5.0     Software Cooperatives - A New Paradigm For Rapid, Cost-Effective Development

Corporate Collaboration Avalanche Gaining Momentum

by MedSudser Mike Ellsworth, mellsworth@stratvantage.com  

Is your enterprise grumbling over symptoms like forced software upgrades, sunsetted software that is no longer supported, and hefty annual maintenance fees that deliver little ROI? Do you get the feeling that you’re duplicating the effort of dozens of companies like yours whenever you upgrade an enterprise system or suffer through a desktop operating system upgrade? 

Three years ago, a group of local CIOs decided to do something about their lack of control over mission-critical software.  

“A lot of us are really sick of getting jerked around by software companies,” says Andrew Black, CIO of Jostens. “We’ve tied our destiny to sets of technical products that we don’t control.” 

So rather than continue to complain, Black and several of his peers from Best Buy, ePredix, Integral Business Systems, and Born decided to band together and create their own medicine to get more value for the money they were investing in application software. The result is the Avalanche Corporate Technology Cooperative, a new concept in enterprise software. Avalanche is a collaborative initiative that aims to reduce the cost and increase control over corporate software. 

According to a survey by CIO.com (2001), almost half of the IT professionals surveyed were unsatisfied with the quality of their business software. Commercial enterprise software implementation projects are plagued by delays and complexity, and companies struggle to stay current with the latest revisions. With on-going support costs comprising almost 40 percent of the overall expense of an ERP solution’s 3 year TCO (META Group), it’s no wonder CIOs are desperately looking for ways to improve the ROI of existing software. It does not appear the software vendors share this goal. Therefore, corporations are spending more and receiving less ROI: 

•        Corporations spend billions of dollars annually on software licenses with marginal ROI

•        Total cost of ownership over five years is up to 20 times the initial software license

•        Corporations are forced into vendor upgrades (averaging less than every three years) incurring significant cost

•        This year, IT infrastructure cost will surpass facilities infrastructure cost in 20 percent of global enterprises
 

Faced with all these rising costs, CIOs have no choice but to do more with less, striving to achieve higher levels of productivity from their staffs.  

But higher productivity is not the only possible solution to the CIO’s dilemma. What if IT staffs could spend time developing only the unique and competitiveness-enhancing portions of the business’ applications and infrastructure? What if they didn’t have to duplicate the same efforts that dozens or hundreds of other similar companies are doing? What if the concept of reusability could be extended outside the enterprise to leverage efforts and assets of peers? The result would be less work for IT staff, increased innovation, and a more collaborative approach to the problems every corporation has.

For example, each corporation’s Oracle version upgrade is fundamentally similar, with only a small percentage of tasks being unique to the implementation. Rather than each company expending time, effort, and money developing project plans, methodologies, and procedures for accomplishing similar tasks, the Avalanche concept allows corporations to collaborate to create best demonstrated practices that can be shared among members.

Thus, one member company can contribute an upgrade plan to the Cooperative, as Jostens has done. Other members can use and improve the plan, and contribute it back to the Repository, thus adding value to the original member’s effort.

That’s the concept at the center of Avalanche’s mission: To provide a framework to allow corporations to share operational software, plans, and techniques and thus reduce the cost of their own IT efforts and improve their ROI.

But Avalanche goes beyond this concept by allowing members of the Cooperative to harness the strength of numbers to not only share intellectual property (IP), but also to collaborate on projects that generate new IP. Its subscriber agreement enables IP to be shared by and between the Cooperative and its members as well as enabling its members to collaborate without legal liability risks. Membership is open to corporate “IT consumers” as well as consultants and hardware and software vendors.

“From the commercial vendor standpoint, Avalanche can be like a user group on steroids,” Jay Hansen, Avalanche CEO says. “We’re talking to major software vendors about the benefits of their membership in Avalanche.” Indeed the collaboration infrastructure Avalanche has put into place can offer tremendous value to vendors who may find it difficult to connect so directly with their major customers.

Collaborative Commerce

One collaborative model that inspired Avalanche’s approach is the Open Source model, which has been actively used by various organizations since the mid-1980s. There is no doubt that Open Source software such as Linux has made a big impact on corporate computing over the past few years. In a survey of InfoWorld’s CTO Network, only 28 percent of respondents said they were not using or planning to use Open Source software.

The Open Source model has many benefits as well as weaknesses.  Advocates argue that the benefits such as cost, control, and sharing (both risk and knowledge) far outweigh the weaknesses. However, leveraging the Open Source model in a corporate mission critical environment has been challenging. Black says “I think originally we thought we’d go out and find a lot of open source applications to run off the shelf, but we found they were really lightweight and I wouldn’t trust my company to them. I need a longer life span for my applications than I think the open source community is targeting.”

Although the idea of Avalanche adopting Open Source software was a non-starter, the rich, collaborative environment of Open Source software development was attractive. “The development model of Open Source software is wonderful,” says Turbolinux Chief Executive Ly-Huong Pham said in a News.com article. “But let’s not confuse a development model with a business model.  Basic business principles were forgotten by some.”

Avalanche did take some important concepts from the Open Source movement, including the idea of collaborative source, a shared code base enhanced by members and available for use exclusively by the membership, rather than the public at large. And several other Open Source concepts underlie the Cooperative’s approach, including the idea of leveraging the collective knowledge of a large body of developers.

“One-to-one collaboration is pretty inefficient and doesn’t scale well,” according to Black. “With a Web-based collaboration platform like Avalanche, companies all over can take advantage of a project plan or what my team has learned about getting a particular set of applications to work together. Avalanche is about scaling up collaboration.”

Innovative Licensing Agreement

One of the most significant achievements of Avalanche is the software licensing agreement that governs the use of the IP in the Repository. Painstakingly crafted with the assistance of law firm Dorsey & Whitney, the software license allows Avalanche to indemnify members against any intellectual property infringement claim from third parties.

Any contributed IP goes through a rigorous inspection and certification process that identifies and mitigates any real or potential IP infringement. Once certified, the IP is protected by the licensing agreement and members can use the software for internal purposes without fear of infringement claims. In a business environment where a vendor is litigating against users of Linux, this protection is comforting.

One annual membership fee gives Avalanche members “All you can eat” access to all products and services offered by the Cooperative including:

• Research and publications
• Collaborative forums and events
• Perpetual, irrevocable, enterprise-wide licenses to software products
• Services and support of software products as available

IT consumer companies, consultants and vendors all can join Avalanche as full members, and there are benefits for each of these categories. Avalanche’s by-laws clearly state, however, that the Cooperative exists primarily for IT consumer members. Two-thirds of its board members, at a minimum, need to be IT consumers.  Its software is distributed to all of its members, including vendors, but its by-laws also state that all members must use the IP for internal use only and it cannot be shared with non-Cooperative members.

Avalanche expects and encourages competing companies to join Avalanche. They remind companies that their competitors already have access to all the commercial software they buy and run, and the fact that Ford and GM, for example, both use Oracle has little effect on their competitiveness with one another. Having access to commercial software, or to software from the Cooperative, does not guarantee a competitive advantage. “It’s how you use it that differentiates your competitive advantage, not the application itself,” says Black. “If I’m OK with being in an SAP user group with competitors, why wouldn’t I be OK with sharing other kinds of intellectual property as well?”

“We think our approach has the capability of revolutionizing the way we conduct IT,” says Elmer Baldwin, CEO of Born. “Done correctly, you can imagine a very different landscape a decade out. If you add up all the IT professionals in industry, we vastly outnumber the number of people in the software industry making products. Why can’t we leverage the power of the hundreds of thousands of developers out there who are busy making applications that are sitting inside our four walls? Just from a raw numbers game, being able to leverage the power that corporate IT is bringing to the table every single day is an industry-changing proposition.” 

For more information, contact: 

Jay Hansen, CEO
Avalanche Corporate Technology Cooperative
301 Carlson Parkway Suite 500
Minnetonka MN 55305 
(952) 258-7710
jayhansen@avalanchecorporatetechnology.com
http://www.avalanchecorporatetechnology.com

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