Last week at the Open World Forum, I had the pleasure of attending Michael Tiemann’s talk on the “Road to the Digital Recovery”. Michael kindly summarized his key points on his blog.
The most interesting sound bite from Michael’s talk was his estimate that $1 trillion is wasted every year in ICT spending. His logic is:
…18% of all applications are abandoned before ever reaching production, 55% are “challenged”, meaning they are either late, missing key functionality, buggy, or some combination of the three that results in measurably degraded performance. Back when this study was done, the scope of the analysis concluded that $78B/year was being wasted by US CIOs on “bad software”, but that is the tip of the tip of the iceberg: with global ICT spending over $3.4T USD in 2008, money wasted on “bad software” now exceeds $1T USD per year.
I actually think that the reality is worse. Much worse.
Michael’s conclusion is based on the number of projects which fail to accomplish or only partially accomplish their stated objectives. Everyone in the software industry knows that these types of failures are a simple fact of doing business-as-usual. The proposed solution is to lower the percentage of complete or partial failures by improving the quality of the software being built through using open source processes and techniques.
While I have no disagreement with that conclusion, I think that it is missing a huge part of the problem, which is that we all collectively waste massive amounts of human and commercial capital by building too much software. The sheer amount of wastefully duplicated effort endemic to the ICT industry is staggering.
Note that I am not referring to the software which provides companies any source of competitive advantage. I am referring to the software infrastructure which every company needs to merely operate in their particular industry. In every single industry you will always find some amount of software required by 100% of the players, for which 0% get any sustainable or even measurable competitive differentiation.
For one example, imagine the scenario where a new government regulation in the (say) insurance industry requires all of the companies in that industry within that jurisdiction to implement a new set of procedures. Pretend that there are 30 companies impacted. Even if the implementation project within each of those 30 companies was executed flawlessly, the wastage is 30x, because none of those companies achieved any customer differentiating value from their efforts. Multiply this scenario across all of the companies in all of the industries and the wastage of human effort, skill and imagination is depressing.
In my view, the future impact of open source on the ICT industry is not simply to make software better quality. It is to reduce the amount of wasteful effort squandered on implementing and re-implementing and re-implementing yet again the same bags of stuff that our current corporately-silo’d development structures require.
Open source communities such as Eclipse, Apache, Linux, et al offer enormous potential cost savings to industry. By establishing the licensing, IP management, governance and development processes to enable cross-company collaboration, these communities open the possibility that much of the “operating systems” of various industries could be built and shared. This will require some cultural shifts, but I predict that the business and economic rationale will inevitably drive companies in this direction.