Software is the universal management tool of our time. In his column, Dr. Johannes Bohnet describes how it determines our lives even in secret and how we can regain sovereignty over software.
What's that flickering? Photo: Corbis
In today's digital age, software is the foundation on which our economy and now our society are built. We become aware of this when yet another software error has jeopardized a company's economic existence or when millions of people are affected in their everyday lives.
A glaring example of how software permeates corporate operations to the core was the critical incident at stock trader Knight Capital. After a faulty software update, the solid, billion-dollar company was nearly forced into insolvency by its fully automated proprietary trading software systems. The systems executed transactions according to faulty algorithms and generated losses every microsecond. Every minute, $10 million was wiped out. After 40 minutes and a loss of 400 million dollars, the power had to be cut off in a desperate attempt to stave off further losses.
We as a society have also been critically dependent on functioning software for decades, and this dependency has increased dramatically in recent years since the "Internet of Things" has seen more and more technical devices, from heaters to garage doors to refrigerators, exchange information digitally and coordinate with each other. Back in 2003, we were horrified to see how a software error in a U.S. energy supplier left people in five U.S. states and large parts of Canada without electricity for several days.
Another example of how permeated our society is by software is the NSA scandal. You no longer have to go to great lengths to observe individual people as you did in earlier times. Nowadays, it's enough to build detectors into the software foundation to very easily pick up intimate details about millions of people, from movement profiles to conversations with friends and business partners. Software is therefore a topic that political leaders and corporate decision-makers should keep an eye on and, ideally, a handle on in terms of risk management.
The reason and driving force behind our software dependency is the obvious economic benefit of software-based business process automation. No car manufacturer would want to give up today's efficiency and have the levers on the machines controlled by hand again. No insurance company today could afford to have rates calculated at a desk again.
However, the efficiency gains in the core business come at a price for the company itself. The IT budget of companies in every industry is growing steadily. This is because huge software systems tailored to corporate processes have been built over years and decades. If you were to print out the source code of an average regional utility, it would result in a stack of paper the height of a 15-story skyscraper. To manage the complexity of these systems, every company in every industry employs a large number of software developers.
New business requirements have to be programmed into the systems every day. On the order of magnitude: GD Informatics Services GmbH of the Generali Insurance Group has 1,100 employees. The major Swiss bank UBS even employs around 7,000 software developers. The trend is upward, as the demand for developers shows. Prof. Dieter Kempf, President of the industry association BITKOM, states in an IT labor market study that we currently have an unmet need for skilled workers of 30,000 software developers in Germany. Around 88 percent of all IT bosses surveyed said their biggest challenge was being able to recruit good employees and retain them over the long term.
With the increasing strategic as well as existential importance of software, a change in the management levels of companies can be observed in recent years. The topic of software is no longer seen as a subordinate issue, but is increasingly being taken responsibility for at board level. This is an important step, because the software landscape can only be designed in a sustainable and cost-effective manner if outdated software systems that have become highly complex over the years are replaced by modern systems.
However, these modernization measures, which are urgently needed from a risk perspective, often require budgets of a magnitude that can only be decided by the board of directors. It is not enough for the "technicians" to notice the technical risk but not have the money or time to improve the situation. A company can only get a grip on compliance, governance, quality and cost aspects if software is perceived and treated as a top-level management issue.
The great difficulty here, however, is that software is abstract. It has no physical form. It is not tangible and not visible. How is an IT executive supposed to make a fact-based decision if both the software foundation and the daily work of the many programmers are invisible? A way out of this management dilemma has recently emerged in the form of novel Big Data and visual data analytics methods that make it possible to generate comprehensible, visual representations from the many abstract data in the code landscape.
The hope is to make software so understandable that even non-techies among those in charge can confidently incorporate it into decisions. With each passing day, this becomes more important.