03 August 2010

UtilityVsStrategicDichotomy: Martin Fowler

One of the most important ways in which these efforts differ is where the risks lie. For utility projects the biggest risk is some kind of catastrophic error - you don't want the sewage pipe to break, or to miss payroll. So you need enough attention to make sure that doesn't happen, but other than that you want costs to be as low as possible. However with strategic projects, the biggest risk is not doing something before your competitors do. So you need to be able to react quickly. Cost is much less of an issue because the opportunity cost of not doing something is far greater than costs of software development itself.

This is not a static dichotomy. Business activities that are strategic can become a utility as time passes. Less often, a utility can become strategic if a company figures out how to make that activity a differentiator. (Apple did something like this with the design of personal computers.)

One way this dichotomy helps is in deciding between building custom software and installing a package. Since the definition of utility is that there's no differentiator, the obvious thing is to go with the package. For a strategic function you don't want the same software as your competitors because that would cripple your ability to differentiate.

Ross goes so far as to argue that there shouldn't be a single IT department that's responsible for both utility and strategic work. The mindset and management attitudes that are needed for the two are just too different. It's like expecting the same people who design warehouses to design an arts museum.

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