Analysis from our State Of Application Development 2018 survey suggests that mid-sized businesses may be struggling with digital transformation compared to larger and smaller companies. What is the evidence of this, and how can low-code level the playing field?

I Have a Theory

Monty Python fans amongst us will remember Anne Elk's (Miss) theory about brontosauri. (Spoiler alert; they are fat in the middle.)

Once you’ve watched that, and regained your composure, prepare yourself for a counter theory that is thin in the middle. Here it comes, this is my theory, and it’s all mine. (Cue throat clearing.)

The squeezed middle theory: Mid-sized businesses have a particular struggle with IT. More specifically, compared to smaller companies on the one hand and larger enterprises on the other, mid-sized businesses have an agility shortfall called the “squeezed middle.” Here is my reasoning:

  • Small and youthful businesses have not yet amassed complexity and legacy issues. That gives them an agility advantage compared to larger organizations. They are more likely to have grown up in the cloud era, or thanks to their comparative simplicity, they’ve found it easier and quicker to modernize IT compared to their larger counterparts. Less bureaucracy and faster decision making help them counteract the disadvantage of meager resources.
  • Multinational enterprises have grown up over decades if not centuries. They have international presence and deep pockets. Despite the years they’ve had to amass complexity and legacy debt, their vast resources keep innovation and agility to the fore. Their ability to recruit from a global talent pool and their use of low-cost offshore technology centers mean sheer horsepower can overcome the inertia that might otherwise slow down digital transformation.
  • By comparison, mid-sized businesses have been around long enough to become burdened by complexity and legacy debt. They lack the global reach, budgets and sheer horsepower of giant multinationals. For them, it’s the worst of all worlds: almost as much complexity as large enterprises, but by comparison a fraction of the resources needed to sort things out.

I admit this isn't a particularly advanced theory, and it's unlikely to be turned into comedic genius, even by Monty Python. Instead, it is merely a combination of common sense and my experience of working in businesses both large and small.

It’s a Hypothesis, You Dullard!

Just in case there are scientists amongst you who are screaming, I had better admit, this is so far simply a hypothesis. However, when I took charge of this year’s State Of Application Development survey, it provided the opportunity to test my hypothesis and nudge it in the direction of a theory.

The State of Application Development, 2018

Each year OutSystems sets out to provide the most comprehensive analysis of the state of application development. The 2018 survey was the fifth of its kind, and over 3,500 respondents took part. The resulting 30-page report (you can download it here) answers five critical questions:

  1. How are app dev priorities adjusting to this digital age?
  2. What are the main challenges of meeting app dev goals?
  3. What strategies are IT teams employing to increase app dev capacity and speed?
  4. Are these strategies working to overcome resource constraints, and reduce backlogs?
  5. Are new app dev practices such as low-code and citizen development making a difference?

We analyzed the results by company size and found several clear indications that mid-sized businesses are indeed falling behind, compared to both smaller and larger companies.

The Squeezed Middle

For the sake of this analysis we divided respondents into four segments based on number of employees:

  1. Less than 500 employees
  2. Between 500 to 4,999 employees
  3. Between 5,000 to 10,000 employees (“mid-sized organizations”)
  4. Over 10,000 employees (“large enterprises”)

The squeezed middle is segment #3 (mid-sized organizations), with between 5,000 to 10,000 employees. Here’s what we found.

1. Less Happy With the Speed of Application Delivery

We asked respondents how happy they felt their organization was with the speed of application delivery. Fewer respondents (37%) from mid-sized organizations described their organization as happy or somewhat happy. This was 4% less than the overall average, and 6% worse compared to organizations with between 500 to 4,999 employees.

2. More Likely to Outsource Development

Respondents were asked if they had outsourced either web or mobile development during the past year. On average, 55% of respondents said that their organization had outsourced such development. Mid-sized organizations were most likely to outsource some web and mobile development at 61%. Large enterprises claimed to make the least use of outsourced development at 49%.

3. Lagging Agile Maturity

We asked respondents to assess their level of agile adoption, using this five-level maturity model.

Agile Maturity Model:

  • Level 1 - Initial: We lack consistency and need training to get everyone aligned.
  • Level 2 - Just Started: Processes not fully defined. Basic level of agile adoption. Development and testing are not fully in sync yet.
  • Level 3 - Defined: Our whole team is using well-defined agile processes, and we're consistently delivering spring after sprint.
  • Level 4 - Measured: We measure code quality and other key measures. Our focus is on engineering maturity.
  • Level 5 - Optimizing: We develop on schedule and release on demand. We’ve invested in automation for continuous integration and deployment. Consistent delivery across teams. Self-organized, sustainable, continuous improvement based on KPIs.

Overall, 21% of respondents described their agile maturity as level 4 or higher. However, the self-assessment of mid-sized organizations was much lower, with just 13% describing their agile maturity as level 4 or 5.

4. Lagging DevOps Maturity

We asked respondents to assess their level of DevOps maturity, using this five-level maturity model

DevOps Maturity Model:

  • Level 1 - Not Started: Outages, war-rooms, blame, unplanned work, delays, and defects.
  • Level 2 - Starting: Thinking about cultural change, starting to write scripts, looking at test automation.
  • Level 3 - Fundamental: Automated build, cross-functional teams, product-focused, cultural change is underway.
  • Level 4 - Managed: Happy people, integrated tool chain that preempts failure, automated test, and deployment, continuous delivery.
  • Level 5 - Optimizing: DevOps is done, fine-tuned, and tied tightly to business goals.

Overall, 19% of respondents described their DevOps maturity as level 4 or higher. However, the self-assessment of mid-sized organizations was significantly lower, with 6% fewer describing their DevOps maturity as level 4 or 5.

5. Worse Backlogs of Web and Mobile Development

We asked whether respondents had a backlog of web and mobile projects stacking up because they could not meet the current level of demand. Mid-sized organizations reported the worst backlogs. Only 30% said they had no backlog, 53% said they had a backlog of 1-10 applications, and 17% estimated that they had more than 10 applications in their backlog.

Comparing the performance of mid-sized organizations to larger enterprises revealed an even more significant underperformance by mid-sized organizations:

  • 13% fewer with no backlog
  • 7% more had a backlog of 1-10 projects
  • 6% more had a backlog of over ten projects

6. Hiring Developers is Harder

We asked respondents whether recruitment of web and mobile developers was challenging. 80% of respondents at mid-sized organizations complained of a developer skills shortage, saying that hiring takes longer and costs more. This assessment was marginally more pessimistic than responses from large enterprises at 78%.

Despite this thin margin, it struck a chord with me. Mid-sized organizations could be less attractive to potential recruits, who might be more drawn either to smaller, more trendy start-ups or larger enterprises that offer greater prospects for career progression.

7. Less Successful at Governing Citizen Developers

Governance of citizen developers seems to be more of a problem for mid-sized businesses, with 32% complaining that citizen development was either uncontrolled or inadequately governed. By comparison, respondents from large enterprises claimed to have the least problem governing citizen developers—with just 25% describing such governance as failing or of limited success.

8. Slower to Adopt Low-code Compared to Smaller Organizations

We asked respondents whether their companies were already using a low-code platform. Mid-sized businesses appear to be considerably behind smaller companies with only 32% adoption, compared to 43% adoption by respondents with 500-4,999 employees. The notion that large enterprises are using sheer horsepower to overcome inertia was borne out by one scary statistic. According to our survey respondents, just 19% of large enterprises are already using low-code. (If you work for a mid-sized organization, and you are not sure why that’s scary, see below.)

The Squeezed Middle Theory Seems to Have Legs

According to these eight IT performance measures, it does seem that mid-sized organizations are struggling to keep pace with larger and smaller companies. So, for now at least, my theory (did I mention it is mine?) lives on.

Low-Code: The IT Savior for Mid-Sized Organizations

What should mid-sized organizations do to catch-up? Statistic #8 provides the answer. Those that have not yet invested in low-code should make it a priority. Coming from OutSystems, that probably sounds glib. However, perhaps the following report findings will persuade you otherwise.

Thirty-four percent of respondents said they were already using a low-code platform, and a further 9% said they’d be starting soon. Our analysis revealed a significant performance advantage for companies already using low-code. Here is what we found.

Compared to those who are not, respondents who are using low-code are:

  • 21% more likely to describe their organization as happy or somewhat happy with the speed of application development
  • 15% more likely to deliver applications in four months or less
  • Less than half as likely to report app delivery times of 12 months or more
  • 15% more likely to describe their agile maturity as level 3, 4, or 5
  • 10% more likely to describe their DevOps maturity as level 3, 4, or 5
  • Nearly three times more likely to say they have no app dev backlog
  • Two-and-a-half times less likely to have a backlog of over ten applications waiting for development
  • Three times more likely to describe citizen development as tightly governed

Given that mid-sized organizations complained most loudly about hiring difficulties and the shortage of web and mobile developer skills, low-code provides the answer here as well. Low-code makes application development accessible to a far broader range of personnel, for example, business analysts, process professionals, business users, as well as professional IT developers.

Finally, such an enlarged pool of developers should help mid-sized organizations reduce their over-reliance on outsourcing application development. That is a sure recipe for improving agility, as testified by numerous case studies, including Liberty insurance.

A Final Scary Thought

For most of the IT performance measures mentioned above, mid-sized organizations are trailing large enterprises, many of whom have not yet adopted low-code. However, it is fast dawning on businesses of all sizes that low-code really can scale and can meet even the most demanding uses cases.

As low-code adoption takes off in large enterprises, the squeezed middle risk falling even further behind unless they seize the low-code advantage first.

About the State of Application Development 2018 Research Report

In its fifth year, the OutSystems annual research report on the state of application development is one of the most comprehensive surveys of its kind. The State of Application Development, 2018 (How IT is Responding to Digital Disruption and Innovation) unveils detailed survey results from over 3,500 IT professionals in all industries across the world.

A free download of this report is available here.