How can you determine whether a new technology is worth the costs and risks and costs of adoption? Start by calculating them. One guideline is the 10X rule: if you can expect a return of 10 times your investment, then it’s worth it.
But to understand how to put this rule into practice, remember that your gains can come from any of several improvements, or a combination of improvements:
- Cost reduction
- Efficiency or productivity improvement
- Faster time to market
- Product enhancement
- Competitive environment
Your expected gains must be the sum total of all factors. If adopting a new technology provides an improvement in one factor but at the expense of another factor, it may not be worth adopting the technology. This is a type of return on investment (ROI) analysis, which frequently focuses only on financial factors. A better analysis will include non-financial factors, some of which may outweigh the financial factors.
The timeframe for the gains to be realized must also be included in the analysis. Some investments in new technology may require several years to begin to provide full value.
A good example is the convergence and integration of voice, video, and messaging (unified communications, or UC) with data networks that so many organizations went through a few years ago. It was expensive at first because they had to replace the old PBX and wiring with new call controllers, new phones, and an IP networking infrastructure. Technology service providers had to learn how to configure and manage these new integrated networks to prevent applications and UC from negatively impacting each other while providing the desired level of functionality.
Managing risk should also be incorporated into your analysis, but remember that you accept a risk whether you adopt a new technology or not. The advantages a new technology provides may not be obvious – until a competitor adopts that technology and makes your competitive disadvantage clear. In those cases, adopting the new technology may simply be a way to nullify that risk. Playing catch-up is never a good business plan.
How to reduce the risk
Developing a plan and working to implement that plan can significantly reduce the risk of adopting new technology. The plan does not necessarily have to be a full-blown deployment. It is valid to have a plan to investigate new technology and how it can be applied to the business.
You can think of it as applied research. What are the positive and negative factors to be considered? What kind of gains may be possible? What are the risks of adopting the new technology or the risk of not adopting it?
There are a number of steps that can be taken to minimize the risk of adopting new technologies.
Identify a business purpose that the technology addresses. One of our customers needed to make their network more agile. Their business was being impacted by competitors that had more agile networks. They began investigating SDN as a way to become more competitive and provide services significantly beyond what their competition could provide.
Establish a multi-functional team to investigate the technology. By staffing the team with members from different backgrounds, you get the advantage of different perspectives. But make sure you are staffing these projects with individuals who are forward looking and open to change. Ideally, the individuals involved will have an understanding of the business, the competitive environment, and be willing to make unpopular recommendations when needed.
Engage external advisors to provide a different viewpoint than the internal staff. A good advisor should have some experience with the new technology and be aware of the common problems to be encountered in its implementation. If the technology is so new that you are the first to adopt it in your industry, try to obtain advisors who have used it in other industries. A very early adopter may have to work with advisors who have no experience in the new technology, but have shown an aptitude for learning new technologies and successfully helping other organizations.
Identify the risks and quantify them. Include both the risk of adopting the new technology and the risk of not adopting it.
Document the costs and benefits of the new technology. Attempt to create a way to monitor the cost-benefit tradeoffs so that you can tell if the new technology is resulting in a gain. With good controls, you can easily determine if it is successful or not. However, it can sometimes be very difficult to observe a benefit due to weak coupling between the technology and the benefit. Technologies around marketing programs come to mind. Other technologies, like server virtualization or network virtualization, result in easily measurable changes in deployment times.
Implement a proof-of-concept implementation. Starting with a small implementation early in the investigation process allows the organization to identify problems early when they are easier and less expensive to correct. It also makes it easy to start over. In the book "The Mythical Man-Month" by Fred Brooks, one of the key concepts is: "Design the first one to throw away; you will anyway." This concept is based on the fact that the early mistakes are best corrected by starting over, building on what was learned in the first implementation. Organizations that tried to continue with the first version found that the entire project had eventually been rebuilt and that it would have been less expensive and faster to start over than to continue to build on the first version.
Processes and culture
Do not overlook the soft costs of implementing a new technology. Both organizational and process changes may be required.
Organizational changes may be needed. For example, the convergence of voice and data required that the voice team and the data team begin working more closely together, and eventually merging. The voice team had to learn about packet networks, unreliable packet delivery, and rerouting when failures occurred. The data team had to learn about mean opinion scores, quality of service, and how voice and video use the network. These teams have often been merged into one team to improve communications and reduce organizational complexity.
Procedural changes are very common with new technology. The process for provisioning for a telephone changed significantly with the introduction of Voice over IP (VoIP). A similar change is occurring with the adoption of Software-defined networking (SDN) and with network functions virtualization (NFV). Be prepared to develop changes to previous processes and expect to encounter some resistance to change.
Clear and frequent communications are important for successfully overcoming the organizational and procedural challenges. When the people within your organization understand the reasons for change, they more easily adapt, even if they don’t agree.
New technologies can be intimidating or invigorating to an organization. The risk factors can be controlled with a systematic process. Assembling the right team, establishing clear goals, and providing the necessary resources can allow a project to move very quickly. Move quickly, determine what works and what doesn’t, then make a decision on proceeding.
This article originally appeared on the NetCraftsmen blog.