data for reduced errors and more complete information for informed decision makingOptimize measures and metrics by specific role, providingrelevant, timely and actionable informationGain visibility into your data across projects, products andgeographical boundaries to monitor status and progress in asingle viewAssess, measure and improve results with continual processimprovement with the adoption of best practice frameworks

Use visualization, prioritization, and unique roadmapping andplanning capabilities to help develop plans that are innovative,valuable and achievableAlign enterprise and project-level decisions with financial andmarketplace needsBlueprint and align business and technology architectures byintegrating Rational Focal Point software with IBM RationalSystem Architect softwareDrive faster, better-informed, strategic and tactical enterprisedecisions with validated resultsAnalyze the impact of change across business processes,infrastructure, applications and moreExecute effective planning and collaboration with prioritizedinvestments to support your future business goals

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For more informationTo learn more about how IBM can help you make better software investments, contact your IBM representative or IBM Business Partner, or visit: ibm.com/rational/ppm

Additionally, financing solutions from IBM Global Financingcan enable effective cash management, protection from tech-nology obsolescence, improved total cost of ownership andreturn on investment. Also, our Global Asset RecoveryServices help address environmental concerns with new, moreenergy-efficient solutions. For more information onIBM Global Financing, visit: ibm.com/financing

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1 IBM, The Enterprise of the Future: IBM Global CEO Study, May 2008.

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