Software Development Fears: #1 Cost and ROI
“I was always a little afraid of the ROI equation because you can’t predict everything.”
In the first in a series of dialogues addressing the questions of outsourced software development and partner selection, NONA CEO Mike Scott chats to NONA’s new Chief Customer Officer Dr Carl Thomen about his experiences as the Head of Digital for Old Mutual Finance, one of South Africa’s largest financial services providers.
Mike: So Carl, welcome to NONA! Perhaps you could explain what it feels like to be in the hot seat and having to make the decision to outsource development?
Carl: I think the first thing that goes through anyone’s mind in that position is how well the concept will translate from idea into reality. Have we thought of everything? And then, will the work be done to the level of quality that ensures the intention of the project has a chance of being realised?
“Luckily, I’ve seen the ‘I’m sure we could get it cheaper somewhere else’ movie a few times. That movie is always a disaster movie.”
Mike: I would assume a lot of the fears surrounding large-scale development projects involve the cost/benefit equation. What were your experiences when it came to looking at what you were paying vs. what you were getting?
Carl: Most important was understanding, in detail, exactly what we hoped to achieve and how that related to strategic business targets. If you’re building something that isn’t explicitly connected to sales or other revenue-generating activity, you need to understand how it contributes to that, or how it moves the needle elsewhere. Then you can make a reasonable cost/benefit calculation. Of course, that assumes you have a really good idea of exactly what you need, which is seldom the case, because things change as you get further down the track. So I was always a little afraid of the ROI equation because you can’t predict everything.
Mike: And when the goalposts move, what’s the best way to react?
Carl: I think just being aware that they are going to move is the biggest thing. If you know what’s absolutely critical to a project being successful, and you can focus on that, you can align things towards those critical pieces and you’ll be successful.
“In software, as in life, you get what you pay for.”
Mike: How did you deal with the “I’m sure we could get it cheaper somewhere else” question?
Carl: Usually, the people asking that question don’t have a good understanding of what is required to successfully build good software, and therefore don’t understand what good software costs to build. Luckily, I’ve seen the “I’m sure we could get it cheaper somewhere else” movie a few times. That movie is always a disaster movie. And that’s because all code wasn’t created equal, and you absolutely want the most experienced developers you can find building mission-critical software, not the cheapest. In software, as in life, you get what you pay for.
“I’ve seen a lot of projects get bogged down in operational discussions and ownership politics, when the focus should have been on retention statistics or the cost of acquisition against lifetime value.”
Mike: Could you talk briefly about your experiences in building customer-facing software?
Carl: There should always be in-depth strategic conversations around the metrics you need to see to be sure that whatever you’ve built is working properly, and a rollout plan that identifies your best predictors of success i.e. the correct lead metrics. I’ve seen a lot of projects get bogged down in operational discussions and ownership politics, when the focus should have been on retention statistics or the cost of acquisition against lifetime value. Pretty much all of the time, what you think your users need isn’t what they need. If you don’t have the right analytics in place, you’re not tracking the right metrics and you’re not objectively and ruthlessly honest with yourself, you’re going to fail.
