Trends It Value

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Copyright 2008 The Trends in IT Value report is protected by copyright and is the sole property o The Standish Group International, Incorporated. It may not under any circumstances beretransmitted in any orm, repackaged in any way, or resold through any media. All rights reserved.

INTRODUCTIONIT executives throughout the world have been searching orthat elusive Holy Grail, known as the value of IT. However, like

beauty, the value o IT is in the eye o the beholder. Also likebeauty, the perception o value tends to ade over time withoutproper maintenance. In many corners o the IT environment

the value o IT has increased exponentially, and continues tobring users and stakeholders greater and greater benets. The

Trends in IT Value report is not designed to quantiy or evenidentiy the value o IT, but to show the trends and drivers that

have been steadily increasing the value o IT over time.

We have identied the 10 most important drivers o IT value;each driver is made up o three elements. The rst driver islowering the inrastructure cost, which comprises: cheaper

basic cost, data center consolidation, and eco-computing. Thesecond driver, increasing application unctionality or eatures,

is made up o cost, optimization, and return on investment.The third driver, reducing the cost o downtime, encompassescost per minute, cost per event, and cost per transaction or

a given application or environment. Maintaining suitablerisk, the ourth driver, consists o ewer moving parts,

incremental adoption, and a vertical stack. And the thdriver, commoditization, includes hardware, applications, and

services.

The sixth driver or IT value is higher readiness, and

this includes central control, active-active processing,and application quality assurance. Seventh, the project

management leadership driver, comprises optimization,iterative processes, and best practices. The three elementsor the eighth driver, service-oriented architecture (SOA), are

increased business agility, business process management, andinvestment reuse. The ninth driver, service delivery, includes

choice, cost, and time. Finally, the vendor consolidation driveris made up o bundle buying, open source, and single-source

support. These 10 drivers and their associated elements areincreasing the value o IT.

STANDISH DEFINITION

Value is real or perceived worth, useulness, orimportance o a given activity or service. One way to lookat inormation technology services value is to consider

the cost o the IT service versus the cost o providingthe service manually. Another way to look at IT value

is to consider the benets o the service provided thatwould be impossible to accomplish without IT.

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Trends in IT Value

TRENDS REPORT

DRIVERS FOR IT VALUE

Lowering the Inrastructure Cost . . . . . . . . . . .2

Increasing Application Features . . . . . . . . . . . .3

Reducing the Cost o Downtime . . . . . . . . . . . .4

Maintaining Suitable Risk . . . . . . . . . . . . . . . .5

Commoditization . . . . . . . . . . . . . . . . . . . . . . .6Higher Readiness . . . . . . . . . . . . . . . . . . . . . .7

Project Management Leadership . . . . . . . . . . .8

SOA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Service Delivery . . . . . . . . . . . . . . . . . . . . . .10

Vendor Consolidation . . . . . . . . . . . . . . . . . . .11

The Standish Group denes trends as the current

general direction o a technology, methodology,business practice, and/or technique. It is a barometer

o the overall activity in relationship to otheractivities. It is not a compilation o all IT activities,

but the ones with the highest priority. Throughout thispaper and other Standish trends research notes youwill see the word driver. A driver, the way we dene

it, could be a government mandate, a market-drivenevent, a business ad, a new discovery, or a vendor-led

initiative.

The Trends in IT Value report is based on DARTS(Demand Assessment Requirements TrackingStudies), the CHAOS project (private acronym),

CENTS (Comparative Economic NormalizationTechnology Study), and other research instruments.All research participants must satisy a qualication

process and join our Standish User Research Forum(SURF). All data and inormation in this report should

be considered Standish opinion and the reader bearsall risk in the use o this opinion. For a more in-depth

view o many o the drivers in this report, pleasesee our trends reports on readiness, open source,optimization, SOA, and service delivery, plus the

CHAOS Report.


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Copyright 2008 The Trends in IT Value report is protected by copyright and is the sole property o The Standish Group International, Incorporated. It may not under any

circumstances be retransmitted in any orm, repackaged in any way, or resold through any media. All rights reserved.

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electrical output o computer systems, cooling an

heating, lighting, etc., or the data center as well a

other computing equipment and peripherals througho

the company. Reducing cost may include consolidatin

applications to eliminate equipment, switching to mo

ecient equipment, or managing shutdown and start-u

operations. Most organizations are just at the beginnin

stages o green programs to reduce cost.

Standish Defnition: Inrastructure is the underlyin

base o systems that an application(s) runs on top o.

consists o the basic acilities, services, and installation

needed or the unctioning o a computer system or

complex o computer systems. Inrastructure cos

are made up o hardware, operating and manageme

sotware, operational sta, maintenance and spacelectricity, air conditioning, security, and oth

computer room-related costs.

Driver 1: Lowering the Inrastructure Cost

The Standish Group estimates that the average stated

yearly goal to optimize IT inrastructure and acilities

cost reductions is 10%. In order to accomplish this goal an

organization needs to consider the current cost structure

and examine ways to improve each and every category.

The Standish Group TCO model breaks costs into three

segments or elements: basic cost, application cost, and cost

o downtime. Lowering the inrastructure cost driver or IT

value comprises three elements: cheaper basic cost, data

center consolidation, and eco-computing.

Basic cost is the cost an organization incurs in order to

operate and maintain a computer installation. Basic costs

include the cost to lease or depreciate hardware, server-

related sotware lease, depreciation, and/or monthly license

ees or operating system sotware, utilities, management,and other sotware related to the operation o a server.

In our TCO model this is labeled Sotware Cost. It does

not include database or middleware that is charged to the

application cost. The basic cost also includes operational

costs (labeled Manpower Cost) and the cost o vendor

maintenance ees to both x the hardware and support the

sotware (Maintenance Cost). Other basic costs include

foor space, electricity, air conditioning, security, and other

computer room-related costs. Much eort is spent trying to

reduce these costs. IT organizations are looking to lower

their inrastructure cost by purchasing lower-cost hardware,

consolidating the data center, centralizing management,

and eco-computing (green computing).

Our research shows almost 60% o IT departments have

already or plan to centralize and restructure their internal

IT inrastructure, pooling resources to oer on-demand

capacity or important applications as well as to lower cost.

Organizations across the globe have cut millions o dollars

rom their IT budgets by closing and consolidating data

centers, reducing servers, and centrally controlling opera-

tions. Blades and server complexes have reduced space re-quirements while improving disaster recovery capabilities.

From our research almost two-thirds o organizations use

outside or industry benchmarks to optimize their service-

level agreements (SLAs) and cost structure.

Eco-computing is about making environmentally

responsible decisions when it comes to the purchase, use,

and disposal o electronic equipment. Cost in reerence to

green computing is typically gathered by measuring the

2

Basic Cost ($000) IBM Z9 HP-INS-16X Dierenc

Hardware Cost 640 810 -27%

Sotware Cost 524 314 40%

Manpower Cost 1,437 547 62%

Maintenance Cost 301 237 21%

Other Cost 637 419 34%Total Basic Cost 3,539 2,327 34%

Application Cost ($000)

Basic Cost 3,539 2,327 34%

Sotware Inrastructure 1,309 397 70%

Database & SystemsAdministration

1,147 1,075 6%

Application Maintenance 1,959 1,719 12%

Other Cost 395 450 -14%

Total Operating Cost 8,349 5,968 29%

Cost o Downtime 55 39 29%

Cost, Including Downtime 8,404 6,007 29%

The above table shows the breakdown of the annual total co

of ownership for three banking applications: ATM, POS, a

EFT doing 200 transactions per second at peak and 80 TPS o

peak. In this table we show basic cost, application cost, and t

cost of downtime of both systems, complete with the necessa

software to operate typical applications. The cost of hardwa

and software is annual, based on a three-year operating leas

The data is from the VirtualADVISOR cost estimating syste

Picking the right system for the right application can increa

the value of IT by lowering overall costs.

IBM ZSERIES SYSPLEX VS. HP INTEGRITY NONSTOP


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Copyright 2008 The Trends in IT Value report is protected by copyright and is the sole property o The Standish Group International, Incorporated. It may not under any circumstances be

retransmitted in any orm, repackaged in any way, or resold through any media. All rights reserved.

Driver 2: Increasing Application Features

IT organizations are always looking or ways to save

or ree up money to improve their value. Computer

hardware has and continues to respond to this challenge

by oering higher and higher perorming systems at

lower and lower prices. Gordon Moores Law states that

processor perormance will double every two years with

corresponding price deductions. Commercial sotware,

on the other hand, continues to climb in price to ll the

hardware savings void. O late, the open source movement

has brought some relie. The driver o increasing

application eatures is made up o three elements: cost,

optimization, and return on investment (ROI).

Application cost is the cost an organization incurs in

order to operate and maintain an application on top o the

basic cost. The cost o sotware inrastructure includesthe lease, depreciation, and/or monthly license ees or

database, middleware, and application-related manage-

ment sotware. Database and system administration

costs include the cost o personnel to manage the data-

bases and systems. The cost o application maintenance

includes packaged sotware maintenance ees and inter-

nal personnel costs. Other costs include all other costs not

accounted or in any other categories. The application cost

category is oten not part o a cost reduction program, but

cost savings can be great within these areas.

Optimization is a complete approach that, when ully

implemented, covers systems, people, processes,

applications and data in other words, the whole IT

organization. The goal is to provide the best value or

the highest level o service and unction. IT optimization

comprises procedures used to make systems, applications,

processes, and people as eective and unctional as

possible, at the best possible value with the least possible

risk. Application optimization could include reactoring,

tuning, and other perormance techniques. Our research

shows that almost hal o all IT organizations tie staevaluations and bonuses to application optimization.

ROI is a perormance measurement used to evaluate

the eciency o an application compared with various

other applications or activities. To calculate ROI, take the

return o an application and divide by its cost; the result is

expressed as a percentage or ratio. I an application does

not have a positive ROI, or i there are other items with a

higher ROI, then the application should be considered or

The above chart shows the average cost o

processing a cash withdrawal over the last

our decades, taking into account ination. The

estimates or an ATM transaction or 1998 and

2008 are rom the VirtualADVISOR cost estimating

system, 1988 is based on past TCO analysis, and

estimates or 1968 and 1978 are based on historical

documents and The Standish Groups estimate with

the technology available at that time.

retirement. Almost 90% o organizations

can justiy new unds or divert unds or

an application that shows a good ROI.

Standish Defnition: Increasing applicationeatures is dened as improving the revenue and benets

o an application, as well as lowering the total operational

cost o a given application. This improvement could be

the result o increased perormance, additional eatures/

unctions, a cost reduction program, a consolidation

program, better vendor negotiations, or better price

perormance. It also may include the reduction in

downtime cost as a result o an improved readiness

program.

COST OF PROCESSING A CASH WITHDRAWAL

1968

1978

1988

1998

2008


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COST OF DOWNTIME

Application Name Cost/Minute

Trading (securities) $73,000

HLR $29,300

ERP $14,800

Order Processing $13,300

E-Commerce $12,600

Supply Chain $11,500EFT $6,200

POS $4,700

ATM $3,600

E-Mail $1,900

Driver 3: Reducing the Cost o Downtime

There is only one way to reduce the cost o downtime

and that is to reduce downtime. In March 2008 Netfix, a

consumer service provider that rents DVD movies by mail,

experienced an 18-hour system outage. This outage cost

them $3 million in lost movie ees, but that was only the

tip o the iceberg. In addition to lost rental revenue, Netfix

could have permanently lost 1% o their customers, which

could easily equal another $10 million over the next three

years. However, they lost 7% o their equity or $100 million

in lost equity or their shareholders, which makes all other

numbers pale. This one event cost Netfix $100,000 a minute.

Every month we collect thousands o downtime events over

2,000 platorms. Besides individual engagements, we have

three ways we calculate the cost o downtime: cost per

minute, cost per event, and cost per transaction.

Cost per minute: The Standish Group collects data on the

cost per minute o downtime by application. We have 50

main applications that we constantly study, and a number

o others that come and go. For example, the average

e-commerce application costs $12,000 per minute o

downtime, while a trading application is $73,000 per minute.

From the downtime data we know the minutes o outage or

a given environment. We just have to multiply the number

o minutes by the cost per minute and we get a ballpark

cost o downtime. We also have to look at when the outages

occur. I they occur at peak time they have a larger impact

and are much more expensive than o-peak.

Cost per event: The Standish Group collects data on the cost

o downtime by event. We look at many dierent events over

the course o a year, such as the number o application bugs,

operator errors, etc. Each event type has an average cost.

For example, operator error has an average cost o $2,000,

while an application bug is 25 times the operator error at

$50,000 per event. We then multiply the cost o each event

by the number o events in each category and get another

look at the cost o downtime. Here we have to also look atwhen the events occur. I they occur at peak time they are

much more expensive than o-peak.

Cost per lost transaction: The Standish Group collects the

cost breakdown o a given application, such as the cost to

recover, lost internal production, lost revenue, interchange

ees, nes rom agencies, or the cost to get back a new or

old customer. We have a deault cost o a lost transaction

or each application in our VirtualADVISOR System. Using

The above table shows the average cost o a

minute o downtime by some o the most popula

applications. These costs are derived rom custom

er, survey data, and case data. The cost o a minute

o downtime will vary by production load, pea

versus o-peak, and other actors.

these three sources we are able to estimate the co

o downtime or a given application, platorm, an

environment.

Standish Defnition: Cost o downtime is what costs the organization when an outage occurs. The

costs include the cost to bring the system back to a

operational state. Costs also may include sta cost

make up or the loss in production during the outag

as well as direct and indirect lost revenue, includin

the cost to replace clients lost due to the outage. Man

organizations either dont consider the cost o downtim

or give minor importance in their TCO analysis.

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Driver 4: Maintaining Suitable Risk

Risk is everywhere throughout the organization. You

cannot eliminate it and it might be harmul to minimize it.

The challenge is to maintain a suitable risk that provides

the most progress and benets. In the development o new

sotware we have outlined in our CHAOS research the 100

best practices to build and develop sotware. Regarding

the risk o operational ailure, we have outlined several

techniques in our IT readiness report. In creating and

maintaining IT value the suitable risk driver is made up o

three elements: ewer moving parts, incremental adoption,

and a vertical stack

In terms o downtime, the more elements that go into the

operation o an application, the greater the opportunity

or something to break. Fewer moving parts means less

opportunity or things to break. We call these movingparts downtime triggers. Everything that goes into the

operation o an application is a potential downtime trigger.

Each trigger should be weighted against the progress and

benet that trigger brings to the smooth operation o the

application. This is also true in projects the less you do,

the greater the chance it will get it done.

A little while ago a Standish Group executive met with a

ormer CEO o very successul sotware company. This

CEO was and still is a great supporter o the work being

done at CHAOS University on project ailure. For the lastew years the CEO has been working on getting a new start-

up o the ground. The CEO had a great and wonderul

vision, and many IT executives thought that vision would

be a panacea or them and their organizations. However,

he could not get the company o the ground. He then

remembered our work on keeping projects small and

cut out a small piece o the sotware. His sales started

climbing. Time and time again, the big bang has proven

to be a big ailure. Incremental adoptions and an iterative

project and process do much better.

Having a vertical stack improves both cost and quality. A

vertical stack is an inrastructure built and maintained by a

single supplier, such as the operating system, middleware,

and database technology. There are many examples o

this type o vertical stack, rom vendors such as IBM,

Microsot, and HP. The reason a vertical stack lowers risk

is that all the sotware is naturally integrated. As it turns

out, the majority o sotware errors occur between the

integration points rather than in the main body code. In

addition, there is cooperation among a

vendors internal product line groups to

x a problem versus the blame game

that can go on when multiple vendors

are involved.

Standish Defnition: Risk means a threat to the

organization, installation, and project success. The threat

can be physical, poor estimating, nancial, or political. In

quantitative terms, risk is the probability o an undesired

outcome. First, risk should be considered by the types o

events, such as a key person leaving the project beore

its resolution. Second, risk should be concerned with the

probability o occurrence; or example, there is only a

10% chance that a key person will leave beore the project

is completed.

CHAOS PROJECT RESOLUTION

The above chart shows the results o project

resolution over the last decade. This data is rom

our CHAOS Research project on project success

and ailure and covers more than 60,000 projects.


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Basic Cost ($000) HP-INS16X

HP iNS

Blades Diere

Hardware Cost 810 420 48%

Sotware Cost 314 240 24%

Manpower Cost 547 547 0%

Maintenance 237 168 29%

Other Cost 419 356 15%

Total Basic Cost 2,327 1,731 26%

Application Cost ($000)

Basic Cost 2,327 1,731 26%

Sotware Inrastructure 397 301 24%

Database & Systems

Administration 1,075 1,075 0%

Application Maintenance 1,719 1,719 0%

Other Cost 450 450 0%

Total Operating Cost 5,968 5,276 12%

Cost o Downtime 39 45 -5%

Cost, Including Downtime 6,007 5,321 11%

Driver 5: Commoditization

The IT industrys pattern or standards has remained airly

consistent: Proprietary technologies are developed, de

acto standards emerge that lead the way to sanctioned

industry standards, then comes the commoditization o

products. Commoditization means the price o the product

and vendor margins are no longer dictated by cost, but

supply and demand. This usually means the pressure is on

vendors to lower prices as they improve their manuacturing

operations. The commoditization driver or IT value is made

up o three elements: hardware, applications, and services.

The rst personal computer was delivered with 256K o RAM

and two foppy disk drives or a price o nearly $5,000. No

one could imagine that these devices would revolutionize

IT in business, but they also changed peoples lives around

the world. You can now purchase the components to setup a wireless network router and a PC or laptop with one

thousand times the capability or ewer than a thousand

dollars and the store will give you an HP printer or ree!

Hardware commoditization has led to organizations just

putting in more hardware to solve perormance issues.

Our research shows that ewer than 20% o organizations

routinely tune their servers or perormance. Like PCs,

mainrames that once cost millions o dollars have also been

replaced by their little brothers and sisters. Most have been

replaced with signicantly more powerul, smaller, and less

expensive servers that are lling data centers worldwide and

running many types o applications more eciently. With

the commoditization o all this hardware, IT organizations

are now deploying applications aster and better than their

predecessors. Additionally, virtualization has allowed or

the processing o many applications on one box or more

ecient utilization o these commodity servers.

While most organizations have given up tuning, we see that

almost 80% o organizations employ load testing to optimize

server availability all or some o the time. System availability

has become a key component or measuring the successo an IT organization. The days o 92% to 95% availability

have given way to the ve nines, or 99.999% availability.

These new generations o servers driving the numbers up

not only are the components o good quality, but they allow

or the quick swapping o components like hot-swappable

drives, CPU, RAM, etc. This makes these servers even more

desirable or IT operations personnel. The acceptance o

blade and component modulation makes implementation

and service extremely ecient and cost eective. The result

o this technology is ease o service. IT is no longer he

hostage or a day or days waiting or parts or a servic

technician.

Standish Defnition: Commoditization o IT is havin physical products or services o the same type th

are interchangeable, such as server boards or serve

themselves, and maintenance o those servers. The pri

o the commodity is subject to the rules o supply an

demand. This is true o personal computers, printer

sotware products, network products, and many

products and services.

6

The above table shows the breakdown o the

annual total cost o ownership or three banking

applications: ATM, POS, and EFT doing abou

200 transactions per second at peak and 80 o

peak. In this table we show basic cost, application

cost, and the cost o downtime o both systems

complete with the necessary sotware to operat

these typical applications. The cost o hardware

and sotware is annual, based on a three-year

operating lease. The HP Integrity NonStop data is

rom the VirtualADVISOR cost estimating system

HP NonStop Blade System data is based on ou

estimates. This table clearly shows the dramati

eect commodity hardware can have on the value

o an application.

HP INTEGRITY NONSTOP VS. HP NONSTOP BLADES


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UPTIME BY PLATFORM

System

Peak

$ DT $000

HP Integrity NonStop 99.983% $39IBM Z/9 Sysplex 99.980% $55

LINTEL 99.902% $226

IBM pSeries 99.899% $233

HP Integrity 99.894% $244

Sun Fire Server 99.850% $346

WINTEL Servers 99.818% $420

Other Servers 99.874% $291

Driver 6: Higher Readiness

Increasing IT and business readiness is an important

component o maintaining the value o IT. IT readiness

goes beyond disaster recovery, high availability, and

business continuity planning (BCP). Readiness is not

about planning. Rather, it is being prepared or disasters by

having active processes that continue beore, during, and

ater any type o ailure. A readiness program is justied

in terms o ROI when the projected cost o downtime

exceeds the added cost o the program over the lietime

o an operation. The higher readiness driver or IT value is

made up o three elements: central control, active-active

processing, and application quality assurance.

Central operations control has greatly reduced the number

o incidents o operator error. For many years operator

error was the leading cause o downtime incidents by a

wide margin. Our same research, however, shows that rom

a time-o-outage standpoint operator error only equates to

about 6% o downtime. We have concluded that operator

error incidents have minor eect on downtime, and

recovery rom these incidents has been swit. Downtime

charged to operator error rose slightly over the last ew

years, indicating that when an operator makes a mistake

it has a greater eect on the systems and applications.

However, our last results show improvement in this area

as well. In general, central operations control is increasing

readiness.

About a third o the SURF organizations consider it

important when purchasing an application package that

the design allows or the sotware Versions N and N+1

o a module to be deployed simultaneously. In an active-

active environment it is very important that applications

be synchronized; otherwise, this could cause an outage or

bad data to be introduced into the environment. One way

to improve application availability is to provide another

mechanism that enables processes running on two or

more dierent computing resources to checkpoint or

share application state inormation between them. Whenapplication state inormation is duplicated across two

computing resources, a ailure may be recovered rom

instantly and transparently. Also, the rest o the sotware

and data stack should be synchronized, including les,

utilities, and management sotware. The last level o

synchronicity is hardware. To ensure a comprehensive

active-active environment, the hardware systems must

mirror each other.

An application quality assurance process

is essential or the implementation o

new applications or upgrading existing

applications to ensure readiness.

Our CENTS data clearly shows that

application bugs are the leading cause

o application downtime. Applications

should be written so application bugs do

not cause cascading ailures that bring down

multiple application instances.

Standish Defnition: Readiness programs are based

on a comprehensive approach that means never hav-

ing to say youre sorry. When ully implemented, the

program covers systems, people, processes, applica-

tions, data, and interdependencies (such as vendors). Itis enterprise-wide and covers not just IT, but business

operations as well to ensure no interruptions. A readi-

ness program should cover natural disasters, man-made

disasters, and run-o-the-mill mishaps and mischie.

The above chart shows the percent o yearly system

uptime and the cost o downtime or the three

banking applications by major system platorm. The

data is rom the VirtualADVISOR cost estimating

system and the monthly CENTS survey. It is based

on more than 100,000 downtime events during the

2007 calendar year. The data presented is the

average o systems that run mission-critical

applications and deploy high-availability

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Driver 7: Project Management Leadership

When looking at project management leadership in the

context o IT value, there are two questions IT management

needs to answer: Are you working on the right things,

and are you doing them in the right way? The project

leadership driver or IT value is made up o three elements:

optimization, iterative processes, and best practices.

As weve learned in our workshops, doing the right thing

is oten very hard sometimes you keep a project or a

requirement; sometimes you dont. Organizations need to

consider cost, risk, and gain collectively in their decision-

making. Every project and requirement should have a

cost, risk, and gain element. By optimizing on the high

gain, while considering risk or projects and requirements,

an IT organization can maximize value. This is a dicult

problem, especially with a mix o hundreds o projects and

thousands o requirements. Layer on top all the competing

constraints, and it becomes almost impossible. The Standish

Group has had a team o proessionals working on a system

to automate this process and aid IT executives and PMs in

the decision-making.

In the early 90s Standish Group published the iterative

development process to help answer the question, Are you

doing it the right way? Since then, iterative has become the

basic oundation o multiple agile types o methodologies,

such as Extreme Programming (XP), Scrum, and RationalUnied Process (RUP). The iterative process has ve basic

components: baseline, requirements, development, testing,

and deployment. Once you have decided to go orward

with a project and you are going to use an agile method,

the baseline is the beginning o the process, or step zero.

Ater the baseline has gone through the requirements,

development, testing, and deployment steps, then you

circle back to the requirements, development, testing, and

deployment steps again and again until the project is done.

Best practices are doing the right things the right way. InThe Standish Groups CHAOS Knowledge Center (CKC)

we outline the 10 most important lessons or project

management best practices, with consideration or the 10

actors or success. We urther break down these actors or

lessons into 10 points each to create the 100 most important

project management leadership best practices. In order to

help organizations ocus on the highest-value opportunity

areas we have developed a benchmark and assessment

product. This product looks at both individual projects and

the project management environment. We call this

healthcheck. A healthcheck on a project manageme

ecosystem can spot problem areas well in advance

serious consequences.

Standish Defnition: Project management leadershi

goes well beyond the basic project management skil

as outlined in PMIs PMBOK. The starting point

project management leadership is qualied proj

management proessional (PMPs). Organizatio

that want to be leaders in the proession o proje

management invest corporate resources in educatio

training, and research and development. Proje

management leadership advances the proessio

and creates an environment where such expertise

recognized, valued, and rewarded. Project managemeleadership means knowing how to communicate ba

news along with the good, and having the sense

know when a project should be killed.

8

PMI CERTIFICATION

The above chart shows the results rom 2003 to 2007

when we asked SURF members, Do you require

your project managers to have PMI certifcation or

the equivalent? The data shows that the percent o

organizations that require their project managers

to have PMI certifcation or the equivalent is on the

rise.

0

5

10

15

20

25

30

35

40

38%

29%

21%

16%

11%

2007 2006 2005 2004 2003


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Standish Defnition: SOA is a business

strategy to achieve business agility

through the ability to recognize, precisely

document, store, categorize, discover,

and make more ecient the organizationsbusiness processes. SOA depends on business process

management and modeling. SOA is not a technology; it

is not a service bus; it is not the new object technology

though sotware can help implement the strategy.

Done right, SOA can achieve eciencies both within

organizations and across enterprise lines.

Driver 8: SOA

The implementation o a service-oriented architecture

(SOA) can oer many benets to organizations as they work

toward increasing IT value. The SOA driver or IT value

is made up o three elements: increased business agility,

business process management, and investment reuse.

Increased business agility means much more than being

able to deliver new business services quickly. Its also

ensuring ease in making these changes. Infexible IT

architectures can hold a company back by not allowing

or the evolution o the underlying services as well as the

applications. This is where the magic o SOA, which is much

more than being able to reuse services, can really come

into play. SOA is about being able to adapt those services,

discover them, categorize them, and be able to continually

enhance their eciency thereby automatically bringing

about change to the business applications, users, and

business partners who interact with them. The majority

o organizations believe that an integration solution or

disparate applications and increased responsiveness to

business requirements are the leading SOA objectives.

Business experts want new services/changes to existing

services delivered quickly to meet market demands,

oten putting overtaxed IT departments on the deensive

through implementation issues. These two opposing views,

coupled with knowledge gaps on both sides, compound

the problem. A solid business process management

(BPM) system is designed to allow the business to adjust

to changes in business processes without the need to beoverly dependent on IT involvement. BPM typically is said

to comprise three steps: modeling the business processes,

deployment into the overall architecture, and analysis.

SOA can provide a strong ramework or delivering

new business requirements. When we asked DARTS

respondents their opinion on the importance o modeling

when planning an SOA project, an overwhelming majority

(81%) cited modeling as critical to important.

Reuse is certainly not a new concept in the world o

sotware, and the push toward reuse has been successul.

Our DARTS survey asked IT executives, How would

you rate the speed in delivering application eatures and

unctions compared with our years ago? Almost 80% o

companies stated they are delivering aster to much aster

than our years ago. But SOA is really not a technology

solution; its a strategy. SOA relies on BPM and modeling

to initiate reuse at a higher level the ability to dene,

analyze, and reuse business processes. Competitive

advantage is sought through repeatable and predictable

processes and compliance execution. So SOA is not only

about reuse, but also about process optimization.

The frst chart shows the results when companies

that have completed, or are planning a SOA project,

were asked about the primary objective they hoped

to achieve. As shown, we see that a large majority

revolve around the core principles o increasing

business agility. The second chart shows the results

when DARTS participants were asked to describe,

on average, how many years they would expect it to

take or an SOA project to be ully paid back.

SOA PAYBACK

1 year: 5%

2 years: 32%

3 years: 41%

4 or more years: 22%

REASONS FOR SOA

Integration solution or disparate applications: 35%

Increase responsiveness to business requirements: 23%

Faster development: 17%

Expose inormation or unctionality to customers,

partners, or suppliers: 9%

Automate business processes: 7%

Lower operational costs: 6%

Keep corporate sotware inrastructure in

line with new technologies: 3%

41%32%

5%22%

0

5

10

15

20

25

30

35

23%

35%

17%

9%7% 6% 3%


10/12



SPE

CIAL

REPO

RT:Trendsin

ITV

alue

COST PER TRANSACTION

Driver 9: Service Delivery

Service delivery providers in the orm o consultants,

contractors, sotware as a service (SaaS) vendors, hosting

companies, outsourcing rms, etc., are an integral and

important part o the inormation technology landscape.

The reasons or their use are many, and vary depending on

the company and situation. Whatever the reasons, though,

its clear that service delivery companies are not a passing

ad, nor are they a pass resource. The market continues

to prosper, change, and support the enterprises it serves.

The service delivery driver or IT value is made up o three

elements: choice, cost, and time.

When considering a broader use o outside service provid-

ers, ask yoursel these questions: What are the core services

that our business oers? How can we best ocus our inter-

nal IT eorts on these core services? What skill sets do wehave in-house to ocus on these core services? What are the

risks versus rewards or using external service providers?

What are the political gains and challenges or using exter-

nal providers? How can we best work with external provid-

ers? Once youve determined the areas that will work best

or using external providers and have outlined the optimal

way to contract with them to gain advantage, the next step

is to determine the type o resources you will need, how

long will you need them, and how you will choose them.

This will obviously vary depending on the project or appli-

cation, so review all o your options and try to determine

where you will see the best value and easiest working re-

lationship.

Saving money using outside service delivery channels is

probably the most oten-cited reason or going with o-

shore outsourcing organizations the allure o getting billed

a small raction o U.S. prices is not easily overlooked. Oth-

er service delivery methods can also show impressive cost

comparisons. One company we interviewed had done an in-

ternal analysis to determine whether they should use inter-

nal or external resources; they ound the average estimatedhourly savings at 3-to-1. The latest DARTS ndings tell us

that when it comes to IT spending, internal services are the

preerred method (79%). However, most organizations do

hire out some portion o their IT services.

As always, time goes hand in hand with money when con-

sidering the benets o service delivery partners. But time

can also stand on its own as a reason to look outside the

company or help. Training employees or new skills, nd-

The above bar chart shows the per-transaction cos

o ownership or the three banking application

depicted in Drivers 1 and 5. While the systems ar

doing 200 transactions per second at peak and 8TPS o-peak, the total o transactions per year is

hal a billion. In this chart we show the cost pe

transaction or the basic cost and TCO, which is

basic cost, application cost and downtime cost. Al

systems are complete with the necessary sotwar

to operate this typical application.

ing resources that are available to deliver new projec

on anticipated time lines, managing multiple project

etc., takes time and, as CHAOS research tells us, time

the enemy o all projects.

Standish Defnition: Service delivery is the u

o dierent delivery methods rom various types

organizations bundled into relevant groups or th

convenience o customers and stakeholders. The

methods may be internal services, sotware as a servi

(SaaS), outsourcing, contracting, and consultin

Services may be perormed in a combination o diere

methods or as a single delivery method.

0

IBM Z9

HP NSI

HP NSB


11/12



Driver 10: Vendor Consolidation

In the past there were many vendors or suppliers sup-

porting IT organizations. Now, the days o having multiple

vendors or dierent key sotware products are nearly

over. Previously, IT organizations would purchase special-

ty sotware such as budget, general ledger, inventory, plan-ning, order entry, and numerous other applications. With

the acquisition and consolidation o sotware companies

came the integration o these specialty modules and the

bundling o sotware that we now call customer relation-

ship management (CRM), enterprise resource planning

(ERP), and supply chain management (SCM). The ven-

dor consolidation driver or IT value is made up o three

elements: bundle buying, open source, and single-source

support.

Bundle buying means having the ability to buy multiple

types o products rom a single vendor and getting discounts

on all the products rom that vendor. Like the sotware

vendors, hardware vendors have gone through the same

type o merger/transition, which allows or purchasing

bundles o hardware such as switches, routers, rewalls,

storage devices, and servers. Examples are Compaq,

Digital, Tandem, and HP; today an IT organization goes to

and deals with just HP. HP, like some other rms, oers

the user the ability to buy divergent products with a

discount on the collection. The more the organization

purchases, the greater the discount.

Open source has done so much or IT. Linux is a classic

example o a successul open source operating system.Globally, open source is on the increase, with a community

o millions o participants. IT executives believe open

source products oer greater security, quality, and

reliability at reduced or no initial cost. Our ve-year study

o open source shows that average IT organizations are

saving 6% o their overall IT budget using open source

technology. This savings comes rom many parts o the

IT organization, including development, operations, and

support. Also, demand or open source oce productivity

solutions such as OpenOce has grown in the last ve

years by 28%.

IT is the beneactor o both vendor consolidation and

open source. Many vendors are oering to support the

ull stack o sotware or hardware coming rom dierent

organizations. There are ewer vendors to deal with on

a day-to-day basis. The nger-pointing that occurred

whenever there was a problem is nearly nonexistent now.

The consolidation o vendors has created standardization

o capabilities, rom being able to swap CPUs, RAM,

disks, and other components, to the advent o blade

technology.

Standish Defnition: Vendor consolidation

is the reduction in the number o

vendors used and the standardization

around a limited number o vendors

that provide products and services to theorganization. Such standardization can help

in the support o technology products and provide or

larger discounts on all products. O course, single sourcing

also has drawbacks and thereore most organizations will

usually have a second source.

The frst chart shows the results when we asked

DARTS respondents to estimate the percentage o

their overall IT spending related to service delivery

options, including internal personnel, external

service providers, SaaS providers, and others.

The second chart shows the results when we asked

DARTS respondents to estimate the percentage o

savings they achieved rom their overall IT budget

through the use o outsourcing providers.

Savings by Outsourcing

None: 26%

Less than 10%: 35%

10% to 20%: 29%

Over 20%: 6%

N/A: 5%

IT Spending

Internal Personnel: 79%

External Service Provider: 13%

Sotware as a Service

(SaaS) Provider: 5%

Other: 2%

35%

26%

29%

6%

5%

79%

2%

5%

13%

35%


12/12

The Standish Group denes trends as the current general direction o a technology, methodology, business practice, and/or

technique. It is a barometer o the overall activity in relationship to other activities. It is not a compilation o all IT activities

but the ones with the highest priority. Throughout this paper and other Standish trends research notes you will see the

word driver. A driver, the way we dene it, could be a government mandate, a market-driven event, a business ad, a new

discovery, or a vendor-led initiative.

The Trends in IT Value report is based on DARTS (Demand Assessment Requirements Tracking Studies), the CHAOS project

(private acronym), CENTS (Comparative Economic Normalization Technology Study), and other research instruments. All

research participants must satisy a qualication process and join our Standish User Research Forum (SURF). All data and

inormation in this report should be considered Standish opinion and the reader bears all risk in the use o this opinion.

For a more in-depth view o many o the drivers in this report, please see our trends reports on readiness, open source

optimization, SOA, and service delivery, plus the CHAOS Report.

Trends in IT Value

C i ht 2008 The Trends in IT Value t i t t d b i ht d i th l t Th St di h G I t ti l I t d It t d

The Standish Group International, Inc.

60 State Street, Suite 700

Boston, MA 02109

P: (508) 760-3600

www.standishgroup.com

SUMMARY

The 10 drivers o IT value and their 30 elements in combination are ever-increasing the value o IT. Lowering the

inrastructure cost will continue to be a trend. Organizations will continue oering greater and greater applicationunctionality. Downtime will continue to decrease as more reliable technology increases availability. Risk will not

be eliminated, but embraced to ensure progress. Commoditization is the river that will continue to ow without

stop. IT organizations will increase their state o readiness through active-active processing and application quality

assurance. Project management leadership will bring in more successul projects on time and on budget, thus

increasing their value. Service-oriented architecture will increase business agility and return on investments.

IT organizations are now avoiding the Big Bang approach which historically has resulted in ailure and are

applying an Agile high-gain, low-risk method. Service delivery will allow or greater reedom o choice, and vendor

consolidation will help the purchasing eorts o IT organizations.

The value o IT is measured in the services it delivers, how it adds to the benefts o the organization, and the

degree o satisaction o their clients and users. Investments in technology continue to provide superior returns

as they are compared to many other investments. However, not all IT projects and investments are equal andorganizations need to consider the benefts gained against each investment as it is compared to other IT and

organizational investments.

In real estate, many proessionals value home and land property, but the true value o any home is what a buyer

will pay or it. In IT, the value is more complex and sometimes hard to quantiy. But like the value o education,

we would be lost without it. For 50-plus years IT organizations have been oering their stakeholders greater and

greater services. It seems almost inconceivable that many o these services are only hal a century old. We take

or granted wireless Internet access at Starbucks or the telephone call in the middle o the Amazon Jungle. We

assume that we can get money rom our bank at midnight or at any airport in a oreign country. So, what is the true

value that you place on many o the IT services provided when they are not there when you most need them?

Documents

Trends It Value