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Press Release
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Industry Study Exposes Massive Application Rework Costs
84% of IT Executives Looking To Simulation To Solve Endemic Cost Overruns
EL SEGUNDO, Calif. –— June 27, 2005 — iRise®, the world’s leading application definition software and services company, today announced the results of its first annual IT executive audit, co-sponsored by Decipher, a leading independent research organization that surveyed 200 IT executives. The key finding from the commissioned survey is that a vast majority of IT organizations budget for rework and that aggregate amounts spent on this problem can run into the billions of dollars, negatively affecting productivity and time to market for many organizations.
Rework, otherwise known as cost over-runs or change orders, is an endemic problem facing nearly every IT organization that develops applications for business. According to Forrester Research, an estimated $103B was spent in the U.S. alone in 2004 on custom application development projects. The Decipher survey found over 80% of organizations claim to finish projects within budget, yet almost three quarters (73%) budget for rework, thus, in effect, planning to fail. Almost a third set aside more than 25% in their budgets for these change orders, which could have been avoided in the first place.
Given these results and the enormous investments cited by Forrester, rework has quietly become a multi-billion dollar issue that is rarely discussed or challenged by CIOs, largely because it has been long assumed to be a “cost of doing business.” Survey results suggest that text-based requirements documents and other static tools are a major contributor to the problem:
- Over 70% of organizations rely solely on static text, screen shots and diagrams to define applications today
- 69% expressed some level of dissatisfaction with their current methods of defining applications.
"iRise has identified and exposed an endemic problem associated with the successful delivery of complex business software ,” said Fred Matteson, CIO at Fireman’s Fund Insurance Corp. “Rework is no longer an acceptable way of doing business. In order to win in today’s business climate, you can’t afford to do the same work over and over again. If you are reworking code, you are delaying getting to market, and at the expense of key features required by the business.”
“Rework is sapping the already stressed budgets of IT organizations everywhere,” stated Emmet B. Keeffe III, CEO and co-founder of iRise. “This survey validates the hundreds of conversations I’ve had with our customers who are struggling with this issue every year. The time has come to expose the rework issue and let IT executives know that it no longer has to be accepted as a cost of doing business.”
As more development work moves offshore, clear definition for what to build becomes increasingly important. According to the Decipher survey results 84% of the respondents noted they were either unsatisfied or only somewhat satisfied with outsourcing and the delivery of its expected benefits. Difficult communications (77%), project management issues (67%) and missed requirements (57%) were cited in the survey as the top challenges organizations face when outsourcing. Coupled with the fact that nearly 80% of the organizations surveyed stated that text-based specifications were the standard for communicating with outsourcers, it is not surprising that most companies are dissatisfied with the expected results of global development strategies (84%) noted in the survey.
“Because users are typically not very good at specifying their needs or managing requirements, code may be more often rejected during UAT. Unfortunately, the costs of the rework required may have to be born by the client if they did not properly specify their requirements. This type of rework can immediately negate any potential labor savings,” states Stephanie Moore, Vice President, Forrester Research. “For companies to determine whether or not offshore outsourcing truly saves them money and how much money offshore outsourcing saves them, they must factor in all hard and soft costs associated with offshore outsourcing.”
Of the 200 IT executives surveyed, 84% expressed interest in being able to simulate applications before development, indicating pent-up demand for solutions and technology that enable business people to more clearly define what to build – and to get requirements right the first time.
In a related announcement today, iRise launched the world’s first interactive document platform that gives business people the power to quickly simulate applications before a single line of code is written. iRise simulations become visual specifications to the development team and downstream organizations that eliminate rework and bring projects in on time and on budget. Although the concept of simulation is not a new one for aerospace, automotive and other industries, iRise is the first company to deliver functionally rich, interactive simulations as a quantum-leap improvement over traditional, static, text-based specifications for complex business systems.
About iRise
iRise® is dedicated to bridging the communication gap between business and IT by improving the process of defining software. Global corporations like Agilent, CNA, CSAA, Health Net, Sprint, SunTrust and Wachovia use its market leading application definition platform to get requirements right - the first time. iRise application simulations cut rework costs, accelerate time to market and reduce the risks associated with global development on mission-critical business systems initiatives. Unlike text-based requirements, visual iRise simulations are unambiguous and enforceable specifications that ensure the needs of the business are clearly understood and met. iRise simulations can be built by business experts and used in a collaborative global model to quickly iterate on stakeholder requirements with business people, dramatically improving project success. Headquartered in El Segundo, Calif., iRise is backed by Morgan Stanley Venture Partners and has sales offices across North America.
1 Forrester Research, Inc., "The Hidden Costs of Offshore Outsourcing", Stephane Moore, March 2005
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