Application Lifecycle Management as a Business Process

APPLICATION LIFECYCLE MANAGEMENT
AS A BUSINESS PROCESS

DAVID CHAPPELL
DECEMBER 2008




SPONSORED BY MICROSOFT CORPORATION






COPYRIGHT © 2008 CHAPPELL & ASSOCIATES
In May 2008, the bond rating agency Moody's disclosed that it had incorrectly assigned a triple A rating to billions of dollars in debt products. In fact, the correct ratings were as much as four levels lower. The error led some of Moody's customers to invest in products that were significantly riskier than they expected. It also led to front-page coverage in the Financial Times and a blot on Moody's reputation.
The incorrect ratings weren't the result of an analyst making poor judgments on these products, however-they were caused by a bug in the custom application that Moody's used to model risk. As business processes like this one become more dependent on software, getting that software right gets ever more important. And because the most important software in an organization is typically developed in-house, doing this well has become a foundation for business success. This set of activities, known as application lifecycle management (ALM), is itself a critical business process. Any organization that creates custom software should take the ALM process at least as seriously as it does any other important business process. Being better than your competitors at creating custom software can provide a significant competitive advantage.
HOW ALM SUPPORTS BUSINESS PROCESSES
Organizations are defined by their business processes. To understand what an organization does, you need to understand its processes. In a very real sense, improving that organization-making it more responsive to change, more profitable, and more valuable-means improving its business processes. 1Supporting those processes with software can help. In a 2008 Harvard Business Review article , Andrew McAfee and Erik Brynjolfsson describe their research into why this is so. One of their key findings is that because software can be easily installed throughout an organization, an improved business process can be quickly replicated in every store, every factory, or every office. Just as important, a software-based process is self-enforcing. Rather than relying on, say, training manuals and hoping that employees follow a new process, the software itself carries out the process in a consistent way. According to McAfee and Brynjolfsson, the ability to embed a better business process in software, then replicate it reliably across an organization, is a primary way to create competitive advantage with information technology.
Yet getting this kind of unique advantage from off-the-shelf software is hard. Almost by definition, packaged software implements well-understood, common processes. And since the same package is available to everybody, differentiating your organization with packaged software isn't easy. Instead, real differentiation comes from unique business processes that are better than those used by your competitors. For unique processes supported by software-which today means nearly all of them-custom applications are required. This is exactly why the ALM process is so important, as Figure 1 illustrates.

1 "Investing in the IT That Makes a Competitive Difference", Harvard Business Review, July-August 2008
2
Figure 1: The output of the ALM process-custom applications-provides essential support for other business processes.
As the figure shows, custom applications might underlie all of the steps in a business process, as in process X, or only some of them, as in process Y. In either case, the custom applications that support this process are created, operated, and maintained by the ALM process, as shown here. How fast a new business process can be rolled out and how quickly it can be changed are largely dependent on how fast the applications it relies on can be Being good at ALM is built and updated. Being good at ALM is a prerequisite for being good at a prerequisite for creating and changing business processes.
being good at Getting better at ALM can even affect the build vs. buy decision for new software. If an improved ALM process makes creating new software creating and faster,... [download for more]