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Drive Innovation Using The Right Skills: The Value Of Custom Software Development

Research Summary: “Drive Innovation Using The Right Skills: The Value Of Custom Software Development” Prepared by Forrester Research, Inc. (2015)

Why Choose Custom Software?

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At Issue: Successful businesses continually seek to improve their ability to win, serve, and retain customers.  As organizations compete, they must find innovative ways to differentiate themselves in the marketplace.  As a result, organizations face increasing pressure to utilize custom software systems tailored to meet their unique business needs.  However, custom software development projects are not guaranteed to be successful. Organizations must take a disciplined, thoughtful approach to custom software development in order to unlock the significant business value that it offers.

Research Objective(s): The researchers’ objective was to evaluate organizations’ success with outsourced custom software projects.  The researchers sought to test the hypothesis that custom software projects succeed not when organizations contract raw development capacity at the lowest possible cost, but rather by hiring the right team for the job – one that offers a mix of technical skills and continuous delivery practices, with a proven capability to deliver business value.

Scope: The study encompassed organizations in a variety of industries in the United States, United Kingdom, and Australia.  All the organizations surveyed had outsourced custom software development for at least 30 percent of their systems and applications.

Approach: The researchers conducted an online survey in 2014 of two hundred IT and business decision-makers.  All survey respondents were at the director level or higher.

Findings: The study yielded five key findings:

(1) Organizations prefer to utilize custom software systems and applications to drive innovation but require help to build these systems.  Nearly 50 percent of companies that outsource custom software development do so because they lack the time and skills internally to complete custom projects.

(2) A majority of companies that outsource custom software development are not satisfied with the services that they receive.  The areas of least satisfaction included product release frequency, autonomy of the development team (respondents noted teams’ insufficient ability to make correct decisions without instruction), development processes used, and speed of product delivery.

(3) Organizations are challenged to find custom software development teams with the right combination of technical, development, and delivery skills.  While software developers commonly possess advanced technical skills, many lack the necessary experience and autonomy to make efficient, intuitive decisions on an organization’s behalf.

(4) Organizations are willing to pay a premium for experienced development teams.  Eighty-seven percent of survey respondents indicated that they would pay more for high-performance development skills, with one in four responding that they would be willing to pay a premium of 20 percent or higher.

(5) Organizations are seeking strategic partners that can immediately provide the necessary technical skills in addition to educating internal IT staff.  The survey respondents, who cited developers’ technical expertise as the top priority when selecting third-party providers, ranked knowledge transfer to internal teams as the second most important factor in their selection processes.

Notes: The full text of this study can be accessed here.

Keywords: custom software development, innovation, differentiation

Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship.  A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York.  Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students.  Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.

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