Goldman upgrades software sector:
Goldman Sachs raised its rating on the software sector to attractive from neutral on the belief that the emergence of Web services architecture will accelerate industry growth and on expectations that share prices will rise as investors position for an anticipated year-end rally. Analyst Rick Sherlund believes a movement to a new generation of Web services base standards, which will result in more flexible and adaptable systems that can allow for changes in business processes, could reinvigorate growth for information technology vendors. He said the Phase I adoption of infrastructure software from IBM , BEA Systems , Oracle and Microsoft to enable the new standards is well underway, and the Phase II re-architecting of existing applications from SAP , Siebel and others is upcoming. He said Phase III will be integrating the new standard into desktop systems, which should stimulate a replacement cycle.
“What are you doing here?” they asked.They were construction foremen, superintendents and project managers attending a course in construction planning from the Lean Construction Institute (LCI). Indeed, what was I doing there?
I started to explain: “In software development, we are told we should manage our projects like construction projects, where a building is designed at the start, cost and schedule are predictable, and customers get what they expect.”
Silence. “You’re kidding, right?” “No, honest, that’s what we’re told.”
Incredulity turns to laughter. The idea that programmers would want to manage projects like the construction industry strikes my classmates as ludicrous.
They struggle every day with a master schedule which bears little relationship to reality, with materials that should be on site but are not, or materials that need to be stored because they arrived before they were needed. The never know when the crew that precedes them will be ready to turn an area over to them, so they never know how to staff their crews. They are plagued constantly by the two biggest forms of construction waste – people waiting for materials and work waiting for people.
A new rail terminal: "At £5 billion, the Channel Tunnel Rail Link is Europe's boldest building project. It is a heroic feat of engineering, reminiscent of the golden age of railways."
Part of a biggest IT project in the world: "IT investment in the NHS ran at £1.1bn a year and recommended that this be increased to reach a peak of £2.7bn in 2007-2008.
A great story from CIO.com on how a crash of a legacy system brought a US regional airline to a standstill for several days, and all that lead to that.
The replacement of the crew scheduling system was among those next on the list. But after nearly 15 years in use, the business had grown accustomed to the SBS system, and much of Comair's crew management business processes had grown directly out of it. Just look at a pilot's contract at Comair; the definition of a workday is lifted straight out of the old SBS crew management application and expressed in Julian minutes the way the system did. (There are 44,640 Julian minutes in a 31-day month.) "That's the reason why it's almost impossible to replace these systems," says John Parker, former airline CIO[...]As it turned out, the crew management application, unbeknownst to anyone at Comair, could process only a set number of changes—32,000 per month—before shutting down. And that's exactly what happened. On Christmas Eve, all the rescheduling necessitated by the bad weather forced the system to crash. As a result, Comair had to cancel all 1,100 of its flights on Christmas Day, stranding tens of thousands of passengers heading home for the holidays. It had to cancel nearly 90 percent of its flights on Dec. 26, stranding more.
There was no backup system. It took a full day for the vendor to fix the software. But Comair was not able to operate a full schedule until Dec. 29.
So, you'd think that after all this trouble they would replace the system? Think twice:
But whether Delta will invest more in Comair's IT remains to be seen. In its 2004 annual report, Delta said that it will post another substantial loss in 2005. A bankruptcy filing remains a possibility. And, says Childress, "when the airlines are in trouble, it's a lot harder to find cash for IT renewal and replacement." In fact, Delta has not ruled out the possibility of selling Comair or the other regional airline it owns to raise cash.
Interesting to watch the dynamics and personal and corporate preferences towards buying a system off the shelf and getting something that is cheap and cheerful versus developing your own and ending up with something that is just right for your needs, but costs you more.
The first viewpoint from Philip Windley's excellent essay on strategic planning and tactical deployment:
Of course, the problem with the SVP of Sales just ordering in Salesforce.com over lunch is that while the deployment is easy, the planning isn't there. How will the on-demand sales automation application integrate with other enterprise processes? Well, the SVP of Sales probably doesnt careshe just wants her team to be more productive tomorrow instead of next year. But, pushed to its extreme, you end up with a hodgepodge of automated business processes that don't work together.Enterprise applications like SAP, PeopleSoft, or Siebel, on the other hand, are strategic in nature. To deploy one, you have to plan (a lot), budget, initiate a project, and assign people. If you're successful (and I stress if), you will have automated major parts of your business, cut your operations costs, and increased your ability to monitor your critical business processes. On the other hand, you may have also just set in stone the business process that the SVP of Sales will want to change the week after the project ends. Most enterprise applications installations are so painful that the last thing you want to do once its over is change anything.
And the second one, a diatribe from Jonathan Schwartz (which is conveniently skewed towards Sun's products, but good anyway):
I was recently with a customer in the retail industry that continues to run its own private Linux distribution. The distro was developed a couple years ago, by a team that stepped off the beaten path for good reason (at the time) - that same development team now owns maintaining the distro, and making decisions about whether to replace it. As time has moved on, the customer has found no major ISV willing to certify to their private distro (without a check, that is - we declined the opportunity to port our Identity engines), and the team involved has found themselves buried with support obligations - driving more resource requirements while the parent company is looking to prune costs. I've seen a number of companies in this predicament (a few on Wall Street, btw).My view, in this instance, is the "private distro" mud path should be paved with a commercial product, on the assumption Sun, Red Hat or Microsoft will all outinvest and outsupport the dedicated team - and bring with them a bevy of already certified ISV's. But neither the team, nor their management, will hear any of this. "Our OS costs less than Solaris, it's free." Right, free like a puppy.
Consider another example - a packaged goods company deploying a large scale enterprise application, that failed to resist the tempation to customize their implementation. Their customization looked convenient (the end users will get "exactly what they want") - but such customization actually ends up creating bad hair days for CIO's (and CFO's) that linger for years. As with the custom distro, a custom SAP or Siebel or Amdocs deployment is vastly more expensive to support than a "standard" off the shelf implementation. The short cut, even paved over with a "commercial off the shelf" product, stays pretty muddy.
The decision on this matter is not easy as there are situations in which it is desirable to go custom-build way, and others in which off-the-shelf is a clear preference. The tricky bit is that what essentially a question of TCO is touching some deeply hidden cultural preferences and tends to escalate into holy wars.
Great post from Seth Godin on why people are generally against change even if the change means making things better.