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Software development beyond IT

by Ragu Gurumurthy, Peter Gratzke, David Schatsky
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    22 February 2017

    Software development beyond IT Can new capabilities help drive digital transformation?

    23 February 2017
    • Ragu Gurumurthy United States
    • Peter Gratzke United States
    • David Schatsky United States
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    • Signals
    • Digital transformation is driving enterprise need for speed
    • Technologies converge to make software development
    • Testing the limits of pervasive software development
    • Implications for tech strategists

    The how, where, and who of software development are changing quickly, as converging trends are allowing nonspecialists to design and create applications without expert aid. Increasingly popular technologies are empowering businesses to develop their own apps—and that means more speed and agility.

    You remember how it was years ago: Anytime your team needed a custom software application that couldn’t be picked up at the local office-supply store, it meant commissioning work from programmers in the IT department. Things have changed—now nearly anyone can develop software.

    Indeed, software development, once the realm of highly specialized professionals, is within reach of nearly every department in your company. Thanks to a host of accelerating technology trends—including cloud computing, open-source software, the API economy, and the emergence of low-code platforms—software applications can be developed at lower cost, in a shorter amount of time and by less skilled people. As a result, development is spreading from IT to the business, from developers to “nontraditional developers,” and from big companies to start-ups that can now punch above their weight. Software development is becoming pervasive.

    Enterprises are taking advantage of these new possibilities and enabling business-line staff to take application development into their own hands to develop the apps they need themselves. For companies that embrace this new paradigm and manage the entailing risks intelligently, the opportunities to act faster and with more agility are significant. Meanwhile, vendors of monolithic enterprise software face a daunting challenge: What’s the role of one-size-fits-all applications in a world where customers can tailor-make their own apps?

    Signals

    Google,1 Microsoft,2 Salesforce,3 and Oracle4 have released low-code platforms that allow users with little or no coding experience to build their own applications

    Analysts forecast >50 percent CAGR for the low-code tool market over the next five years5

    The API economy is projected to be a $2.2 trillion market by 2018,6 and venture funding in API-related start-ups has more than doubled between 2013 and 20167

    Some 65 percent of companies leverage open-source software to speed application development,8 and VC investment in open-source start-ups is growing exponentially, reaching $7 billion in 2015 alone9

    The US Department of Labor expects a shortfall of 500,000 developers by 202010

    Digital transformation is driving enterprise need for speed

    Companies in all industries are embracing digital transformation. This entails, among other things, applying digital technologies to business processes to achieve greater business performance. At the same time, executives are feeling increasing pressure to deliver digital solutions faster and cheaper. Staying competitive and relevant requires speed.

    But of course, it’s always a challenge to bring new solutions and capabilities to market quickly, particularly when software is involved. Corporations are constrained by long software development cycles and formal IT engagement procedures. Competing priorities on IT teams can spawn ballooning backlogs that are inimical to agility. And staffing proficient software engineers can be difficult and expensive, given a persistent shortage of technical talent.11 All the while, the majority of CIOs—70 percent, according to Deloitte’s most recent global CIO survey—face a mandate to reduce costs while enhancing delivery of solutions that improve business performance.12 To do so, enterprises are increasingly looking beyond traditional software development and purchasing paradigms.

    Technologies converge to make software development easier, faster, and cheaper

    A number of technologies are converging to rewrite the enterprise software-development rulebook. Tech leaders such as Google, Amazon, and Microsoft, alongside a range of well-funded start-ups, are offering a host of products and services that—in combination—enable enterprises to significantly increase their developers’ productivity while opening up the development process beyond IT, to “nontraditional” developers in other functions and business lines. Meanwhile, start-ups are significantly increasing their technical leverage, allowing them to take on large incumbent enterprises by intelligently piecing together third-party resources rather than building everything from scratch. Four technology developments are driving the trend: open-source software, the API economy, cloud computing, and low-code platforms.

    Open-source software. Enterprises are increasingly using open-source software to reduce the cost and time required to develop applications. Open-source software is distributed as source code that any organization can inspect, modify, and enhance.13 Organizations using open-source software can slash costs compared to commercial alternatives14 as well as development time compared to in-house development. They can also take advantage of the innovation and rapid enhancement that open-source communities encourage.15 Indeed, the use of open-source software has become mainstream in recent years, with open-source alternatives to commercial software available for most business application categories.16 More than half the organizations surveyed by Gartner had adopted open-source solutions as part of their IT strategy by 2011,17 and by 2012, on average approximately one-third of deployed code was open-source.18 According to a widely cited survey, 65 percent of companies now leverage it to speed application development.19 And investors see a profitable future: VC investment in open-source start-ups is growing exponentially, reaching $7 billion in 2015 alone.20

    Application program interfaces. Enterprises are accelerating their use of application programming interfaces (APIs)—that is, code that provides a standard means for two software programs to communicate with each other, enabling one application to take advantage of another that is already written and tested.21 Enterprises use APIs as faster, better, cheaper alternatives to in-house development. Uber, for example, uses APIs to tap into Google Maps, Checkr background checks, Braintree payments, and Twilio texts.22 And companies are becoming more systematic in their use of APIs: Forrester predicts that in the United States alone, companies will spend $660 million on API management tools and services in 2020, up from $140 million in 2014;23 according to CB Insights, VC investments into start-ups focused on developing/managing APIs exclusively or as part of a larger business has tripled in the last three years, to $1.3 billion in 2016.24 Some 67 percent of organizations report using open-standard APIs.25

    Cloud. Cloud service providers are continuously enriching their offerings and adding capabilities to their platforms. They are “moving up the stack,” adding services such as database management, identity and access management, and machine learning. Enterprises leverage such “platform-as-a-service” (PaaS) offerings to create and deploy applications at reduced cost and increased speed.26 Adoption is growing, with the global PaaS market reaching $4.6 billion in 2016, exhibiting a growth rate of 21 percent.27 Enterprises are shifting to PaaS (and IaaS) fast: The average company plans to allocate 45 percent of its cloud budget to software-as-a-service, 30 percent to infrastructure-as-a-service, and 19 percent to PaaS.28

    Low-code development. Enterprises are increasingly taking advantage of low-code platforms to develop and deploy apps without putting pressure on their already-overburdened IT departments. Low-code platforms build on the model-driven development approach: Users interact with graphical models and configure pre-built application components to create functional applications. This allows business users to construct complex applications without having to be proficient coders. Model-driven development allows smaller teams to deliver software faster. Analysts forecast a 55 percent CAGR for the low-code platform market over the next five years, reaching a market size of over $15 billion by 2020.29

    Testing the limits of pervasive software development

    For all its benefits, turning everyone into software developers is not a panacea for slow application development cycles or software budget overruns. Democratizing software development introduces new risks: APIs are deprecated (declared obsolete), cloud providers change terms of service, and low-code platforms impose limits on customization and optimization.30 Additionally, with the business lines empowered to develop their own applications, self-developed apps can pop up across an enterprise like mushrooms—a financial-services company says it runs more than 1,000 discrete applications on its low-code platform; a travel-services firm runs 2,300 apps.31 This proliferation of apps can cause governance issues and introduces novel risks that IT organizations need to manage. All of this means that the role of traditional IT is not diminishing but transforming. Enabling secure and productive environments for pervasive software development may mark the difference between successful development efforts and “shadow IT.”32

    Implications for tech strategists

    Business leaders should consider adopting and distributing pervasive software development tools to help drive digital transformation. As software development becomes cheaper, companies will be able to digitize more business processes with less effort. Companies will also be able to formulate digital responses to market opportunities at greater speed. Business line and function leaders will need to get comfortable overseeing app development in their ranks.

    Talent leaders must expand what it means to be “tech fluent.” Employees of the future will not only be literate users of technolog—increasingly, they will be shapers and even developers of it as well. This means that companies, after offering resources and training, should expect talent in non-IT groups to cultivate their own development activities and build skills to contribute to application development.

    Software vendors will face growing expectations for customization. As software development spreads throughout companies, software vendors will face increasing pressure to allow for significant customization of their own platforms. Companies such as Salesforce and Oracle are already providing tools to build apps on top of their products. This trend will grow in significance as they continue to open their products—with APIs, for example, further embracing platform strategies. By the same token, start-ups will see opportunities to challenge and disrupt incumbents.

    These trends are about more than IT—they have implications for operations and for strategy as well. At a time when digital transformation has become a strategic priority for many organizations, mastering pervasive software development could mean the difference between being a leader and being disrupted.

    Credits

    Written By: Ragu Gurumurthy, Peter Gratzke, David Schatsky

    Cover image by: Molly Woodworth

    Acknowledgements

    The authors would like to acknowledge the contributions of John Ream of Deloitte LLP and Sourabh Bumb and Navya Kumar of Deloitte Services India Pvt. Ltd.

    Endnotes
      1. Frederic Lardinois, “Google launches App Maker,” TechCrunch, November 30, 3016, http://tcrn.ch/2fM1sC8. View in article

      2. Frederic Lardinois, “Microsoft launches PowerApps, makes building business apps easier,” TechCrunch, November 30, 2015, http://tcrn.ch/1QPqgcc. View in article

      3. Simon Bisson, “The future of apps: How Salesforce is using low code development,” ZDNet, June 27, 2016, http://zd.net/28YfuQ8. View in article

      4. Paul Krill, “Oracle Visual Code brings cloud-based app dev to business users,” InfoWorld, September 21, 2016, www.infoworld.com/article/3122837/application-development/oracle-visual-code-brings-cloud-based-app-dev-to-business-users.html. View in article

      5. Forrester, Vendor landscape: The fractured, fertile terrain of low-code application platforms, January 15, 2016, www.forrester.com/go?objectid=RES122549. View in article

      6. Doug Flora, “Building for the open API economy,” IBM Bluemix blog, May 10, 2016, www.ibm.com/blogs/bluemix/2016/05/building-for-open-api-economy/. View in article

      7. Deloitte analysis based on CB Insights data. View in article

      8. Black Duck Software, “The tenth annual Future of Open Source Survey,” www.blackducksoftware.com/2016-future-of-open-source, accessed February 13, 2017. View in article

      9. Elizabeth Dwoskin, “Tech firms grapple with how to make open source pay,” Wall Street Journal, March 3, 2016, www.wsj.com/articles/tech-firms-grapple-with-how-to-make-open-source-pay-1457031731. View in article

      10. US Department of Labor, “Software developers: Job outlook,” Occupational Outlook Handbook, www.bls.gov/ooh/computer-and-information-technology/software-developers.htm#tab-6, accessed February 13, 2017. View in article

      11. Sylvain Kalache, “Tech companies pitching in to battle the talent shortage,” CIO, October 19, 2016, www.cio.com/article/3130691/education/tech-companies-pitching-in-to-battle-the-talent-shortage.html. View in article

      12. Khalid Kark, Mark White, Bill Briggs, Anjali Shaikh, Navigating legacy: Charting the course to business value, Deloitte University Press, November 10, 2016, /content/www/us/en/insights/topics/leadership/global-cio-survey.html. View in article

      13. Red Hat, “Opensource.com,” https://opensource.com/resources/what-open-source, accessed February 13, 2017; Andy Murren, “What is open source software,” Sila Solutions Group, October 4, 2016, http://csrc.nist.gov/scrm/ssca/documents/Fall_2016_Presentations/Tue_AM_1_What_OSS_Is_and_Is_Not_Andy_Murren.pdf. View in article

      14. Donald Feinberg and Merv Adrian, “The state of open-source RDBMSs,” Gartner, April 21, 2015, www.gartner.com/doc/3033819/state-opensource-rdbmss-. View in article

      15. Bernard Golden, “Why enterprises embrace open source,” CIO, June 1, 2015, www.cio.com/article/2928658/open-source-development/why-enterprises-embrace-open-source.html. View in article

      16. SourceForge, “Enterprise-ready open source projects,” https://sourceforge.net/directory/enterprise, accessed February 13, 2017. View in article

      17. Laurie F. Wurster, Bob Igou ,and Zeynep Babat, “Survey analysis: Overview of preferences and practices in the adoption and usage of open-source software,” January 24, 2011, www.gartner.com/doc/1528219/survey-analysis-overview-preferences-practices. View in article

      18. Steven J. Vaughan-Nichols, “Apple, Microsoft, VMware: Everyone’s building open-source software,” ZDNet, August 29 2012, www.zdnet.com/article/apple-microsoft-vmware-everyones-building-open-source-software/. View in article

      19. Black Duck Software, “The tenth annual Future of Open Source Survey.” View in article

      20. Dwoskin, “Tech firms grapple with how to make open source pay.” View in article

      21. Margaret Rouse, “Application program interface,” TechTarget, http://searchexchange.techtarget.com/definition/application-program-interface, accessed February 13, 2017. View in article

      22. Josh Constine, “Accel bets big on startup-to-startup APIs,” TechCrunch, March 18, 2015, http://tcrn.ch/1x1wJJ1. View in article

      23. Michael Yamnitsky, “The API management solutions market will quadruple by 2020 as business goes digital,” Forrester, June 7, 2015, http://blogs.forrester.com/michael_yamnitsky/15-06-07-the_api_management_solutions_market_will_quadruple_by_2020_as_business_goes_digital. View in article

      24. Deloitte analysis based on CB Insights data. View in article

      25. Apigee, The state of APIs: 2016 report on impact of APIs on digital business, March 2016, https://pages.apigee.com/rs/351-WXY-166/images/apigee-state-of-APIs-report-2016-03.pdf. View in article

      26. Apprenda, JPMorgan Chase & Co.: Next generation enterprise IT, https://apprenda.com/case-studies/jpmorgan-chase/, accessed February 13, 2017. View in article

      27. Gartner, “Gartner says worldwide public cloud service market is forecast to reach $204 billion in 2016,” Januaryh 25 2016, www.gartner.com/newsroom/id/3188817. View in article

      28. IDG, “2016 Cloud Computing Survey: Executive summary,” November 3, 2016, http://core0.staticworld.net/assets/2016/11/03/cloud_exec_summ_2016.pdf. View in article

      29. Forrester, Vendor landscape: The fractured, fertile terrain of low-code application platforms. View in article

      30. Rob Marvin, “Building an app with no coding: Myth or reality?”, PC Magazine, June 30, 2016, www.pcmag.me/a/2504907. View in article

      31. John R. Rymer et al., Low-code platforms deliver customer-facing apps fast, but will they scale up?, Forrester, August 11, 2015, www.forrester.com/report/LowCode+Platforms+Deliver+CustomerFacing+Apps+Fast+But+Will+They+Scale+Up/-/E-RES122546#endnote1. View in article

      32. Don Clark, “Cisco reports rapid rise of unauthorized cloud usage,” Wall Street Journal, January 13, 2016, www.wsj.com/articles/cisco-reports-rapid-rise-of-unauthorized-cloud-usage-1452690000. View in article

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    Ragu Gurumurthy

    Ragu Gurumurthy

    Chief Innovation & Chief Digital Officer

    Ragu serves as the chief innovation and chief digital officer of Deloitte LLP and the chief innovation officer of Deloitte Global. In his dual role as the US and Global Innovation leader, Ragu is responsible for collaborating with each of the US businesses and across member firms to help increase the innovation and digital coefficient of the firm. He works with member firm leaders and global business leaders to drive strategic growth offerings and cross border commercialization of assets. Ragu is also a principal in the Strategy & Analytics practice of Deloitte Consulting, focusing on the Technology, Media, and Telecommunications sector. He has a unique blend of operational, principal investing, and advisory experience in the technology and telecom sectors. He has extensive experience helping clients in their efforts to adopt ideas to significantly improve their organization's performance. Prior to Deloitte, Ragu gained professional experience in consulting, private equity, and product management. He has authored several articles and has been cited in numerous news publications including The Wall Street Journal, The New York Times, Forbes, Bloomberg News, Reuters, The Financial Times, and Deloitte Review. His most recent publications in Deloitte Insights have focused on artificial intelligence, cognitive computing, and big data. Ragu earned his Master of Business Administration degree from MIT Sloan School of Management, his Master of Science in management information systems from the University of Texas, and his Bachelor of Science in physics from Madras University.

    • rgurumurthy@deloitte.com
    • +1 203 708 4743
    Peter Gratzke

    Peter Gratzke

    Senior Consultant | Innovation | Deloitte LLP

    Peter is a senior consultant at Deloitte LLP. He tracks and analyzes emerging technology and business trends, focusing on the growing impact of cognitive technologies, for Deloitte’s leaders and its clients. Before joining Deloitte, Peter worked at an international economic organization and held various roles in municipal and national governments in the United States and Europe. He is the author of multiple publications on economics, innovation, and entrepreneurship.

    • pgratzke@deloitte.com
    • +1 212 436 2509
    David Schatsky

    David Schatsky

    Managing Director | Deloitte LLP

    David analyzes emerging technology and business trends for Deloitte’s leaders and clients. His recent published works include Signals for Strategists: Sensing Emerging Trends in Business and Technology (Rosetta Books 2015), “Demystifying artificial intelligence: What business leaders need to know about cognitive technologies,” and “Cognitive technologies: The real opportunities for business” (Deloitte Insights 2014-15). Before joining Deloitte, David led two research and advisory firms.

    • dschatsky@deloitte.com

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