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Understanding the Software Knowledge Gap in the New Normal

Understanding the Software Knowledge Gap in the New Normal 1

Why business and technology need to talk more to get finance working smarter

By Nick Mills, CircleCI EMEA GM

The seismic events of the last 18 months have meant technology is now shaping the way we work more so than ever before. Whilst many businesses are now returning to some semblance of normality it remains the case that technologies like Zoom, Slack, and others, have cemented their place at the centre of the business communications ecosystem.

Understanding the Software Knowledge Gap in the New Normal 2

Nick Mills, CircleCI EMEA GM

And in finance, the change has been even more profound, with thousands of FinTech startups seizing the initiative during the pandemic to accelerate the pace of change.

But it’s not just digital products that have increased in importance. It’s also the case that a higher proportion of legacy businesses now build their own software in-house. Firms now report spending huge budgets on software development.

This means software is now more important than ever. It’s become cliche to say that every company is a software company, but it’s also true.

So it might come as a surprise to some that many areas of software delivery are still stuck in the past.

In our recent research paper, The Business of Software Report: Uncovering the Knowledge Gap, we spoke to more than 2,000 business executives from across various industries in the U.S. and U.K., including finance and banking, to find out how they measure software quality and which metrics they are using across their businesses to understand its delivery.

And we’ve identified a shocking gap between leaders in business and the software teams they trust to deliver products. The gap is one of understanding and measurement.

Almost nine in ten (89%) executives believe they can accurately measure the performance of software engineering teams, but the data tells a different story. At least 40% of respondents are judging the performance of their teams using measures like lines of code and story points, both of which are outdated metrics that don’t accurately reflect good software outcomes in the modern age.

We can go further than just finding a gap though. From the data, we can also estimate how much this could be costing each business. To do this we took the average percentage revenue uplift our respondents said they’d achieve with improved software delivery and multiplied it by the respondents’ mean reported revenue.

By this measure, the business leaders we spoke to estimate that updating their software delivery practices could be worth £92m per business per year.

So, the immediate financial incentive for improvement is clear.

But getting these measures right is important for the future success of businesses too. 80% of respondents believe the success of their business relies on the ability of their software engineers.

And in the new normal, the case for improved software measurement is only going to get more important over time.

In 2021, IT spending on enterprise software is expected to amount to around $517 billion worldwide, a growth of 10.8 percent from last year. And the number of developers to service these software needs will only grow. There were 26.4 million software developers in the world in 2019, a number that in 2023 is expected to grow to 27.7 million and 28.7 million in 2024.

This is even more pertinent in finance, where FinTech and digital services are transforming the industry beyond recognition. One study found that 46% of people now exclusively use digital channels for their financial needs.

And this trend has accelerated rapidly during the pandemic. A landmark study by the World Bank, the Cambridge Centre for Alternative Finance at the University of Cambridge’s Judge Business School, and World Economic Forum, found strong growth across almost all services in the FinTech market through COVID-19, particularly in emerging markets.

All of this rapid growth will require a lot of new software. And in order to really be successful, that software needs to be measured and reported on properly. And that, of course, means the business leaders tasking these software teams with building products need to understand fully what success looks like.

The best way to do this is by talking to developers. We were shocked to find that around half of the businesses we spoke to do not allow developers to choose their own tools. It is surely counterproductive to have management or procurement teams deciding how developer teams they don’t fully understand should best work.

This is just one example of a lack of empowerment that could be costing companies time and energy.

Instead, developer teams should be brought into the conversation early. Businesses might even consider appointing a ‘Developer Experience Engineer’ to handle the intricacies of the developer environment in order to maximise their productivity. These can make it easy for dev teams to focus on their most important purpose and generate the highest value by solving, automating, and eliminating the daily toil developers often encounter.

In any case, communication between teams has never been more important. Understanding the knowledge gap between developers and management is the first step to building bridges between these disparate teams to help them all work smarter.

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