Academic journal article The McKinsey Quarterly

Breaking through the Barriers to New Systems Development

Academic journal article The McKinsey Quarterly

Breaking through the Barriers to New Systems Development

Article excerpt

Practical -- and tested -- strategies for lightening the burden of "legacy" systems

THERE IS HOPE FOR EXECUTIVES imprisoned by their information systems. For years, an inability to change those systems quickly has thwarted promising business innovations. But several new approaches to systems development are now able to deliver business benefit fast. Not all of them are technically elegant. Not all of them will work in every situation. But, taken as a group, they make even major changes to information systems possible in weeks or months -- rather than the years required by traditional efforts.

These new approaches achieve this, in part, by overtuning many assumptions that underlie traditional development strategies, among them:

Old "legacy" systems must be totally replaced. In fact, legacy systems can often be supplemented or modified to provide most or all of the business value of a new system at a fraction of the time, risk, and cost.

Systems must be tailored to the unique way in which a company does business. Too often, customized systems development does not stand up to cost/benefit anelysis. Especially for relatively standard processes that do not confer competitive advantage -- general ledger, accounts payable, accounts receivable, and order processing, for example -- the economics increasingly favor the purchase of standard software packages. Instead of customizing software to fit a business, it is usually more effective to change business processes to fit the software.

Systems are best designed in their entirety first, and then constructed. Potential users can rarely define in advance exactly what they need a system to do. Indeed, in today's business environment, their needs are likely to change two or three times during the four- to five-year course of normal systems development. So instead of trying to plan every detail in advance, it is better to build the parts of the system that have the greatest potential to deliver business value quickly, put them into operation, and then refine and improve the system as needs become clearer.

Business value

More important than their overturning of old assumptions, however, is the fact that these new approaches have already demonstrated their ability to deliver new and improved systems more quickly, more cheaply, and more reliably than can traditional methods:

* An electronics manufacturer replaced its core product design, product installation, and aftersales service systems -- approximately 80 different pieces of software, running on four different hardware platforms -- with two standard software packages. From concept to rollout, this substitution took less then two years, cost a fraction of a custom-built replacement, and slashed ongoing support and maintenance costs.

* A consumer goods company developed and installed in less than eight months a new PC-based system to enable salespeople to plan sales "events" for any product in any store. Using scanner data and projections of the likely costs of each promotional event, the system also helps them analyze how much profit a proposed event will yield -- both for the store and for the company.

A question of priorities

One reason that existing systems-building methods are so slow to deliver business benefit is that they are frequently shaped by the systems developer's priorities, not those of the business itself. In the traditional development process, developers can become isolated from business needs. As a result, they spend a great deal of time solving technical problems that bring only marginal business benefit. A good rule of thumb is that 80 percent or so of the value of any system can be captured relatively quickly and easily -- and that the remaining 20 percent can often be so hard to capture as to be not worth pursuing.

The new development approaches discussed below keep efforts focused on the economic 80 percent. These approaches come in three distinct forms. …

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