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Posts Tagged ‘Hassinger

Open Source Software and Agile Software Development: Parallels and Lessons for Enterprise IT

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Cutter Consortium has published the Executive Update entitled Open Source Software and Agile Software Development: Parallels and Lessons for Enterprise IT by Sebastian Hassinger (“Seb”) and me. Here is the abstract:

The phenomenon of open source software (OSS) is a recognized and mature aspect of the global IT market with profound implications for enterprise IT. A newer trend emerging is the various disciplines and methodologies that fall under the rubric of agile software development, which has a number of interesting parallels with and similarities to OSS. With the adoption en masse of OSS projects, such as Linux and Apache, by the mainstream enterprise customer, there is a track record of more than 10 years with which to gauge the extent and the nature of the impact on the enterprise. While agile has not yet reached the level of adoption that OSS enjoys, all indications are positive for that occurring in the near future. By examining its parallels with OSS, one can make inferences about the nature of the long-term potential impact of agile.

I am honored to co-publish with Seb!

(If you have not yet “e-met” Seb, here is his bio:

Sebastian Hassinger has worked in the IT industry for more than 25 years in large firms and as an entrepreneur. He founded two ISPs, helped launched several startups, and held senior strategy and business development roles with Apple, IBM, and Oracle. Mr. Hassinger created the first customer support Web site for Apple Computer. At IBM, he helped create a new business unit in the Tivoli subsidiary to address the needs of system management in the Internet era; worked on special projects for Tivoli’s CTO, including defining an Internet protocol for management of dynamic services; and was Senior Strategist for IBM’s Pervasive Computing initiative. At Oracle, Mr. Hassinger is Director of Market Development, where his specific responsibilities include developing the financial services market worldwide and the Asia-Pacific horizontal market. He holds MBAs from Columbia University and London Business School, is a published author, and holds more than a dozen software and business model patents. He can be reached at shassinger@gmail.com).
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Reflections on The Use of Agile Methods by the Entrepreneur

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Walter Bodwell has posted his reflections on The Use of Agile Methods by the Entrepreneur. To quote Walter’s summary:

It looked at agile from a different point of view than typically done.

See here for the full review of the presentation by Walter.

Written by israelgat

March 5, 2009 at 2:36 pm

iBetaTest

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Colleague and friend Sebastian Hassinger drew my attention to iBetaTest – a new service that brings together application developers and beta testers.  It is a fascinating concept no matter what software development method you use. Once it spreads beyond iPhone applications it could have quite an impact.

Written by israelgat

February 10, 2009 at 9:07 pm

Posted in Testing

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Enterprise Software Innovator’s Dilemma

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In his classical book The Innovator’s Dilemma, author Clayton M. Christensen introduced a framework for analyzing disruptive technological changes. The framework is based on four principles, as follows:

  1. Companies Depend on Customers and Investors for Resources.
  2. Small Markets Don’t Solve the Growth Needs of Large Companies
  3. Market that Don’t Exist Can’t be Analyzed
  4. The Technology Supply May not Equal Market Demand

Christensen illustrates how the four principles apply to computers, retailing, pharmaceuticals, automobiles and steel at various critical junctures along the road. In the software industry, Netscape’s web browser technology is an enlightening example of disruptive technology in action.

Enterprise Software Innovator’s Dilemma

A couple of years ago, my colleague and friend Sebastian Hassinger characterized the state of affairs in enterprise software by the following chart a la Christensen:

Enterprise Software Innovator's Dilemma

The key point this charts gets across is that Open Source Software is becoming “good enough”. It has already met or will soon be meeting the minimum requirements of the enterprise customer. By  so doing, Open Source Software will steadily gain ground from traditional enterprise software vendors.

Strategic Implications for the Incumbent

The maturation of Open Source Software forces incumbent software vendors to seek differentiation for their proprietary products. Such differentiation usually attempts to follow one or more of the following three patterns:

  • Strategy of fear, uncertainty and doubt (FUD), portraying open source products and the communities behind them as not quite appropriate for mission critical applications. As the open source community has been tackling more complicated problems and producing increasingly sophisticated  products, the FUD strategy has lost much of its effectiveness.
  • Functional differentiation through features that are not available in open source products. This kind of differentiation loses much of its effectiveness once the “good enough” open source software line in the chart above intersects with the enterprise customer requirements line (the purple line in the chart). The extra features might indeed be included in the proprietary software, but the incremental value to the customer diminishes.
  • Customizing proprietary software offerings to the particular requirements of top customers. This differentiation stratergy is discussed in the next section.

IT Services

Given the ineffectiveness of the first two strategies to deal with Open Source, various incumbent enterprise software vendors try to protect their business by way of customizing their vanilla offerings to the particular environments, needs and use patterns of their top customers. Such customization  is typically done through professional services engagements for which the customer usually pays. Under this business design, IT service revenues – professional services as well as customer support – often become more important than product revenues. The attach rate the ratio of service revenues to product revenues tends to hover in the 100- 400% range. In other words, for every dollar a sales rep brings in, in the form of product revenue, he is expected (and often goaled) to bring as much as one to four dollars in service revenues.

Although a high attach rate might be attractive from a revenue stream perspective, it is counter strategic on three critical accounts:

  • It completely distorts the economics of the product – a $1 product could  for most practical purposes cost $2-5. Readers of the Customer Intimacy post in this blog might recall the characterization given by Crawford and Mathews to Consumer Underworld relationship between vendor and customer: “Be inconsistent, unclear, or  misleading in your pricing”.
  • It accentuates the customer frustration with the enterprise software model, tilting the balance further in favor of Open Source Software. IT services are seen for what they often are –  complementary business to unsatisfactory enterprise software.
  • The attach rate dives like a rock in difficult economic times such as the current macro-economic crisis. The phenomenon is described in the recent MGI Research article on the subject.

Agile Based Market-of-One

Hyper-productive Agile teams are sure-footed in moving requirements back and forth between release and backlog. This flexibility in changing the release contents quickly can be channeled toward customizing software to the needs of top customers straight from the R&D lab. Instead of doing it through professional services, R&D tailors custom releases.  In other words, the enterprise software vendor produces markets of one in an efficient manner through Agile methods. If these efficiencies are passed on to the customer, the customer-vendor relation with respect to price could be transformed from Consumer Underworld all the way to Customer seeks the Company.

Although the development of market of one software through Agile methods in the lab can be quite effective, its distribution, deployment and subsequent operation in the customer environment need to be equally efficient. The “containerization”, distribution and provisioning of the output of hyper-productive Agile teams enables the achievement of end-to-end agility. This topic will be explored in forthcoming posts with special emphasis on three important business aspects, as follows:

Written by israelgat

January 27, 2009 at 9:45 pm