SOURCE: The Standish Group

December 14, 2010 10:00 ET

Application Modernization Projects Have the Highest Likelihood of Success, and Deliver the Fastest Route to ROI: Standish Group

BOSTON, MA--(Marketwire - December 14, 2010) - In its latest research report, the Standish Group has found that application modernization projects have the highest likelihood of being completed on time, on budget and with all critical features included when compared to alternative approaches.

The new report, Modernization: Clearing a Pathway to Success, delivers an objective comparison of the cost, risk and ROI associated with rewriting, buying a package, and modernizing a particular order processing application. The study found that, in this situation, application modernization had the highest likelihood (53%) of being completed on time, on budget and with critical features included. This compares to a 30% success rate for replacing the order processing application with a commercial off-the-shelf (COTS) package and just 4% success when re-writing the application from scratch using the latest tools and techniques.

Since introducing the CHAOS report in 1994, The Standish Group has been the leading provider of software project management research and reporting, building a database of the experiences of more than 70,000 cases of completed IT projects. In a recent engagement with an organization looking to improve its mission-critical order processing application, they drew a statistical picture of the data that closely matched the organization's proposed project and predict the expected resolution results, cost overrun and ROI experience for each of the three options. The current system in use by the organization is estimated to cost the company in excess of $1.8 million per annum in lost orders, extra labor, and additional inventory.

Resolution Results Comparison
The following table shows the likelihood of resolution of the project in all three cases:

Resolution/Project 1: Application development 2: Package application 3: Application modernization
Successful 4% 30% 53%
Challenged 47% 54% 39%
Failed 49% 16% 8%

Expected ROI Comparison
The following table shows the expected return on investment in all three cases:

ROI 1: Application development 2: Package application 3: Application modernization
High 11% 34% 52%
Average 66% 57% 37%
Low 23% 9% 11%

The full report, which can be downloaded here, includes analysis beyond a simple cost and time comparison. It takes into consideration factors such as the likelihood of time and budget over-runs, exposure to risk, and includes the top three reasons why projects fail.

Peter Gadd, VP, Modernization, Micro Focus, comments on the findings: "This report delivers valuable insights into the challenges and success factors that need to be considered when undertaking any business-critical IT modernization project. The research findings certainly support what we are hearing from many CIOs -- that modernizing mission-critical applications is often the lowest risk approach which returns value much faster than the alternatives. While no two projects are ever the same, we urge CIOs who are evaluating the best approach for their business-critical applications to read the research findings as it includes information that could help determine which option makes the most business sense for their organization."

"We have been studying the art of application development and project management since the early 1990s," states Jim Crear, CIO of The Standish Group. "Whether you are developing an application from scratch, customizing a software package or modernizing an existing application, all options have their own attributes and challenges that need to be taken into consideration.

"Since modernization projects are pre-optimized, requiring no process changes and little to no training, it is often the best route to take for business-critical applications. By definition, you get the same application you had before the project, but on a more flexible and less costly platform, making it easier to further improve the value it delivers to the organization."

About the Standish Group
Since 1985 The Standish Group, the leader in spotting future trends, has been helping end users and vendors of technology solutions prepare for the future. Standish's cumulative research encompasses 15 years of data on why projects succeed or fail, representing more than 70,000 completed IT projects. Through CHAOS University, The Standish Group has hosted almost 500 specially designed workshops, as well as focus groups, project assessments, project group therapy sessions, and executive retreats that focus on particular issues of project management.
For further information on project studies and other trends, visit our website at: www.standishgroup.com.

Research Methodology
The Standish Group evaluated the order processing capability of an organization running on an IBM z10 mainframe and consisting of two million lines of COBOL/CICS code. The organization plans to upgrade the application and reduce the total cost of ownership by running it on commodity hardware and software. The Standish Group was brought in to deliver an objective comparison of the cost, risk and ROI associated with rewriting, buying a package, and modernizing the software application, evaluating the likelihood of the project being completed on time, on budget and with critical features included.

The CHAOS Project database provided the cost, risk, gain, and reasons for success and failure. All three methods were matched against the profile, with a 90% match of the 120 attributes of more than 100 projects. Since 1994, The Standish Group has been studying research project success factors and best practices. The company has 10 factors of success and each success factor has 10 best practices. Each best practice has been assigned weighted points. A perfect score would be 100 points; however the top 30 best practices add up to 50 points. The TCO database gave the operating costs for the application running on commodity hardware versus the IBM z10. A special CICS project database allowed verification of the project cost.

Contact Information

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