This post was written for my colleagues that only ever worked at software house. It was supposed to be short and sweet, but giving a kick for self-reflection too.
Why does a company need IT?
Today we're going to look at IT as a whole, a bit more broadly than just software development. As it happens, modern IT is a business unit that is supposed to (at the very least) support the organization in executing its strategy. Software development itself is not a business unit, unless we're talking about a company that sells software. But I'm not about that...
So what else counts as IT:
- systems maintenance
- support (helpdesk)
- proxy (purchasing, licensing).
There may be more, depending on the size of the company.
IT maturity levels
But let's focus on this: what does IT (and therefore software) give to an organization to fulfill its mission? That depends on the level of development of that IT. From the beginning.
Level 0: No IT
It's 2022 and some businesses work without any IT involvement. Reality check.
Level 1: IT is a cost
A typical situation when, for example, a company needs a server to run a website that someone did. The company pays and that's it. The sad reality.
More investment in IT = more cost.
Level 2: IT cuts costs
Newly purchased invoicing software means that accounting has less to do and more time to drink coffee. Since coffee is expensive, this leads to a reduction in FTEs. The result is a reduction in costs for the company.
IT expenditures only make sense up to the amount of expected savings.
Level 3: IT makes a profit
The implementation of an online e-commerce store has been a success and customers are buying vacuum cleaners like crazy. Salespeople have less work to do because the customer chooses the model and color himself. No one gets fired because salespeople work on commission.
IT expenditures fall down according to the decreasing marginal utility function.
Level 4: IT creates a new market.
Our mobile app makes it so that passenger and driver can figure out where they are and where they are going. Customers no longer want to wait for a questionably fresh cab that is unknowable-where. Sales people stroll on Facebook making viral videos, accountants transfer profits to tax havens.
More expenses = more revenue (to some point, of course).
Well, where's the software development?
I don't know if you've noticed, but it's only at Level 4 that there is software that is owned by the company. For an organization like Uber, software is not only a competitive advantage, but is even essential to the company's existence. In other words: Uber would not be possible without their proprietary, unique system.
The other levels have been simplified. For each of the problems in Levels 1-3, it is possible to find a better or worse existing solution that can be bought. Sure, the cash may be in the millions, but the product is already in place and possibly needs to be implemented. I'm talking about all those SAS, SAP and similar businesses.
What does this mean for a software house?
That's a very good question :) I myself am curious about your opinions at what level software house (SH) operates. Specifically, at what level are the projects you work in? A separate question is at what level does SH want to be? Feel free to comment!