Last month in this space I wrote about the importance of optimizing the cost-effectiveness of Captives (i.e., Global In-House Centers) by setting metrics and enhancing process transparency for better management of them. For these management methods to work, though, an organization needs to employ automated function points as a way to way to gain insight about current costs and supplied value, which can then be used to enhance received output from current or future providers.
CAST’s Lev Lesokhin underscored the importance of third-party vendor management in a recent commentary on this topic in InformationWeek’s Wall Street & Technology. In his article, he says:
At the end of the day, Wall Street CIOs cannot blame development teams or third-party vendors for their lack of insight into their application portfolios…The only way to reduce IT costs and validate outsourced work is to proactively monitor application quality standards for security, performance, and reliability before acceptance and implementation.
Proactively monitoring outsourced application development, such as that done by Captives, requires a set of metrics that can effectively track the vendor’s deliverables and measure their value along four primary objectives:
- Improvement – determine the high-leverage targets and track progress
- Estimation – identify sources of variation in effort and cost that predict outcomes
- Benchmarking – assess status against competitors and internal baselines
- Vendor management – establish a fact- and performance-based relationship
But these objectives cannot be measured subjectively. For analysis of the productivity of software development and maintenance to have any true value, it must be measured quantitatively using normalized units of production and effort – such as function points.
Function points make it possible to analyze business functions as an individual unit within an application regardless of utilized languages, development methods or the type of hardware platform. The required amount of effort for delivering individual or sets of business functions is the only variable.
Sounds great, but as Lesokhin points out in his InformationWeek commentary, “Some IT organizations have flirted with manual function point analysis to help track the amount of ADM production over time, but it is a tedious and time-consuming process that sometimes produces a biased, and therefore untrustworthy, end result.”
In other words, “what’s the point?”
Fortunately, there are organizations that have harnessed the rules for automated function point analysis adopted by the Object Management Group (OMG), the acceptance of which was driven by CISQ. With the standards set forth by OMG for automated function point counting solutions, like CAST Application Intelligence Platform, the industry has seen increased use of functional sizing at the application and portfolio level. This in turn will lead to more effective and efficient management of IT portfolios, improved vendor management, better valuation of software assets, improved ADM performance management and a reduced ADM costs.
By using automated function points, an organization is able to step away from analyzing individual lines of code and toward a more unified approach that is capable of providing accurate measurements for each individual application. Each unit of measurement is a business function the application will perform to meet specific user needs or fulfill business requirements. Furthermore, categorization allows every business function to be properly analyzed for a meaningful score, which can then be used to further evaluate productivity, quality, and several other factors within a complex, multi-tiered relationship with Captive developers.
With the data provided through automated function points, organizations have what they need to control IT costs, maintain ADM service excellence and mitigate IT risks when working with Captives, all of which leads to benefits such as improved time to market, minimized business disruption, decreased risk and enhanced compliance…all very necessary in the drive to succeed in today’s business environment.
Erik Oltmans, an Associate Partner from EY, Netherlands, spoke at the Software Intelligence Forum on how the consulting behemoth uses Software Intelligence in its Transaction Advisory services.
Erik describes the changing landscape of M & A. Besides the financial and commercial aspects, PE firms now equally value technical assessments, especially for targets with significant software assets. He goes on to detail how CAST Highlight makes these assessments possible with limited access to the targetâ€™s systems, customized quality metrics, and liability implications of open source components - all three that are critical for an M&A due diligence.