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Friday
May272011

The hype cycle vs legacy…

I am going to talk about a consequence of the hype cycle that seems to be missed by many.  I will use an anecdote to illustrate the point…

About 10 years ago, I was engaged on a short assignment to review a new technology organization's customer service programs.  The company had grown rapidly in a new market that was now maturing.  They had 3 customer service systems.  They had 4 main customer groups served through 4 sales channels.  Each channel used different business processes to execute the same activities and accessed all three systems.  The IT solutions had grown organically with the business and were a mess!  But now, with the market maturing, there were mainstream solutions from major suppliers that could replace these systems that were starting to constrain the business.  However, the cost of resolving this, $15M, was seen as too expensive.

A few years later, the organization had lost its competitive position, had moved from number 1 to number 2 and was taken over by a foreign competitor entering the market.  With a more complex product portfolio, more customer groups, a more complex sales model, the customer services systems were now seen as a major constraint to business growth.  I happened to be engaged through another consultancy to look at the problem again.  This time the cost of sorting it out had grown to $80M.  Again the executive board decided that this was too expensive.

Recently, the organization merged with a major competitor.  I heard that they had embarked yet again on a program to replace their legacy customer service systems.  The market is now much more complex with many more products, it is also more competitive with tighter margins.  The systems have grown in complexity since the last attempt to sort them out.  I suspect the cost this time will be $150M or more.  A ten times increase in cost in ten years. More importantly, the organization was the market leader 10 years ago but now it is in 3rd position with a likely drop to 4th.

SAM_0149a

The key point is that everything that you build before good practice emerges is likely to be poorly designed and poorly built.  It should be thrown away and you should start over.  If you don’t you will inevitably perpetuate bad practice.  Future development will be compromised because time pressures to deliver tactical business change and the constraint of the legacy.  And the cost of replacing it to deliver strategic business change will grow over time.

Sometimes I wonder why there is so much legacy.  The answer is obvious if you overlay the adoption cycle with hype cycle…

SAM_0156

So what are the lessons:

  • It is never too late to sort out your legacy
  • Don’t build on bad practice
  • The so called first mover advantage can be a handicap
  • Build knowledge before building solutions

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Reader Comments (5)

Take the point where you should start over as the beginning of a new hype curve. The hype won't be as large the second time round as you don't really have new technology and it's the same audience that was disappointed last time. But as you have more understanding of the problems there will be lot less disappointment.

You gain more understanding by doing things over, and end up a lot higher on the chart. On top of that you've lost some legacy problems, had a second round of hype which the marketing guys love and have a better product.

May 29, 2011 | Unregistered CommenterStephen Turner

I have seen the problem stated in your article with so many company. Inherent organic growth of business and IT doesnt ADOPT to the new growth. The cost of having the cosmetic face lift to the existing IT may be small but it cannot really support the growing business needs. The Adoption Cycle is realy the Key. Good One But Customers Still want to save the dollars

July 20, 2011 | Unregistered CommenterAjay S Solanki

I like the topic and means of analysis. I believe the point identified in the top diagram "This is where you should start over" is too far to the right. Legacy direction and future roadmaps should be planned prior to that point - the planning and slow migration to the new programs should actually start when "Reality Dawns" or even before (according to risk profile, strategy, and budget of the organization). This slow approach avoids the huge price tags, but requires some pretty good planning.

August 1, 2011 | Unregistered CommenterPaul Helmering

I am slightly struggling to understand how this can be applied to "Product" (or systems instead of technologies. This works for technologies but does this apply equally for systems? (COTS or otherwise)

October 25, 2011 | Unregistered CommenterRohit Sharma

Product - it depends on the overall ambition and complexity of the product. An ERP, for example, has a huge ambition and is highly complex. Successful implementation is about business transformation. The interesting thing here is that the scale and complexity is so high that the time to implementation is sometimes longer than the time between major upgrades. This means that unless organizations implement old versions then the market will never reach maturity.

November 27, 2011 | Registered CommenterAlan Inglis

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