Table Of ContentThe Business Value of
Software
The Business Value of
Software
By
Michael D.S. Harris
CRC Press
Boca Raton and London
CRC Press
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Library of Congress Cataloging- in- Publication Data
Names: Harris, Michael D. S., author.
Title: The business value of software / Michael Harris.
Description: Boca Raton : Taylor & Francis, a CRC title, part of the Taylor &
Francis imprint, a member of the Taylor & Francis Group, the academic
division of T&F Informa, plc, [2017]
Identifiers: LCCN 2017006007| ISBN 9781498782869 (hb : acid-free paper) |
ISBN 9781498782906 (e)
Subjects: LCSH: Business--Data processing. | Computer software--Development.
Classification: LCC HF5548.2 .H374 2017 | DDC 005.068--dc23
LC record available at https://lccn.loc.gov/2017006007
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Contents
Preface ................................................................................................................xi
Acknowledgments ............................................................................................xiii
Author ................................................................................................................xv
Acronyms .........................................................................................................xvii
1 Why Software Value? ..............................................................................1
Why Not Information Technology Value More Generally? .........................1
Who Should Care about the Business Value of Software? ............................4
What Is the Business Value of Software? ......................................................5
Impact of Perspective on Business Value..................................................6
Software Value Sidestep ..........................................................................7
Software Value Life Cycle........................................................................8
What Role Does Time Play in the Business Value of Software? .............10
A More Sophisticated Definition of the Business Value of Software ......10
What Do We Mean by Software Value as an Asset and Software
Value as a Flow? .........................................................................................11
Current Approach to Managing the Business Value of Software as an
Asset ..........................................................................................................11
Financial Perspective .............................................................................12
Software Maintenance Perspective ........................................................12
Portfolio Management Perspective ........................................................13
Current Approach to Maximizing the Flow of Software Business Value ...14
What Is Lost When Software Value Is Invisible? ........................................18
2 Six Things the C-Suite Should Know about Software Value ................19
Chief Executive Officer ..............................................................................21
The Board ..................................................................................................22
Chief Financial Officer ..............................................................................23
Chief Marketing Officer ............................................................................25
Chief Digital Officer ..................................................................................26
Chief Information Officer ..........................................................................28
Lenses ........................................................................................................29
Summary ...................................................................................................31
v
vi ◾ Contents
3 Make the Business Value of Software Visible .......................................33
Why Visible? .............................................................................................33
Why Learning? ......................................................................................35
Why Status? ..........................................................................................36
How Visible? Information Radiators ..........................................................39
Value of Problem Status Visualization.......................................................42
Value of Process Status Visualization .........................................................43
Value of Solution Status Visualization .......................................................51
Summary ...................................................................................................51
4 Forms of Software Value .......................................................................53
Financial Forms of Software Business Value ..............................................55
Software as an Asset or an Expense ............................................................56
GASB Statement 42 .............................................................................60
How to Capitalize Agile? .......................................................................61
The Dark Side of Software Capitalization and Amortization? ...............62
Software as Revenue .............................................................................66
Non-Financial Forms of Software Value ....................................................68
Software Reputation ..............................................................................68
Technical Debt ......................................................................................69
Data and Information ...........................................................................69
Open Source .........................................................................................70
Summary ...................................................................................................70
5 Establishing Software Value Strategies ................................................71
Lean Software Development ......................................................................72
Removal of Waste ..................................................................................72
Pull Not Push .......................................................................................73
Monitor and Control Variation in the Process but Not in the Inputs ....74
Reinertsen’ s Principles for Optimizing Value Flow through
Product Development ...........................................................................75
Kanban ................................................................................................77
A Portfolio Management Kanban System ..............................................80
Cost of Delay and Weighted Shortest Job First .....................................82
Connecting Up the Dots between Portfolio Management and
Development Teams .................................................................................84
End-to-End Business Value ...................................................................87
Orphan Stories ......................................................................................88
SAFe Portfolio Layer and Software Value ..............................................88
SAFe Value Stream Layer and Software Value .......................................89
Summary ..................................................................................................90
Contents ◾ vii
6 Business Value from Products and Programs .......................................91
Product or Program? ..................................................................................91
Similarities between Products and Programs .........................................91
Differences between Products and Programs .........................................94
Software Value for Product/Program with Enabling Portfolio Strategy .....94
Value Streams ........................................................................................95
Value Stream Mapping and Analysis .....................................................97
Software Value for Product/Program without Enabling Portfolio
Strategy ....................................................................................................100
Product/Program Value in Waterfall Organizations ............................100
Product/Program Value in Agile Organizations ..................................102
Organizations Using Agile and Waterfall ............................................104
Contributions to Maximizing Software Value at the Product/Program
Level ........................................................................................................104
Summary .................................................................................................105
7 Establishing Software Value Tactics ...................................................107
The Why and How of Queue Management for Software Development ...108
Waterfall and Queue Management ..........................................................110
Agile and Queue Management ................................................................111
Value Visualization ..................................................................................113
The Problem ........................................................................................113
Why Value Visualization? ....................................................................115
The Value Visualization Framework .........................................................116
VVF Step 4: Define the Cost of Delay ................................................117
VVF Step 5: Quantifying the Economic Value of Stories Once
Deployed .............................................................................................118
Resource Allocation at a Tactical Level ....................................................118
Lenses on the VVF ..................................................................................119
A VVF Example ......................................................................................120
Summary .................................................................................................123
8 Metrics for Business Value in Software Development ........................125
Value Metrics for Agile Governance .........................................................126
Traditional Waterfall Metrics ..............................................................126
The Metrics Challenge for Agile ..............................................................127
Software Size ......................................................................................130
Software Productivity ..........................................................................131
Software Complexity and Technology Flexibility ................................131
Software Quality/Reliability ...............................................................132
Customer Collaboration ......................................................................133
viii ◾ Contents
Individuals and Interactions ................................................................134
Responding to Change ........................................................................135
Agile Governance Metrics Maturity Evolution ....................................136
Benchmarking Business Value .............................................................140
Summary .................................................................................................146
9 The Software Value Management Office ............................................147
Where Does the SVMO Fit in the Organization? ....................................148
What Is the Mission of the SVMO? .........................................................151
What Are the Functions of the SVMO?...................................................151
Software Value of People ..........................................................................153
How Should the SVMO Itself Be Measured? .....................................153
Portfolio, Product/Program, and Team Measurement .........................154
Software Value Information Available .................................................154
Percentage of Individuals with Access to Software Value Data ............155
Percentage of Individuals Using Software Value Data to Make
Informed Decisions .............................................................................155
Software Value Flow Increase versus Last Quarter ..............................155
SVMO and Earned Value Management ..................................................156
Summary .................................................................................................159
10 The Business Value of Software Estimation .......................................161
Software Development Estimates .............................................................163
Where Is the Business Value? ...................................................................164
#NoEstimates Scenarios ...........................................................................170
Standard Corporate Environments ......................................................170
High-Level Estimation (Product and Release) .....................................170
Task-Level Estimation (Iteration and Daily) ........................................171
Commercial/Contractual Work...........................................................171
Budgeting, Estimation, Planning, #NoEstimates, and the Agile
Planning Onion .......................................................................................171
Summary .................................................................................................172
11 Mergers and Acquisitions: Software Value and Risks ........................173
Prioritizing the Software Value and Risk Assessment Based on
Business Functions ...................................................................................174
Software for Common Functions ........................................................175
Software for New Functions (New to the Acquirer) ............................175
Prioritizing the Software Value and Risk Assessment Based on Lenses ....176
Build-Buy Lens ...................................................................................177
End-Client Lens ..................................................................................179
Profit Lens ...........................................................................................180
Contents ◾ ix
Approach to Assessing the Software Value and Risk of a Business ...........180
Software Asset Due Diligence .............................................................182
Software Asset Risk Management .......................................................184
Software Asset Maturity Analysis ........................................................184
Software Asset Integration Management .............................................185
Summary .................................................................................................187
12 Broader Impact of Software Value Management ................................189
Business Value of Cybersecurity ..............................................................189
Value of Unused Software ........................................................................192
Hardware and Software Value .................................................................193
Software and People .................................................................................196
Holistic Value ..........................................................................................199
Other Applications of Value Visualization, Cost of Delay, and WSJF
in Information Technology ......................................................................202
Summary .................................................................................................202
Appendix: Waterfall and Agile Software Development Methodologies ......205
Waterfall Development ............................................................................205
Agile Development .................................................................................208
Other Agile Methodologies .................................................................210
References ...................................................................................................213
Index ...........................................................................................................215
