Business Value for Developer

Whenever we create an application, a very strong statement were always thrown around.

“We want to provide as much business value for the business”

There was nothing wrong with this statement. But when we asked further with question of “How?” and what do we mean by “Value”, nobody seems to be able to give a straight answer.

When someone says “business value” in business, they usually means The Dollar.

For a project to be approved and move forward to production, someone requires to justify how it would benefit the company. These benefits are usually in terms of how much it would save the company in the long run, or how much the company would make by embarking on these new adventures. At the end of each financial year, this is how companies are usually being assessed on their performance.

Let’s look at the basic in business.

Scenario 1: Simple buying and selling.

If I buy 10 Apples for $1.00 Ea, the cost of buying me an Apple is $10.00.

If I sell the Apple for $2.00 Ea, and I managed to sell all of them, my gross revenue is $20.00 and my profit is $10.00.

Let’s add another variable to it.

If my salary is $100.00 / hr and it took me 2 hours to buy/sell those apples, the extra cost for the company is $200.00 to buy/sell those apples.

If I buy only 10 apples, the profit of the company is -$190.00 for those apples.

For the company to be at least break even with the apple business and paying my wage, I’d need to buy/sell at least 200 apples in every 2 hours. This however, does not answer the question whether it was justifiable to hire me for buying and selling apples in the first place.

Let’s see how this scenario might evolve when we develop a software.

Scenario 2A project to make more money by enabling company to offer more for a particular targeted market segment.

Salary of the developer: $100.00 / hr.

The developer estimates, it would take them 3 months to deliver the project. This equates to 12 weeks of project. With enough knowledge of project management, the developer added a contingency to that 12 weeks of 20%, and this added 2.4 weeks more. Let’s round that up to 3 weeks and hence the project is a 15 weeks project.

Supposedly the developer is working 7.5 hours per day, 15 weeks of project is 562.5 hours and it cost the company $56,250.00 to pay the developer for the software. In here of course we assume as the developer being hired is a skillful one, hence the application will be finished and launched to the production by the end of those 15 weeks, and at the earliest 12 weeks.

If the new application estimates to make new profit of $2,000.00 (after tax) per month (because making money is harder than spending them…), It would take the company 28.125 months (just about 2 years) before covering up the cost of the developer.

Adding the length of time to develop of 15 weeks, it means the company can only get any any profit after about two and half years.

The project was a success, it meets the budget and was on time. But does this application consider as a success?

What does this means?

As a software developer, usually we do not need to make the justification such as the above because someone has already make them. But they are the more reasons why collaboration between the business and IT in any projects is necessary.

Any business that developed software is a software company

Businesses that fails to understand this will ultimately fail managing their IT. Businesses run by taking risks. They create contingencies, mitigate risks and plan for the best. They compete in the market with others and try to win the war by winning smaller battles. IT however were train to make complex things more complex by thinking of the edge cases. The art of any good IT individual is to make complex thing simple whilst not making it simpler.

As developers, it becomes very critical to understand the business we are in. This drives the application development and effectively becomes the value of the application itself. Value for any applications created for the business are measured and driven by how well the business perform after the application is being used. Only by understanding this and combined with integration and collaboration of IT in the business, IT will stop being the cost department and starts being revenue maker.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s