You might be familiar with the OutSystems platform. It provides full-stack development and the ability to manage applications during their entire lifecycle. It has been used by thousands of organizations worldwide to create applications for customer experience transformation, workplace innovation, process automation and modernize applications. The technology and use cases are amazing! But how does that translate into business value?
The ROI Axis
IT applications are created with a single purpose: to deliver value to the business. Value can be delivered in many different ways: optimize processes, increase customer retention, or even comply with a regulation. No matter how great it looks or how cutting-edge the technology is, without value, it has no purpose.
Business value is the capacity to help a business reach a goal, but being valuable is not enough. Businesses usually measure value in terms of money - our economic standard unit for quantifying value. Something is only said to have business value if its value exceeds its costs. In the context of IT applications, the costs are all expenses necessary to keep it running: support, maintenance, subscription, infrastructure, etc.
Business Value = Value - Cost
IT applications also have an implementation cost. This type of cost is different from the others because it only happens once, and it must be paid for upfront. Implementation costs are all costs that come prior to go-live: software development, project management, systems integrations, licenses fees, system configuration/ customization, etc.
Between the business value and the implementation cost, there is a relationship called ROI (return on investment). That is the rate of return a business receives for a given investment. No decision-maker will invest 100 in a project that produces 80 in return. Investing 100 in a project that produces 300 might be interesting, depending on the target ROI.
We can visualize the relationship between these 3 concepts with a chart. In a 45-degree angle, we have the ROI Axis, or the threshold payoff of an investment. The larger the implementation costs are, the larger the business value needs to be in order to justify the investment. The ROI Axis determines a project’s feasibility. Any project with a business value x implementation cost combination that falls above the ROI Axis is worth implementing, and the ones that fall below are not.
Notice there is a special place in the bottom left corner of this chart. Those are the small projects with little cost and little value, which makes them little relevant. The IT department usually doesn’t have the resources nor the time to work on those projects, so the business users might end up coming with creative solutions that are not managed by IT. That is the realm of shadow IT.
IT Project ROI
The distance between an IT project dot and the ROI Axis is a measure of its ROI. The larger the distance, the better the ROI. If we plot the IT projects in this chart while considering their Business Value x Implementation Cost combination, we will notice that they tend to be around the ROI Axis. This is because the projects too far up must have been already implemented, given their high return on investment, and the ones too far down are too expensive or bring too little value to even be considered.
The application backlog requires a prioritization. This will ensure that the organization will maximize the ROI over time, creating an implementation pipeline with the best cost x return ratio.
With that understanding, we can now take a deep dive to the benefits of adopting OutSystems as the platform for IT projects and digital transformation.
Take Your Projects From Backlog to Production
The most obvious benefit of the OutSystems platform is the ability to develop and deliver fast. This empowers organizations to turn their projects from backlog into reality at a much faster rate. IT projects only start producing business value once they are live and running - projects in the backlog bring zero results. The more projects your organization has on backlog, the greater the value of adopting OutSystems platform. Customers that adopt OutSystems and create a cadence of applications implementations soon find new ideas that they didn’t think were possible before, increasing adoption and ROI.
OutSystems not only helps bring your projects to life, but increase their overall ROI.
Build Fast: Reduce Implementation Costs
Using OutSystems makes the whole implementation cycle shorter (application development, debugging, and testing), requiring less time, resources and investment on each project. This implies in an overall reduction in Implementation Costs, which in our chart means that all applications are shifted to the left.
Pushing applications to the left results in 2 major benefits:
- The applications already above the ROI Axis are now even further from it. Because the application’s ROI is measured by its distance from the ROI Axis, all applications gained an ROI boost.
- Some applications that were below the ROI Axis are now above it. This means that a project that wasn’t viable suddenly presents a positive ROI, creating even more opportunities to deliver business value.
Build Right: Modernize Legacy to Increase Business Value
There is a set of applications that are part of the IT landscape but fall below the ROI Axis. Those are applications that were built in a past where they provided a positive value. With the passage of time, its technology might be obsolete, it might not be fully integrated with the rest of the ecosystem due to technical limitations, or it might not even provide the necessary value because the business conditions have changed. These are called legacy applications. Their maintenance costs alone usually far exceed their business value, thus falling below the ROI Axis.
A strong use case for OutSystems is the modernization of legacy applications with an opportunity to:
- Include new features.
- Improve non-functional requirements, such as security, scalability and performance.
- Add new integration capabilities.
- Update the technology stack.
Legacy applications have a unique potential for business innovation. They usually support key customer-specific business processes and their requirements are nuanced, not catered for by COTS. By modernizing them, companies can create specific intellectual property that is only available to them. This creates a genuine opportunity to differentiate and transform their business.
Application modernization comes in 3 different flavors, and OutSystems provides you with the capabilities to achieve all of them. It is important to understand the possibilities to evaluate the best option for each system depending on the current status and company goals.
- Encapsulation: Create a “wrapper” around the legacy application, providing it with modern integration capabilities, new business logic, and even a new user interface. This case works better when the legacy application itself is left untouched.
- Rebuild: The legacy application is mapped and rebuilt in a new, modern architecture. The new application has modern integration capabilities and the ability to execute in a different, modern runtime environment.
- Rethink: This is the most thorough change. The business processes fulfilled by the legacy application are remapped and a new application is redesigned from scratch. This option provides the most freedom and flexibility to adjust to new business processes and changes that could not be addressed by the old application anymore.
All these factors can greatly enhance the business value of a legacy application, bringing it again above the ROI Axis.
“Build right” does not apply only to legacy applications augmentation. OutSystems capabilities also increase the business value for new applications. Although it is not represented in the chart, applications built with OutSystems experience not only a shift to the left because of speed but also a shift up because of the lower maintenance costs.
Build for the Future: Keep Your Applications Competitive
The last ROI improvement point is how OutSystems assures that your applications remain competitive. Applications tend to lose business value over time. The market changes, new technologies arise, technology stacks evolve, and workforce skill sets start to follow the trends, making recruiting and retention more difficult. It is important to build future-proof applications so they can stand the test of time, protecting your investment.
OutSystems provides just the right tools for this. Your applications are developed in the OutSystems visual language. As the technology evolves, the platform is adapted to incorporate changes in underlying stacks seamlessly. Non-functional requirements, such as security, scalability, and performance are built in the platform, and evolve according to the new, future technology standards. By leveraging the fast development capabilities of OutSystems, organizations can evolve applications and create new functionalities to respond to market changes. According to research from Business Value Consulting team, OutSystems customers:
- Improve application stability and reduce code defects to lower application maintenance costs by 25-50%.
- Reduce post-live/ongoing application development and enhancement costs by 35-65%.
- Reduce the overall lifetime cost of building, supporting, and owning applications by 10-40%.
The goal of the OutSystems platform, with its great power and technology, is to help organizations execute on their IT projects and reap enormous business value. The platform’s capacities to build fast, right and for the future translate into different capabilities to improve the ROI of IT applications. By bringing projects from backlog to production quickly, reducing implementation costs, modernizing legacy applications, and creating future proof applications, OutSystems platform itself is the investment with the best ROI an IT department can find.
For more information about the Business Value of OutSystems, download our business value eBook.