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1 WHITE PAPER Integrated Application Life-Cycle Management: Accelerating Innovation, Reducing Costs, and Improving Quality Sponsored by: SAP Melinda-Carol Ballou April 2010 Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC OPINION As global organizations continue to struggle with accelerated change and ongoing financial and resource constraints, executing well on a consistent, effective, and efficient application life-cycle management (ALM) strategy is vital given the business criticality of enterprise applications. With the business and economic challenges of the past months and corporate dependence on core financial, human resource, supply chain, and customer relationship applications, establishing effective ALM approaches can be essential to optimize quality and performance and to help manage change consistently. Many companies have 20 60% fewer resources now than they had months ago and are struggling to do much more with significantly reduced staffing. This is coupled with increased use of complex sourcing (leveraging onshore, offshore, and open source) and delivery models (on premise, on demand, cloud), increased technology challenges, and less money. These challenges are occurring in the context of fierce competitive pressures and thin margins. Optimized software and IT approaches can enable survival and innovation in this climate by helping to lower the cost of ownership and by enabling companies to adopt change faster. Overall, IDC sees the following trends:! Effective ALM should create an integrated approach covering areas such as requirements management, design, testing, software version control, change, build and release management, and application operations issues. These areas should encompass IT project and portfolio management (IT PPM) as well as IT systems and service management (ITSM) to help support effective operations and deployment. This can enable adaptability and economies of scale across the end-to-end lifetime of packaged and in-house applications. We see success dependent on the maturity of company approaches from a process and organizational perspective leveraging and evolving existing, standard, and vendor-provided processes as appropriate. A successful ALM strategy should also map to the most obvious user pain points to evolve and sustain ALM change and to transition staff successfully.! Establishing an appropriate ALM strategy is particularly important given pressures on corporations resulting from a difficult global economy, offshoring/outsourcing, regulatory compliance, and emerging new development paradigms with changing architectures, services evolution, and composite applications. We also see the negative impact of layoffs last year in quality management and other areas being experienced sufficiently now to drive companies toward more effective ALM approaches.

2 ! As a result, we see the rise and renewed emergence of technology and resource investments for adopting an ALM strategy, as companies seek to drive business agility and value. The purpose of this paper is to lay out the role that ALM plays in the context of resource and financial demand, service and change management, and quality to improve business success with applications. IN THIS WHITE PAPER This white paper discusses and defines an ALM framework from inception to deployment, provisioning, operations, and continuous optimization of applications throughout their lifetime an "end-to-end" approach. We discuss the evolution of IT/business collaboration for ALM in the context of an increasingly complex application portfolio with broad, global distribution needs. We consider implementation of a successful approach to ALM areas, including change management, service management, testing, operations management (technical and business process), and IT project portfolio management. We consider the potential of resulting IT and business benefits from more effective ALM approaches across the application portfolio, such as possible reduced total cost of ownership (TCO), accelerated innovation and change management, and improved quality. SITUATION OVERVIEW Why ALM Matters ALM Market Trends and Evolution to Target a Coordinated Strategy Effective approaches to ALM can save money, enable faster and more dynamic responses to business change, and improve quality earlier in the life of an application, where adopted. What is different now? A new urgency, resulting from the current state of the economy and from the increased complexities of the overall market, is leading companies to reevaluate and to invest in ALM approaches. This ALM strategy should span life-cycle phases from project inception to deployment through operations and application optimization. Given the significant expenditures for software at the back end of the life cycle in operations and maintenance (as much as 80%+ of spending), it is incumbent on organizations to engage in up-front planning for deployment, release, long-term provisioning, quality, and change management as part of an overall ALM approach. In the past, most organizations typically considered the application life cycle as stopping at the transition and hand-off to software deployment. However, savvy executive IT, business, and financial leaders with mature and pragmatic approaches are moving toward an encompassing approach to ALM as they deal with the "new normal" world in which they find themselves. With global organizations emerging from the financial crisis of the past two years, there is little leeway for failure for key business applications, for misappropriation of limited resources into redundant software initiatives, for failure to focus on areas of lesser relevance, and for neglecting an ALM approach to planning for effective architecture, operations, and maintenance. A long-term, strategic focus for enterprise 2 # IDC

3 application development and delivery can enable both greater dynamism for the business and significant savings over the lifetime of software. With the emergence not only of virtualization but also ever so gradually of cloud-based approaches to infrastructure management and cloud for testing and other ALM areas, we also see the opportunity for levels of planning and flexibility not available earlier. Yet "planning" is the operative term here; with great power comes great responsibility, and management approaches are key to being able to leverage the advantages of technology for overall ALM and application management. Beginning with project inception and requirements, demand for up-front collaboration and coordination between IT and the business is key. Because 70 80% of application project failures result from poor requirements gathering, management, and analysis, effective up-front assessment in an agile and iterative manner can help to establish the groundwork for business goals, customization of enterprise applications, and prioritization across competing needs. Given a scarcity of resources across the board, coordinating that information with IT PPM is a core benefit. This can enable organizations to leverage effective business planning and to help determine resource allocation in ways that best serve and flexibly support business needs. Coupling this with agile, iterative approaches to allow for business change and innovation as part of a dynamic feedback loop is strategic. We are also seeing the emergence of coordination between IT PPM and IT asset management (ITAM) and systems management and IT service management solutions to enable planning across operations, ongoing enhancements, and maintenance areas where the highest percentage of investment costs are allocated (as discussed previously). These are obviously issues for enterprise-packaged applications and also for software created in-house. With increased demand for visibility into financial systems and resource management, tight coordination with these systems of record and ALM solutions is also central to organizations seeking both visibility into the consequences of their application expenditures and management of their financial and human resources. We therefore recommend that organizations evaluate the level of integration and coordination across those areas to enable the levels of control needed to structure IT budgets related to the areas of greatest demand. The need for quality and change management in this context is also fundamental: What are the consequences of introducing additional change the risks, benefits, and costs? How well are those changes integrated into quality to mitigate performance, security vulnerabilities, defects, and other potential costs to the organization? What will the return on my investment be? Change is a constant across all life-cycle phases, from the beginning of the software life cycle at project inception through to service management. This becomes even more the case where resources are scarce, market demands for innovation are high, and competitive pressures are fierce. Increasingly, we have seen tighter integration and support for quality management within the context of enterprise applications. Software change and configuration management and version control are equally important. Also, ALM strategies should extend to help desk requests, enhancements, and the impact on operations and management of incorporating such changes into enterprise applications IDC #

4 An IDC custom survey indicated significant change and churn for key business applications (see Figure 1). This level of "churn" must be incorporated into an overall understanding of how best to approach ensuing disruption to core business applications and other software dependent on those systems of unmanaged (or poorly managed) approaches to both quality and change. FIGURE 1 Rate of Change and Churn Q. How often are the following applications updated and rolled into production? Weekly and Monthly are the most often (Security, Customer Facing, Desktop, TP at least daily) Others 7% 11% 43% Security applications 28% 22% 21% 16% 8% 5% Desktop applications 22% 26% 18% 12% 16% 6% Productivity applications 18% 31% 22% 17% 5% 8% Back office applications 14% 27% 21% 16% 9% Embedded applications 17% 28% 19% 17% 6% Product management applications 15% 22% 32% 12% 10% 10% Product development applications 9% 32% 30% 7% 9% Customer-facing applications 23% 30% 21% 5% 8% Transactional applications 21% 28% 25% 16% 5% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% At least daily At least weekly At least monthly At least TWICE per year At least ONCE per year Don't Know n = 139 Source: IDC's Debugging and Business Value Survey, 2008 ALM Evolution, Outlook: Trends Driving Broader ALM Adoption Key disruptive trends that are contributing to an increased focus on ALM and overall software life-cycle management include the following:! Organizations are seeking to do more with fewer resources in the wake of financial and staffing constraints, and they increasingly need efficient ALM approaches to restore and sustain high-performing, consistent, business-critical software.! Complex sourcing/offshoring, plus the use of open source, necessitates strong teaming and effective requirements, testing, security, change, and quality management, including deployment and release planning and coordination as 4 # IDC

5 part of IT project portfolio and an overall portfolio management approach. Without effective ALM, it is both risky and nearly impossible to coordinate execution across broadly distributed sources for application development and customization of enterprise applications.! Global economic competition, plus local compliance initiatives across geographies, demands quality, change management, adaptability, and a rigorous, overall approach to ALM. This need is exacerbated by additional regulatory demands that require auditability, management, and increased resources to deliver on these initiatives.! Flexible development paradigms with services creation are increasingly driving technology and business collaboration along with the emergence of strong, agile approaches as composite applications and management become the norm ( ). This will necessitate changing approaches to architectural design, requirements, and application testing (and change management), while enterprise applications evolve to new architectures.! In that context and overall, IDC sees user demand for ALM for enterprise packaged implementations as increasingly significant. Areas such as quality, change management, and deployment issues for customized and generic packaged software deployments are as business critical as the applications on which companies are running their organizations. This becomes key during a time of transition to services-based approaches and architectures.! End-user experience and business impact, as well as the challenges of emerging Web technologies (rich Internet), collaboration via social networking, virtualization, cloud computing, mobile, and Web 2.0, combine to create a wealth of technology complexity that demands rigorous, adaptive approaches to ALM planning and engagement.! Emerging license and delivery mechanisms with SaaS (also including early cloud offerings) enable additional choices and require highly engaged customer support on the part of vendors. SaaS can help to speed adoption and also limits complexity for human beings who have direct, immediate access to on-demand ALM and IT PPM software functionality and who no longer need to allocate resources for deploying and managing the systems and infrastructure on which the applications must run. Especially as a result of these disruptive pressures and emerging technologies and solutions, companies must establish appropriate processes and organizational approaches to move to ALM successfully. Cultural and political barriers are a potent threat to successful adoption of ALM solutions. While we human beings are capable of change, we are wired more for consistency than for change. In other words, we change our existing behavior with great reluctance (if ever we do change). Creating understanding on the part of executives and users about the value of ALM is a key, initial step to help overcome resistance related to both the expenditure for ALM and adoption. (For additional context, see "Using SAP Solution Manager to Improve IT Staff Efficiency While Reducing IT Costs and Improving Availability" and "The Business Value of IT Testing Solutions".) Successful ALM adoption demands strong 2010 IDC #

6 executive buy-in as well as grassroots outreach, marketing, and incentives for use and adoption. If this underlying area of process and organizational transition is not addressed, ALM deployments will fail. Creating a "before" and "after" baseline is helpful to evaluate follow-on benefits by understanding the increased efficiencies of scale and cost savings once the solutions have been deployed. An effective ALM strategy can support IT organizations and businesses for significantly greater value from their applications (change, testing and project, resource and financial prioritization) by addressing problems earlier and effectively to help lower TCO. Yet unless there is a point of comparison via data gathering prior to bringing in comprehensive ALM, it will be impossible to measure, assess, and understand those consequences and benefits. As discussed previously, growing application complexity, shifts in architecture, and new deployment paradigms (with SaaS and emerging cloud solutions) combine to create user demand for consistency and performance for global applications. ALM helps enable both improved consistency and application quality and performance. Organizations need to prioritize initiatives based on key business areas and processes (a paucity of resources demands better decision making). IT PPM and overall planning can help enable improved approaches for prioritization, resource, and project management. A successful and secure evolution to ALM within the enterprise as a key link between the business side and IT for successful software development, application customization, deployment, and operations demands both process change and organizational change. ALM Fundamentals for Evolution to Integrated Approach Organizations struggle with disparate approaches and inadequate coordination across groups, including business, IT, operations, quality teams, change management, etc. Business stakeholders drive requirements evolution and help manage resource and financial constraints and prioritization to successfully develop and launch high-quality IT projects, programs, and customized applications. Yet they are separated by both corporate function and P&L structures from those in IT and operations who will deliver the software capabilities. Companies are placed in the challenging position of trying to bring together fractured teams and individuals who neither speak the same language nor work in the same corporate culture. Establishing organizational bodies to help support portfolio decision making (program management offices [PMOs] or "enterprise" PMOs [EPMOs]), quality management organizations (centers of excellence or COEs), and change management groups (change advisory boards or CABs) is an example of a way in which companies organize to help individuals to coordinate around key ALM areas. These groups also can become a central organizing point for improved practices for areas such as IT project and portfolio management, quality management, and change management. Changing human behavior is difficult and becomes more possible if individuals can learn from prior successes and evolve the content for what worked well and avoid poor processes. 6 # IDC

7 We see many companies leveraging the use of external service providers to help enable a shift in process and also to facilitate organizational transitions (to EPMOs, COEs, etc.). It is critical also to manage these relationships well and establish a balance between internal oversight and external support from systems integrators (SIs). A plethora of existing heterogeneous ALM systems, poor change management, the complexity and expense of test automation, and the need to manage test data all contribute to increased business costs and challenges to effective ALM adoption. Even implementing the best automated tools available for ALM will not result in success without effective use at appropriate times and in appropriate ways. (This reflects the adage that "a fool with a tool is still a fool.") Improved organizational and process approaches can help to address disconnects between business, development, deployment, and service management. We have seen ITIL evolve as a standard with its basis in best practices for operations management. ITIL v3 reaches back to coordinate with earlier pre-deployment phases of ALM, such as change management. The combination of process standards, such as ITIL and CMMI, and emerging agile approaches can help to support and augment effective process management creation. As we have discussed already, there is a need for ALM integration from requirements to change management and deployment for testing to release, systems, and service management. This approach should incorporate business processes along with metadata management as application architectures shift. Adoption of consistent and up-to-date ALM information sources throughout the entire life cycle or a "single source of truth" remains a remote goal as organizations continue to struggle with multiple solutions for change management, testing, project management, etc. However, we increasingly see companies focusing on more targeted ALM solutions as they seek to consolidate disparate ALM offerings for economies of scale and also try to move in the direction of a consistent, coordinated, integrated ALM strategy. Evolving better ALM practices, managing content, and setting organizational constructs to assist in shifting human behavior to be more effective are fundamental elements to creating a successful ALM approach for enterprise applications. CHALLENGES/OPPORTUNITIES The biggest challenges for ALM adoption include cultural barriers across groups (business, development, operations) and required organizational and process shifts for success in making the transition. In addition, organizations typically have scattered ALM point solutions and ALM information, which can be located in different solutions across different locations as a result. However, while broad, end-to-end ALM solutions require significant investment to implement, the potential for resulting efficiencies, dynamism, and cost savings provides incentive. Key opportunities reside in business agility and honing corporate focus to target business-critical areas first and to prioritize more effectively. Cost savings result from areas such as improved code quality (and savings from finding defects sooner) and effective resource prioritization at a time when companies are struggling with fewer resources. IDC sees benefits of partnering across ALM areas by major providers to augment existing capabilities for users seeking broad, end-to-end solutions IDC #

8 CONCLUSION Help Drive Business Agility and Manage Complexity with ALM Organizations should evaluate their current organizational and process maturity, determine key pain points, and establish a targeted ALM strategy, beginning where demand is highest. They should evaluate appropriate automated ALM technologies in the context of company maturity and make certain to coordinate appropriately with solutions and services that effectively support their application platform of choice (while integrating with external systems, as needed). All too frequently, organizations have tended to focus merely on pre-deployment ALM. This is not an affordable or an effective approach in an environment where economies of scale become possible with appropriate infrastructure management. Increasingly, we see the emergence of virtualization, SaaS, and cloud-based solutions. Given that context, and the need for performance optimization and cost savings overall, companies must evaluate and adopt an "end-to-end" ALM approach that encompasses effective infrastructure, systems, and service management. This can also become an opportunity to coordinate disparate teams from project inception to operations - by enabling a common, consistent, coherent platform to sustain and support key enterprise applications with adaptive approaches to infrastructure and architecture to meet dynamically changing world business and technology demands. Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2010 IDC. Reproduction without written permission is completely forbidden. 8 # IDC

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