Insights

The Hefty Cost Of Inefficient Software

Cost savings are top of mind for many firms, so how can they ensure they reap the full value from their software investment? The global software market is growing rapidly. Many companies are investing in bold development and operations (known as DevOps) and agile programs. Despite this, in many cases inefficient and outdated practices are diluting the success of their software development.

Today, many companies – including legacy software vendors – do not excel in software delivery, missing or forgetting some key best practices. According to Oliver Wyman’s analysis of the European Union’s industrial research and development (R&D) data, almost €100 billion was invested in software R&D by the top 2,500 companies during 2018. Furthermore, this trend is set to continue, with five percent compound annual growth rate (CAGR) forecast until the middle of this century (2017-2050). 

Software is often one part of the bigger picture of integrated products and services. Seamless integration is a key issue for all those involved in the development of products and services, and not just for software R&D. This places enormous pressure on engineering teams to ensure that their software development processes are effective. Achieving this demands the alignment of software development practices across the entire organization, not just within R&D or the individual development team.

This generates important questions for those who are responsible for developing software or who own software companies, such as private equity funds. How do they build a sustainable and profitable software business? Which full suite of tools and techniques do they need to support successful product development? And, how do they ensure that theirdevelopment processes are fully integrated as well as effective?

To explore these questions, Oliver Wyman conducted a study of the current state of software development. Based on this research, we examined the issues currently facing the industry and outline guiding principles for successful software development in today’s environment.

Almost €100 billion was spent in 2018 on software research and development, and engineering. Yet, a large part of this investment is wasted through inefficiencies.

R&D spend levels are increasing, but this does not automatically equate to success. We estimate that a large part of this investment is wasted through inefficiencies that could be significantly reduced by using best practice software development techniques.

This raises the question of how firms could drastically improve their software R&D practices.

Our report below looks at how firms can make the best use of their product managers, and adapt their their software development approach to be even more customer-centric? We examine how companies can leverage the best technologies, including  software-as-a-service (SaaS )and the cloud, as well as share components across software. Driving excellence in software is also an important theme, bringing together many elements, such as quality, flexibility, agility, and securing the right talent. Finally we  discuss which barriers to change organizations can expect to see, and importantly, how to find their way forward.

€15 to 30 Billion - Counting The Cost Of Inefficient Software Research And Development


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