Software Development Challenges and Opportunities

(Last Updated On: February 6, 2023)

An overview of software development challenges and opportunities will help readers with understanding trends leading to good business decisions. The worldwide enterprise software market is anticipated to reach $84.4 billion by 2027, growing at a 6.42% CAGR, according to Yahoo Finance. The globe saw fairly rapid technological development during the previous 30 years. In hindsight, it is true without exaggeration to say that the development of electronic devices and the Internet has had a significant influence on daily living as well as administrative practice. Among many other radical technical developments, the computerization of several business processes and the development of large-scale databases have resulted in significant cost reductions and quality enhancements throughout time. The electronic integration of financial markets and the widespread use of the Internet have cut transaction and communication costs significantly and have brought people from different countries and cultural backgrounds together more closely than was previously possible. This article will give you an overview of software development challenges and opportunities. Keep reading.

Computers are becoming essential tools in practically every industry throughout the world, and many firms today use software development to apply and adapt computers to particular business concerns. These computerization and automation initiatives were once solely used by major organizations since they were so expensive. However, the software sector has grown over time to provide smaller businesses with off-the-shelf products and services. After surviving the devastating dotcom meltdown of 2000, software development companies have made a name for themselves as major participants in the technology sector.

Computing standards and technologies

There are various possibilities and difficulties resulting from the advent of numerous computing standards and technologies. The software industry’s relatively low entrance barrier is one of its primary advantages. Since the software sector is not capital-intensive, effective market entry mostly relies on expertise and an in-depth understanding of a particular industry subject. Entrepreneurs with the necessary abilities may compete with big businesses rather readily, which poses a significant danger to other, much larger enterprises.

The significant reliance on knowledge combined with the relatively short lifespan of computer technology makes knowledge workers particularly crucial to the business. On the other hand, companies need to discover strategies to limit turnover and safeguard their intellectual property. As a result, knowledge workers in this business have more negotiating leverage and demand a different management approach and work environment than those in other industries, particularly those with larger market entry capital needs. The relatively powerful position that software professionals occupy affects corporations’ human resource policies and poses issues with the protection of intellectual property.

There are no import taxes

The still-young sector is endowed with an unlimited supply of fresh options, including the opportunity for businesses to work seamlessly and at minimal expense with other organizations around the world. Furthermore, there are no import taxes, which makes the movement of software across international boundaries highly effective; nonetheless, the sector, with its craft-like professions, suffers from a lack of standards and issues with quality. Traditional management philosophies, such as Weberian bureaucracy, appear to be unable to deal with unpredictable situations, making it challenging for modern managers as well as management science to successfully manage such dynamic companies.

Challenges in the Software Industry

Numerous studies show that current methods for developing software are extremely ineffective and wasteful (Flitman, 2003). The average project efficiency is just 62%, which results in 37% waste. The work effort breakdown for a typical software development project is as follows: 12% planning, 10% specification, 42% quality control, 17% implementation, and 19% software construction (2003). The nature of this resource allocation is subject to several interpretations.

1. Quality control

First, the astronomically high percentage (42%), which is used for quality control, may point to a lack of standards and established work procedures. This significant effort wastage might also be the outcome of ineffective planning and specification procedures.

There is a potential to decrease the 19% share for software building because it depends on the hardware, software, and tools utilized. This may be done by carefully regulating and standardizing internal work processes. But since implementation activities are the major source of revenue, the disappointingly low proportion of only 17% for this activity should worry business owners.

2. Programer’s output

The average American programmer creates about 7,700 lines of code per year, or about 33 each workday, which appears to likewise represent the comparatively low production level noted by Flitman (2003). (Slavova, 2000). It becomes clear how expensive such projects can become when you consider that a sizable software project, like Microsoft Word, reportedly requires 2 to 3 million lines of code and that productivity and quality management are important considerations for today’s software organizations. Finding the cause of the productivity issue and a solution in the form of a management practice presents a challenge for modern software managers.

The fact that the typical American programmer generates merely 33 lines of code every workday, or 7,700 lines of code annually, appears to likewise represent the comparatively low production level noted by Flitman (2003). (Slavova, 2000). Given that a sizable software project, like Microsoft Word, is said to require 2 to 3 million lines of code, it is clear how expensive such projects can become. Additionally, productivity and quality control are top issues for today’s software organizations. The difficulty for modern software managers is identifying the cause of the productivity issue and a solution in the form of management practice.

3. Employee skills

Concerns about software development productivity and quality are addressed in a profusion of recent research. According to Elliott, Dawson, and Edwards’ 2007 analysis, the existing workforce lacks high-caliber skills. The researchers also partially attribute the problem to current company cultures, which might result in unproductive work practices. Project documentation was judged to be inadequate among the major issues because materials lack sufficient depth and are not updated frequently enough. Software testing as a kind of quality control is not used as frequently, and it appears that there aren’t enough quality assurance procedures to guarantee that software is created with quality in mind from the start. Companies, where employees prefer to avoid conflict and, as a result, steer clear of product tests, were shown to have poor organizational cultures (2007).

4. In-effective corporate culture

Since the knowledge of employees is what drives software companies, managers now have a significant problem in developing an effective corporate culture. Recently, Mathew looked at the connection between organizational culture and quality and productivity in the software industry (2007). The human-centered nature of software companies and their reliance on knowledge workers are also reflected in their massive expenditures on salaries and benefits, which account for more than 50% of their income. As the sector develops and expands, firms have the issue of managing a larger workforce, which puts culture at the forefront of management. According to Mathew’s (2007) research, cultivating a culture of trust has the most impact on productivity. Increased employee autonomy and empowerment result from higher levels of trust, which enhanced the management consensus that trust and organizational success are closely associated. Companies with higher levels of employee empowerment and trust enjoyed greater staff participation, which resulted in higher-quality goods (2007).

5. High personnel turnover

However, in addition to aspects not directly related to labor procedures, additional factors that go beyond them also affect product quality. It was discovered that a relatively high personnel turnover rate has a negative impact on organizational culture and product quality (Hamid & Tarek, 1992). Continuous turnover and succession raise project completion costs, result in significant delays and expose organizations to increased risks due to the potential for severe disruption of their development processes. Despite the fact that human resources strategies should work to keep important employees in the firm, businesses nevertheless need to prepare for turnovers and reduce their risks. The loss of information when employees leave is one of the biggest hazards for firms that value people and knowledge workers.

6. Hiring trends

In the previous two decades, knowledge management has developed into a relatively young subject, however, it is mostly used by large, international enterprises (Mehta, 2008). Companies began hiring chief knowledge officers and teams with the intention of gathering and organizing information as they became aware of the significance of knowledge management efforts to reduce the risk of know-how loss inside their businesses. Companies may gain from the enhanced conveyance, storage, and availability of crucial business information by developing unique knowledge management systems. These actions can aid businesses in innovation and knowledge capital development over time (2008). The task of setting up such systems and gaining employee support for knowledge management systems continues, though. These systems also leave a crucial issue unanswered. What happens when great achievers quit and take their whole knowledge base with them?

7. Top management engagement

Top management engagement is another important factor influencing the quality of software products and services. Poor project planning, a shaky business case, and a lack of top management support and engagement are the three main reasons why projects in the software industry frequently fail (Zwikael, 2008). Software projects focus on on-time project completion, budget, and adherence to requirements, similar to projects in other sectors. The industry requires certain support systems from top management to enable projects.

Here is a summary of these procedures. Successful companies exhibit a higher level of project progress control than others, according to key support processes like the proper assignment of project managers and the existence of project success measurement. However, Zwikael acknowledges that top managers rarely concentrate on these key processes and instead prefer to deal with those processes that are simpler for them to work on personally.

The ten top management support processes in the software industry are the most important (Zwikael, 2008).

Support Process for software development

Appropriate project manager assignment
Refreshing project procedures
Involvement of the project manager during the initiation stage
Communication between the project manager and the organization
Existence of project success measurement
Supportive project organizational structure
Existence of interactive interdepartmental project groups
Organizational projects resource planning
Project management office involvement
Use of standard project management software

Opportunities in the Software Industry

Numerous new market prospects were created by the introduction of low-cost communication through the Internet and the diversification of the software business into many other disciplines. Some of the major prospects were sparked by the accessibility of cheap communication, while others resulted from the potential for global cooperation and regional diversification.

1. Geographic diversity

Geographic diversity in the form of internationally distributed software development represents a significant potential that, particularly bigger firms, aim to take advantage of. This source of opportunities, which is primarily used by multinational corporations, has been studied by Kotlarsky, Oshri, van Hillegersberg, and Kumar (2007). However, it is also claimed that an increasing number of small businesses are profiting from distributed software development across national boundaries. The study found that by developing reusable software components and minimizing job interdependencies, software organizations may achieve noticeably greater levels of productivity. Reducing dependency increases the likelihood that the modules developed will be valuable on their own in subsequent projects.

Additionally, this decrease in entangled computer code benefits project teams. Teams in businesses that disperse their innovations abroad have more autonomy and require less contact. The authors draw attention to the fact that, in addition to sound project planning, dispersing software development also requires the standardization of tools and development practices. It may become nearly difficult to coordinate and manage the numerous remote team operations without such prearrangements (2007). Deploying video or other Internet-based conferencing technology can help teams collaborate across borders and take advantage of significant cost savings opportunities. But how successful are these channels of communication?

2. Type of organization

A new type of organization that has benefited the most from the Internet over the past ten years has developed. Virtual firms are totally based online, and the majority, if not all, of their team communications, take place online utilizing webcams and messaging tools. In virtual businesses, managers must not only take use of new technologies but also figure out how to inspire and guide their teams in their work. Research by Andres (2002) contrasted face-to-face teams with virtual teams for software development and found both potential and obstacles for virtual managers. Due to the lack of physical presence, managing work from a foreign time zone can be challenging. Communication will have to be asynchronous or limited to times when both time zones’ working hours coincide.

3. Rise of Virtual teams

Virtual teams make this process easier by leveraging voice/text chat, email, and most crucially, by minimizing job interdependency. According to Andres (2002), these forms of communication have less “social presence,” which implies that people require and can sense the presence of other people in a group. Many digital communication channels have the drawback that they lack verbal cues, body language cues, visual cues, and cues from the person’s voice. Email, phone, video conferencing, and in-person meetings are the several communication modalities that rank from the lowest to the greatest when put on a social presence continuum. Andres compared development teams who had face-to-face meetings to those that used video conferencing and found that the latter group was much more effective and productive, even if the video conferencing team benefited from saving time and money on travel.

The 2002 research, however, had a number of drawbacks. First of all, it has been around for seven years, during which time both Internet prices and speeds have drastically decreased. Recent advancements in computer speeds, video quality, and availability have made this method of communication more practical. Additionally, managers today are just beginning to understand how to effectively use these communication channels. For instance, despite the fact that email technology has been for the last 20 years, many managers still believe that emails might lead to a great deal of uncertainty. Future managers will face difficulty in adapting their writing to the constraints of email and other text messaging technology. Another crucial point to remember is that written communication may be permanently archived and may have legal repercussions; as a result, managers frequently choose to purposefully avoid such channels for legal or political reasons. However, the research by Andres (2002) found that team members had a negative opinion of video conferencing, most likely because the technology had not yet developed and they were not yet accustomed to it.

All participants must be aware of the particular features of video conferencing in order for it to function properly and modify their communication and voice accordingly. No matter what kind of meeting it is, preparedness is crucial. The level of group preparedness could someday be studied in combination with Andres’ research. Do members of the team spend enough time before the meeting preparing questions and responses for their teammates? In some situations, video conferencing could demand more planning than in-person meetings.

4. Advantage of globalization

Outsourcing is a further chance for the software industry and a difficulty for managers everywhere. 70 billion dollars were spent worldwide on outsourced software development in 2007. (Scott, 2007). Many businesses take advantage of globalization by selecting overseas providers for their software development assignments because of the severe lack of IT talent in the U.S. and Europe. However, outsourcing necessitates intricate coordination between the company and its numerous supplier groupings.

The theory holds that overall coordination issues and expenses are less expensive than internal development, however, this objective is not always met. While outsourcing may result in 24-hour development globally and give the firm continuous services around-the-clock if it is implemented and handled effectively, it may also lead to the loss of intellectual property. While the software is often not patentable outside of North America, mechanical elements are typically patentable in nations that uphold intellectual property rights.

5. Customers can rent a service online

Software companies face difficulty in managing to outsource, but they also use technology to save costs in a variety of ways, such as by providing remote access, telecommuting, and service-oriented architectures (SOA) (Scott, 2007). Between 1997 and 2005, remote access and telecommuting more than doubled, saving $300 million annually by reducing the need for office space (2007). Similar in principle, SOA includes clients renting out software. Customers can rent a service online and lower their total cost of ownership because these tasks are no longer necessary on the customer’s end, which eliminates the need for software and server purchases, installation, and maintenance. The virtualization of the software industry gradually expands the horizons and offers new opportunities, but it also presents managers with never-ending difficulties.

6. Outsourcing

Slavova conducted research on some of the benefits and drawbacks of developing an offshore and virtual team (2000). India and Ireland were the two biggest offshore software development destinations in 2000. By spreading out development jobs throughout the world, offshore businesses may reduce costs by up to 60%, complete them more quickly, and have specialized subject expertise from years of delivering comparable services to other clients. The integration of work from other sources, however, represents a significant obstacle. Furthermore, misconceptions that lead to incorrect readings of project specification papers might result in major communication challenges that endanger the project. Slavova (2000) discovered that the most popular remedy and strategy for dealing with issues with offshore suppliers are to frequently visit them in person. However, this tactic results in higher travel expenses and disruptions of the managers’ workflows, which may completely outweigh the advantages of outsourcing. Therefore, managers in the software industry must weigh the risks and possible rewards before outsourcing, as this tactic has proven unsuccessful for many businesses.

7. Online innovation

Online innovation is a big potential that has arisen in the previous ten years. On the Internet, this community innovation effort is commonly referred to as “open-source” and has produced several technological advancements, including the free Linux operating system. Businesses first saw this wave of market changes as a danger since open-source solutions were seen as a direct rival to their own goods. In many instances, this was and still is the case; nevertheless, a few businesses, notably IBM, are taking use of this new method of the invention for both personal and communal gain (Vujovic & Ulhi, 2008). Software firms struggle to consistently provide new and improved goods because they work in a setting that is becoming more unstable.

Companies can gain from suggestions made by the general public, especially other businesses, by making the computer code available to the public on the Internet. However, one of the main motivations for “becoming open-source” is the rapid acceptance and diffusion of the company’s technology at relatively little or no cost. Companies also profit from free bug identification and testing by external users. For instance, IBM receives free promotion through the adoption of open-source software. But how can businesses profit from giving something away?

8. Open-source

In order for the business to charge for the product, the closed innovation model (the conventional practice of supplying software without disclosing the program code) can be paired with open-source. In other situations, the business can freely disclose the technical platform online before offering specialized tools that make use of the new platform for sale. Given that several interested parties collaborate on the same project, pooled development, testing, and maintenance expenses represent the biggest financial savings.

However, the open-source paradigm of information sharing is nothing new. In the third quarter of the nineteenth century, open innovation models’ principles and advantages were already understood. Back then, the US and UK steel industries engaged in open innovation. The dominance of proprietary technology for which expensive royalties were payable was eliminated thanks to the cooperation of several industry participants (Vujovic & Ulhi, 2008).

Given the fast-paced nature of the IT sector and the transient nature of computer technology, open innovation approaches have been considerably more widely used. Vujovic and Ulhi compiled a list of helpful tactics by examining the biggest open-source players on the market. A few of these tactics, including employing open-source to thwart a rival and the open model as a path to increased market share, are also quite pertinent from a top management standpoint.

Strategies for adopting the open-source

Strategies for adopting the open-source approach (Vujovic & Ulhøi, 2008).

Business Strategy
Obtaining a higher market share
Obtaining market power
Better adoption of a product and thereby establishing standards
Shifting competitive advantage to another architectural layer
Making the product more ubiquitous
Delivering faster time-to-market
Spurring innovation
Complementing a revenue core stream
Blocking a competitor

How to resolve challenges in the software industry

There are many similarities between management history and the relatively recent growth of the IT sector, and the software business in particular. The development of management science was shown by Taylor’s scientific management (Wren, 2005), yet the software sector appears to be trailing behind the such significant improvement. The software development discipline continues to have quality issues as a result of a lack of standardization due to its high level of complexity. Managers must assess software development processes and create sector-wide standards and metrics, similar to Taylor’s work. When such policies and processes are in place, software projects will become considerably more predictable.

If Taylor were still alive, he would have recognized a lot of the tactics used in the software business today. Additionally, the issues with anomie and social disorder during the social person period are far more relevant now than they were before. Mayo explained in the 1940s how managers put too much emphasis on technical issues in an effort to increase efficiency while disregarding the human social component (p. 296). The computer business is now more clearly showing the same problem. Rapid technology advancements have opened up a lot of options and fundamentally altered the workplace. However, management was unable to plan for these significant changes that technology would bring to the workplace at the same time. At best, managers are only responding to technical advancements since, given the complexity of human nature, most of the repercussions are unforeseeable. As an illustration, email has various advantages, including low cost and straightforward asynchronous communication, however, many email messages are misconstrued because they are not worded properly. Additionally, the massive volume of communications that are received every day is making it difficult for IT knowledge employees to keep up with them since they seriously disturb everyday workflow.

The span of control is becoming a problem for managers to handle properly as knowledge workers are becoming more and more crucial to an organization’s existence and as businesses in this sector develop and need larger headcounts. According to Wren (2005), the number of relationships that must be handled skyrockets as the team size grows (p. 353). Larger teams are more difficult to manage because of all the relationships that must be established between members of the team. Therefore, inspiring big teams of knowledge workers can be challenging, especially as innovative jobs often call for extensive teamwork. So, one of the biggest challenges facing aspiring managers is work design. The importance of hygiene issues has received more attention than workplace motivational elements. Flexible work schedules, telecommuting, empowerment, and more responsibility may be helpful in the short term, but management will need to develop new tactics for keeping knowledgeable workers on staff in the long run.

Product quality is still a major problem. Although Deming’s principles are sound, the lack of standards and metrics makes it challenging to implement quality assurance in the realm of software. Given that a bigger number of outside developers are involved, the open-source innovation paradigm may offer some respite in this regard. However, open-source projects are challenging to oversee for the same reason. Since open-source projects are self-managed and not owned by a certain party, they may experience unchecked, tumor-like development.

The software sector is directly affected by a number of Deming’s fatal sins (Wren, 2005, p. 463). In contrast to component-based manufacturing, most products are created from scratch, and software organizations have few standards. Software engineers sometimes disregard rules and regulations because they view their work as a craft. In addition, it is simple for practitioners to lose sight of quality improvements through the creation of organizational standards due to the environment’s complexity, changing requirements, and pressure to meet deadlines. Even though many scientists, including Deming, have long maintained that such measurements are ineffective, high turnover and individual performance assessments are nevertheless common in the industry.

Final thought

If future managers are unable to discover a means to prevent it, they must find strategies to make up for the high turnover rate. The division of labor may be effective for the business, but the staff may not agree, and this can lead to ongoing challenges. The best performers dislike routine duties and would rather leave with all of their expertise. For some years, IBM has effectively used employment expansion to counter this trend (Wren, 2005, p.332). Unfortunately, this tactic might not be effective for all businesses and can only be applied within specific organizational constraints. Managers will need to face the discipline of managing knowledge workers in light of the advances of the previous two decades and come up with a practical answer for their company.

The management of knowledge workers may be solved by combining management science with recent developments in psychology and sociology. It is critical for managers to have a thorough awareness of this particular workforce group’s motivating factors. These workers benefit from increased pay, more freedom and flexibility, and a stronger negotiating position. Knowledge workers contribute to the creation of intellectual capital within the organization, which places them in a gray area between the typical, lower-skilled employee and the owner of the business. Turnover may be significantly more harmful than with traditional workers because the majority of this capital is lost and stays with the employees when they choose to quit the company. Managers must thus look for more innovative incentives to motivate and retain knowledge workers rather than merely applying standard techniques to this diverse set of personnel.