€15 To 30 Billion: Counting The Cost Of Inefficient Software R&D

How to reap the full value from a software business? The global software market has become huge in scale and is growing rapidly. Many companies are investing in bold agile and DevOps programs, yet at a time where firms are becoming even more cost conscious, in many cases inefficient and outdated practices are diluting the success of their software development.

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  (CAGR ) forecast until the middle of this century (2017-2050). Still, many companies – including legacy software vendors – do not excel in software delivery, missing or forgetting some key best practices.

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 big questions for those who are responsible for developing software or who own software companies, such as private equity funds:

  • ­  How do we build a sustainable and profitable software business?
  • ­  Which full suite of tools and techniques do we need to support successful product development?
  •   How do we ensure that our development 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 R&D and engineering. Yet, a large part of this investment is wasted through inefficiencies that could be significantly reduced by using best practice software development techniques.

R&D  spend levels are ancreasing, 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.

In this POV we look at how firms can drastically improve their software R&D practices.  

We look at the role of product managers, and how a customer-centric approach should be prioritized throughout the whole process . We examine how companies can leverage the best technologies, including 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 R&D