X.^Kcac,^,^ -IBKAESS t.f5-=.,0-- ALFRED P. WORKING PAPER SLOAN SCHOOL OF MANAGEMENT THE "FACTORY" APPROACH TO LARGE-SCALE SOFTWARE IMPLICATIONS FOR STRATEGY, DEVELOPMENT: TECHNOLOGY, AND STRUCTURE Michael Revised November 12, 1987 A. Cusumano WP #1885-87 MASSACHUSETTS INSTITUTE OF TECHNOLOGY 50 MEMORIAL DRIVE CAMBRIDGE, MASSACHUSETTS 02139 THE "FACTORY" APPROACH TO LARGE-SCALE SOFTWARE DEVELOPMENT: IMPLICATIONS FOR STRATEGY, TECHNOLOGY, AND STRUCTURE Michael A. Cusumano Revised November 12, 1987 WP #1885-87 FEB 5 1988 RECeiVED Michael A. Cusumano MIT Sloan School of Management Sloan WP#1885-87 (Revised) 11/12/87 Software Project Paper #1 THE "FACTORY" APPROACH TO LARGE-SCALE SOFTWARE DEVELOPMENT: IMPLICATIONS FOR STRATEGY. TECHNOLOGY. AND STRUCTURE The impact linking the technology of fields of on business organizational structure is strategy research, organizational history, a concern theory, production and technology management, and comparative international These diverse studies. have literatures dilemma resulting from two opposing demands: variety in and product offerings; the treated all basic a managerial the desire of consumers for desire of managers responsible for engineering and production for standardization and control over processes, and components as tools, a way reduce complexity and costs to development and manufacturing, as well as in testing new, due expense, been to highly complex, opportunities for firms but may eventually emerge terms of costs per unit, to "mature" move toward more It stabilize at high has also oyer time, efficient means of The factory-type manufacturing organizations engineering and production. that products, the absence of economies of scale and scope. asserted that some product technologies creating and customer service. "one-of-a-kind" or product have traditionally been used to Laboratory or "job-shop" organizations construct in an in but with industry little provide maximum flexibility to introduce efficiency in new products or processes quickly. The basic argument studies choices of (Cusumano 1987b, -- this c, d) paper and is that a series of organizational accompanying case type and process such as job shops versus more rationalized factory environments. . with standardized procedures, and intermediate components tools, by the supposed characteristics be determined or by the assumed product types, level accumulate experience or as changes cost low of basis product features grow in factories that combine mass-production As firms and less frequent, compete on the Newer factory concepts and and standardized designs. computerized technologies also make may not technology or specific a industry "maturity." of may indeed build mass-production managers of -- possible to create "flexible" factories it job-shop flexibility efficiency with in product variety. Furthermore, shops, making, some firms example. for in industry may choose to compete as job an Royces Rolls instead passage of time may thus be important mainly maturity" brings with a rise and organizations, strategies with it varying levels of T Model The cars. that experience or "industry the options firms have for their production in some moving from job shops with A challenge for managers flexibility. technologies new and complex in of seem that most to factories relatively of approporate for job-shop production might then be how to use strategy, technology, and organizational structure to improve efficiency in development product processing and operations paper This treats large-scale mainframes and minicomputers to mass-produced products, number of interactions If one tries process ways of is -- a segment relatively implementing even among program components. to development software of a environments technology that, The study asks and control, do producers to the and the potential functions, a specific question: measure structure by some simple indicators standardization compared new and highly complex due similar for of of inputs similar and software products follow different process strategies job shops on organizations software one on facilities end of the U.S. and Japan The conclusions for example, spectrum corresponding to more factory-like and The survey evidence presented here the other? in hypothetical a -- follow that, is that they do. some firms if major of more factory-like create production organizations even for software, then strategy and implementation are at least as important as the complexity of the technology and the emergence organization; function industry maturity. of factories of to which identify this firms shaping the need not be seen as simply a Both notions are consistent with Chandler's basic dictum that structure should follow strategy hoped when designing in study that a more seem (Chandler 1962). set of criteria committed to would make It was possible it software disciplining technology, and that studying these firms through detailed cases would then provide insights into how to develop and implement strategies for managing product and process development more effectively, especially for a relatively new and complex technology. THE PROBLEM FRAMED Business IN DIFFERENT LITERATURES have long maintained that production organizations historians evolved over time and with accumulations of product and process knowledge, moving from craft-like prominent is the and 18th initially has in Chandler, 19th this shops to mass-production who has described the evolution centuries the textile interpreted job in Britain, Europe and industry and then gun-making. movement as driven by managers factories. Most of factories during the United States, This historical attempting to view raise . and worker productivity processes production integrating lower interchangeable components; and dividing large, standardizing centralized facility; coordinating closely mechanizing labor; specializing a in by costs unit and developing process; the flow of each automating or then tasks; and imposing rigid accounting controls (Chandler 1977; Skinner 1985). In area the of organization industrial theory, school a of thought rather complementary to Chandler has tended to see the characteristics of particular determining Woodward including technology, (1965, who 1970), ranging from organizations, large-batch and mass identified unit production, job to three shops and basic tended to become larger in scale and or batch operations mass to types of production, to in that over time operations more complex, making producers as production continuous processing operations as organizations to become larger and more complex, unit outputs, Most important was small-batch The assumption here was chemical manufacturing. and processing, how an organization evolves. large part in inputs, a necessary for as they evolved from too, or it continuous-production operations Somewhat Lawrence and argued there to manage a in contrast Lorsch is is (1967) the contingency theory school as well as Galbraith (1973, associated with 1977), which has no one best way to design the structure of an organization particular appropriate depends on the organization" (Scott, technology. What structure is most effective or "what environmental demands or conditions confront 1981: 208). A recent case study of medical-imaging scanner introduction similarly concluded that identical technologies can result in different structural outcomes, depending "on the specific historical process in which they are embedded" (Barley 1986: 107). and Production management operations such specialists Abernathy as and Utterback (1975), Hayes and Wheelright (1979 and 1984), and Schmenner have also focused on the range (1984) to firm a product technologies mature as Woodward, and Chandler product and process options open of in underlying the sort of a notion that, is As with cycle. life product as innovations descrease over time, firms tend to take advantage of accumulated and experience innovate process their rationalize to drastically reduce unit costs while standardizing quality, modes shop production of The tradeoff manufacturing. used production and expensive difficult Model T production drive far for extensive, to in firm a moved toward continuous and designs Indeed, the experience of Ford and the processes demonstrates how 1920s example, periods a became its company can assuming product technology or consumer tastes were more stable than they were, and making factory systems so long factory because change. facilities as and near bankruptcy by pushing such strategic commitments too into itself -- be to rigidity in by moving from job- engineering large-scale to technology and of time to change new to product rigid they took process or technologies (Abernathy and Wayne 1974). Recent developments necessary flexibility to or combine development locking an design and production technology have made traditionally and efficiency, as Rationalizing goods revise in accepted well as divisions processes organization product differentiation powerful combination of competitive without into with skills a between tradeoffs it process between design and production. simply single process producing mode of efficiency (Porter 1980, standardized production also -- but a rare 1985). For example, during the 1950s and 1960s, Japanese auto firms pioneered producing large standardizing methods and inputs but not techniques, "small-lot production" standardized of lots workers capable of quickly changing Monden (Schonberger 1982; or job-shop combine "small-lot" perform different operations or jobs Cusumano Producers of machine 1985). Piore and 1986; flexibility end-product variety with the in and management control quality, productivity, 1984 and machinery and to equipment, and various metal components have also managed to textile tools, 1983; to due products final Sabel Sabel 1984; Palframan 1987; (Jaikumar factories large of Group 1987). technology concepts (putting together similar parts, problems, or tasks) have scheduling facilitated well production product design rationalizing as parts of counterparts older industries in arranging engineering, factory layouts small for and Producers of semiconductors, (Hyer and Wemmerloc 1984). firms and or like automobiles, as large their like routinely use standardized components and add end-process customization, increasing productivity while maintaining flexibility Computer-aided design (FMS) transfer allowing firms designs, with to in design tools digitalized integrated designs automate this little 1985; Jaikumar 1986; or variety (Harvard with of School to manufacturing tools, modularized designs with no penalty associated with low lot volumes Meredith 1987). of certain countries to develop similar sets of strategies and structures. noted, managers to develop low-automation, systems during the 1950s and 1960s (Cusumano 1985). a firms As the small size of the domestic Japanese automobile market apparently persuaded been new (Skinner Comparative international studies have observed the tendency in 1986). manufacturing systems flexible automatically combining Business similar trend in flexible manufacturing There appears to have the Japanese machine tool industry (Jaikumar 1986). A survey and U.S. 55 of Japanese tended 51 establish to Japanese manufacturing plants found that the types similar more efficient, continuous-type oriented toward (Lincoln, Hanada, and McBride 1986). large number many firms, of manufacturing organizations, of them operations have produced also seems to Italy of processing machinery textile a producers, emphasizing this combination of efficiency and specialization (Piore and Sabel 1984). Difficult separate to the are effects of culture or nation from the tendency of managers in kind to similar environmental conditions. the same time actually development. process characteristics of if firms also technology a rationalize operations. seeing It not is might options clear in the same industry at to manage product and the ability These questions can be examined producing similar software certain what extent the peculiar to constrain a the question must Nonetheless, be answered to what degree managers operating exercise from that country to respond in still have and being simply products managers of at least in do so with to part by similar or different strategies and production organizations. Determining organizations why managers make evolve from deliberate the decisions, frequent and conflicting debate (Scott 1981). new products and processes, worry about parts and there are procedures options: they could recoup of personnel, they from mass sales, may still complex whether subject of in designing Managers can refuse to and encourage their which then might be mass- These firms might even be insensitive shortage or do, certainly, standardization, marketed. profits a is But, engineers to design highly marketable products, large they choices want to development costs, although, to if they have maximize if a individual On the other hand, productivity. companies that choose to products might have even greater incentives to exploit similarities procedures, parts or across product different Firms lines. customize in tools, pursuing standardization (package) or customizing strategies, but especially the latter, might want thus components This whether it software standardize development process and major the reduce costs and perhaps improve quality as well. to , to can be illustrated is an automobile, program, customized product there -- as a are from a follows. machine tool, basically product). 1) sell a It product, obtain a or a fully semi-customized product (from a a a a purchased standardized follows that vendors should have three corresponding options: customized product; 2) sell standardized product; 3) customize a Managers can adopt one manage product and process development.' product-process life tools cycle or (Figure even of several strategies to a different type of With flexible factory models such as 1). software, moreover, it becomes difficult separate product development from process development. A similar typology has Lampel and Mintzberg 1987. a Based on the fact that job shops one can also draw continue to exist as factories appear, machine options: in-house department that modifies semi-standardized product. for a semiconductor chip, a three needs vendor or an in-house department; obtain standardized or "packaged" product; obtain vendor or an customer a If recently 8 been suggested independently by to Table 1: STRATEGIES FOR PRODUCT-PROCESS DEVELOPMFNT MANUAL FULL CUSTOMIZATION: Customize inputs and development process for each product IMPLEMENTATION: Maximize the capability of the organization to produce a unique product that will capture a high price from at least one customer Hardware Analogy Job Shops Software Analogy Small Laboratory Environment : : M ANUAL SEMI-CUSTOMIZATION: Customize some inputs and processes and sell more than one of each product IMPLEMENTATION: Maximize the capability of the organization to produce a unique product that will capture a large share of the market Hardware Analogy Batch Processing Software Analogy Large Development Center : : AUTOMATED FULL STANDARDIZATION: Fully standardize inputs, and final processes products IMPLEMENTATION: Maximize the capability of the organization to produce a product with standard features at the lowest possible price Hardware Analogy Model-T Factory Software Analogy Undesirable? : : MANUAL STANDARDIZED SEMI-CUSTOMIZATION: Standardize inputs and processes but customize end products, with large-factory efficiency IMPLEMENTATION: Maximize the capability of the organization to produce semi-custom products at a low price through the use of as many standardized procedures and inputs as possible Hardware Analogy Small-Lot Production, Group Technology Software Analogy Software Factory : : AUTOMATED STANDARDIZED CUSTOMIZATION: Standardize inputs and processes but customize end products and automate processing IMPLEMENTATION Maximize the capability of the organization to produce customized products at a low price through the use of highly flexible process techniques and/or automation Hardware Analogy Automated Flexible Manufacturing Systems Software Analogy: Program Generators, Used in Factories or Independently : FIGURE 1: REVISED PRODUCT PROCESS LIFE-CYCLE MATRIX Rate of Major Innovation Process nnovation Innovation Time Product-Process Development Organization -^ Batch -> Automated Factory Flexible Factory Flexible Manufacturing System Job Shop FACTORY APPROACHES TO LARGE-SCALE SOFTWARE DEVELOPMENT Software production dates back to the 1950s, when computers were first designed that could store in controlling basic operations and refined over time, come memory internal a As variety of applications. the series of phases followed resemble that for "hard" products, to sets of instructions in it (programs) has become software development has consisting of planning, detailed design, construction (coding), testing, and servicing (maintenance) phases. hundreds and years takes employees develop It and test programs such as operating systems for large mainframe computers or real- typically time control of to systems for factories or electric power plants. Furthermore, the clarity of designs, consistency of documentation, and lack or presence of defects or inadequate designs impose enormous costs on requiring extensive future modifications could software producers. Development costs for software programs over their lifetimes were typically about 10% for planning and design, less than about 15% for testing, and as much as 10% for coding, 70% for maintenance (Frank 1983). As with hard manufacturing, because there are numerous computers and applications. software, including types These operating difficult to generalize is it products of fall into systems, for a about software wide variety of two basic categories: "systems" management systems, database telecommunications and other related programs designed to operate the basic functions of the computer or computer system; which operate a level above and implement specific functions control, payroll analysis, or software software -- -- and "applications" programs, word processing. like production Applications include "packaged" products designed by producers for general sale --and customized programs tailored to meet 11 the unique needs of an individual customer. or Firms, least at products, software tend to specialize facilities, making possible, it in theoretically, particular them for types of achieve to economies of scale or scope through standardization of tools, procedures, and inputs. other industries, In resulting or technologies, tradeoff reduced a in ability in product or process moving toward design standardization or factory in Software development may seem to be primarily mass-production. and engineering design adapt to changes to market demands, has traditionally been seen as the major accepts firm a in the rigidity imposed by such "rationalization," that companies make packages, with reproduction involving one-of-a-kind products, for activities systems software, simple process of a or Reinforcing notion this the sense customized programs, replicating continuing a is set of in code. might appear that software development organizations should shops. a all Thus, resemble job among many debate programmers, managers, and academics over whether software development more like factory-like an art or discipline than craft and an (Brooks control suitable activity engineering for Shocman 1975; it 1983; is or Hauptman 1986). A problem with continuing such attitudes production may impede process. In to view progress software technology as a rationalizing in development, only about 5% annually computer processing Munson 1984). in since capacity Despite better mere craft the progress in is that design and improving One study concluding around productivity continues to be agonizingly slow. 1980 estimated that increases a programming output per man-hour had risen the 1960s, averaging computer 12 in contrast about 40% languages, a to improvements year (Horowitz in and management methods. and design techniques, such as program generators that automatically tools produce code from high-level designs, demand for programmers 1980s outstripped the supply of programmers by about 10% than 20% referring to supply-demand imbalance this back as 1969 (Hunke 1981; Frank 1983). buy fully customized (Kamijo the as "software as crisis" far 3- to 4-year wait a Japan, the typical backlog was 26.4 In Further hardware development, 1986). began U.S. companies desiring to fact, applications programs typically had (U.S. Department of Commerce 1984). months !n Japan and more in Observers (Zavala 1985; Aiso 1986). the U.S. in the mid- in and small large in machines, continues to expand the demand for lengthy, complicated programs, even computers, personal for microprocessors such as the addition, Intel data from IBM, the utilization full cost In individual productivity are in TRW, and GTE can of indicate that fixing bugs 100 times in that of detecting the design stage (Boehm 1976). in the short, In years 80286 and 80386 (Businessweek 1987). completed program during operation errors for serious impediment to improvements a quality problems; a delaying lack of programmers, rising demand software, for increasing length of programs needed to utilize improved hardware capacity, as well as the enormous productivity, have development. For high-quality maximize created a products its programs idea a lower at manpower and of using need in creating to increase firm to competitive advantage -- The impact of quality problems or product changes on raise its costs invested efficiency standardized than other resources, factories" procedures, 13 for capability to produce companies, should the software marketplace, as "software levels tools, to in variety of a simply or provide a to potent other industries. produce and software a variety components of reusable across different projects appears to have been first proposed by engineer at NATO 1968 a Conference on Science Honeywell a improving software productivity. Conference members criticized the idea as unworkable, largely due problems: three to modules which did software that modules did And not the and method too Two, then they could be easily found and so citing Mcllroy 1976; impossible characteristics specific was seemed it systems and types of all program create to difficult for reliable user. depend on no third, seemed it be efficient constrain not machines. 1984, would that One, available to particular of program catalog to write (Horowitz and Munson reused. McNamara 1987). These were and remain serious problems, although many large software producers have made progress efficiency, 1984; as well Goldberg 1986) Southern California software Several . and factories, others and companies and Scacchi (Eliot Horowitz and Munson (Ramamoorthy 1984; reusability as design and overall development facilitating in the University of even claim to have established 1986) have even launched software elaborate less rationalization projects. Of particular importance at software primarily encountered for research project several would standardized approaches common solve: to (1) the hoped they Lack discipline development process, a managers more factory-like and with repeatability the result or that continually reinventing products and processes, and not becoming as proficient at development or project control of an experiment that producer of real-time a problems of is By the mid-1970s, government contracts. environment SDC was this System Development Corporation (SDC), occurred had to as managers wanted. an effective way to visualize and control the production process, 14 (2) as Lack well as a to measure before the project was completed how design. Difficulty 3) accurately in before detailed design and coding, meaning performance specifying and recurrence reuse components, management, despite the fact that managers would modules believed that significantly development. and verification shorten (program a interfaces between tools and databases, documentation, verification, management system in a tools for policies centralized facility of software engineers decide databases, project to on-line and automated support systems for standardized with and procedures about 200 programmers of software for program design and implementation, and The concept and system California. development library, etc.) areas used similar required time it capability to off-the-shelf of 4) making tools, Little 5) application use the and integrate of many extensive managers Several set disagreements on the of necessary to reinvent these from project to project. and requirements requirements, or changes demanded by the customer. of certain Lack of standardized design, logic code implemented well utilize this Santa Monica, in and methods SDC copyrighted tools under the name "The Software Factory" (Bratman and Court 1975 and 1977). The SDC experiment was not particularly Scheduling and successful. budget accuracy improved dramatically, but the three problems raised NATO conference surfaced as well. without portable computer different computers problems. Most managers customer not like to giving in a languages for seriously, create sites, and For example, different the programming it reuse to code from in groups that sort of mobile job-shop SDC has would mode one This applications. tradition been work difficult project led the to for on other project at individual of production. They did up control of development efforts to 15 was extremely at a centralized facility. and were leading to not a by top management required decline the flow of work in company allowed project managers and also it into use the Software the facility. tended to complain the remove programmers from the factory to Programmers unfamiliar, rigid standard, as as the impose the well and inelegance of reusing other people's code. retrospect, In it infrastructure factory about Factory, Ultimately, faded out of existence after approximately 10 projects. difficulty seems that SDC managers standardized of tools attempted and methods, to and reusability on both project managers and programmers before software technology goals, was refined enough failed solve to Furthermore, architects of the factory do this easily. to matrix-management problems the SDC steady work flow into the new system. by 1978, some to although software The SDC model was standards (Cusumano and U.S. to also by the developed later an important influence on the U.S. Department of the case Howes even Defense Finnell 1987). companies 1984; a gradually abandoned the effort actively continued to develop better software methods, and programming environments (Stucki and Walker 1981; Boehm maintain continued to use many of the factory procedures and it the tools. of necessary Willis 1981; Griffin 1984; Hoffnagle and Beregi 1986). SDC and other American firms no longer use terms 1984; though tools, This is such as "factories" and appear to prefer designations such as "laboratory" or "systems development center," or no organizations (McCue 1978; appear to buisness, have been slow Hunke too label all, to recognize software as of attention, process rationalization as their hardware operations. 16 refer to their software Some companies, such 1981). deserving of the same degree at a as IBM, also major part of their strategic planning, and But another question is whether U.S. or software of level and methods, tools, and integration other large facilities standardization inputs facilities with other countries have truly pursued in sufficient among people, distinguish to systems, their a functions, operations from minimal standardization and integration. JAPANESE APPROACHES TO SOFTWARE ENGINEERING Perhaps the most significant outcome of SDC experiment was the that reports from this company encouraged several Japanese software managers to pursue software factory organizations or and control 1985; Sakata factory reusability 1985; concept (Iwamoto and Okada and 1986). Shibata into least at 1985 Japan, however. greater efforts at process Matsumoto 1979; SDC Japanese did not 1981; Mizuno introduce experimentation the with centralized and highly disciplined programming environments actually predates the SDC experiment, going back facility called in 1976-1977, a software factory NT&T in 1985, in to Hitachi's 1969. opening of the world's NEC, Toshiba, and and Mitsubishi Electric 17 in first Fujitsu followed 1987 (Table 2). Table Key: OS Note: Est. = App = Ind Tel = = 2: 1987 MAJOR JAPANESE SOFTWARE FACTORIES Operating Systems General Business Applications Industrial Real-Time Control Applications Telecommunications Software facilities develop software for mainframes or minicomputers, Employee figures are 1987 estimates. All software tools and programming and a planning or reporting systems that teamwork methodology throughout the software Third are quality control techniques designed they become difficult to fix. And fourth catch to group facilitate life bugs early, are extensive efforts to cycle. before improve software quality and productivity through reusability of software modules and automation of software production (code Department of Commerce 1984; Uttal 1984; generation) (Kim U.S. 1983; Businessweek 1984; Johnson 1985; Haavind 1986). If software followed the product-process historical Japanese firms were advanced along these curves, software factories seem to be so popular facilities operated more countries such as the U.S. late 1950s and early 1960s, like factories in Jsnan than might explain why this -- if large indeed the Japanese software facilities But Japanese firms began writing software several years behind U.S. and cycle life in in the counterparts, so more experience does not seem to be the explanation. One U.S. group touring Japan concluded not developing unique or more advanced them more systematically then U.S. that the Japanese firms firms software tools, (Zelkowitz 1984). they were This using suggests studied are simply more inclined than others toward makiing their production operations more efficient. of while the Japanese were that, Commerce report suggested that U.S. management because Americans tend to firms lag view this A 1984 U.S. Department in software technology production more as a "craft" than the Japanese: The Japanese have... made impressive gains in the development of software tools and have encouraged their widespread use within their software factories to boost productivity ... By contrast, while the United States is developing software engineering technology, the use of tools in U.S. firms is quite limited... Many U.S. software companies consider programming a craft and believe the future strength of the industry lies 19 " creativity rather than development as do the Japanese." its in approach disciplined a A 1985 study by the Electronic Engineering Times explanation. It appeared as developing writer the in journal this unique team-oriented software culture cited utilizing their traditional team or were more effectively well to software to as an the Japanese that group approaches, as contrast to tools, in Americans, who, as usual, were overly dependent on small groups and highly skilled individuals: "[T]he approach to software technology taken by major developers in Japan, such as NEC, Fujitsu Ltd, and Hitachi Ltd., universally strive to harness that tradition of excellent teamwork... Each of these developers has automated versions of planning and reporting systems that enforce strict teamwork methodology through the complete life cycle of a a computer program -- from planning to design to maintenance, and without coding, since high-level language-source codes are automatically produced from the design documents. ... Until now, the Japanese have been hampered in their software development efforts by a lack of teamThe tools borrowed from the United States simply do oriented tools. not fit the Japanese culture because they put too much control in too few hands. America, industrial software development is generally done in groups that are as small as possible to minimize the communication problems That makes the knowledge of each individual among people. programmer a critical factor to the success of any softwareBut... that is just not tolerable in the Japanese development project. culture. As a consequence, the Japanese have had to perform basic research into software tools that can be wielded by many hands at Nobody else was going lo develop group-programming tools for once. them. In If national technology, historical, Japan, as the such reasons as opposed companies on clear differences a to between exist in the management the U.S., engineering Japan and simply or and the 20 more a particular is ("hackers") emphasis manufacturing U.S. of One explanation might be no doubt complex. prominent software craft culture less disciplined difference are do the of Japanese But practices. composition in of a their which might software markets, focus on process innovations be encouraging Japanese firms certain to necessary to rationalize design and production operations. Although the figures are only approximate, software sales in the early 1980s were standardized packages. only about 5% of Japanese some degree involved difference is also had a of software compared sales customization that microcomputers software sales, the U.S., in to (Table One reason 3). Table 3: contrast, for this accounted for only about 10% of Japanese about 50% in the U.S. But Japanese customers demands on Japanese software producers faced with a In were standardized packages; 95% long history of preferring customized systems, programmers and about 60% of backlog of orders, as indicated in SOFTWARE MARKETS COMPARISON a placing tremendous shortage of Table skilled 3. (1984-851 Japan USA 2.5 25 25 Overall Market Characteristics: Revenues (Billion $) Annual Demand Increases (%) Annual Growth in Supply of Programmers (%) Typical Wait for Customized Programs (Months) Total Market Product/Market Breakdown: Integrated Systems Software Package Software (%) Custom Software (%) All All Systems Software (%) Applications Software Sources: U.S. 13 4 26 40 5 (%) Microcomputer Software/Total Market All Systems Software All Applications Software Computer Manufacturers 11 (%) as Suppliers of: (%) Department of Commerce 21 1984; Zavala 1985; Aiso 1986; Kamijo 1986; Businessweek 1987. by the author from data in the software includes operating systems, database management systems, telecommunications systems, and The size of the Japanese software market is related programs. underestimated because systems software is usually sold bundled with hardware. The figures Note: listed cited are estimates Systems sources. The preceding discussion software is a and implemented managers their the facilities what markets in Japanese trend, examine why present factory-like A second question industry? specific products, this and organizations, product and process strategies, and of the have chosen of which is -- appear -- firms The systems. survey a final major of the in producing what resemble factories? to how they have paper subject of this Japanese If be needed to will and strategy, this do job shops, is simultaneously exist case studies of individual firms factory results One raises several questions. large-scale software industry, batch of and U.S. to is software producers. THE SURVEY The published descriptions and stated objectives Factory drawing that project up should operations: (Bratman eight exist and criteria at process least to Court and 1975 compare software for large-scale and standardization for the 1977) provided facilities engineering control; tool SDC Software along and a a for basis spectrum manufacturing standardization and reuse of The factory-tool infrastructure the SDC project suggested consisted of linkage; and inputs standardization and control (emphasis on software modules). 22 a centralized program library to store modules, documentation, and completed programs; set of a central database to track production-management data; a uniform procedures documentation; different parts standardized of program; a in the initial design, specification, project databases and interface These five variables databases. questions for survey, an constituted addition, since an objective standardized components for linking the the of reuse, a working on tools and and tool various core process if and testing, groups for which attempted to see U.S. and Japan were currently emphasizing In coding, managers the in similar type of infrastructure. factory rather than was strategy to produce "reinvent the wheel" with every customer order, three questions were included about reusability. Major software producers literature surveys and lists of in Japan and the U.S. were identified through software producers, containing eight core questions plus more than a and sent dozen others, experimental nature, to provide supplementary data.^ requested performance measures such as actual a rates questionnaire many of an Optional questions also of reused code in Additional questions were also sent to survey participants, although comments from the respondees, site visits and interviews, as well as partial correlation analysis, revealed that many of the non-core questions were not particularly useful for measuring "rationalization" along large-scale engineering and manufacturing lines. For example, three questions asked for emphasis on standardization of languages for high-level design, module description, and coding. It turned out that Japanese and English were mainly used for high-level design, and many managers did not know how to answer; Japanese tended to develop specialized languages for module description because they were less comfortable than U.S. programmers in using English-based languages for this purpose, which made it unfair to U.S. firms to use this question; and coding languages were often determined by customers. A question about top-down design was discarded because emphasis on this tended to contrast with a more factory-type process of combining new and old code in layers. Similarly, questions about emphasis on high-level abstraction or layering were discarded because not everyone knew how to interpret these. 23 a For the core questions, managers either responsible for recent sample year. management or with engineering software overall experience sufficient to present an overview of practices for the entire facility were asked to rank the emphasis on (see Table 4), to 4 scale of a Questionnaires were directed diversified large or as well managers to as policy comment on each answer. to the at their facilities at or facility product-area usually differed significantly among divisions since software practices level, in themselves and general managerial of and firms, some diversity seemed useful meet to different market or internal needs. The sample was limited to that usually require large amounts of people, which might facility level different therefore to seek provide similarities operating projects: time, incentives and for and tools managers for common systems making departments or facilities components mainframes products to develop, and on the at or or least tools across minicomputers ("systems" software); and real-time applications programs, such as for factory These were further control or reservations systems ("applications" software). broken down into telecommunications combined because systems; of industrial software (applications and systems were the smallness of the sub-sample); operating systems; real-time commercial operating control applications; and general business applications. All the Japanese firms contacted U.S. firms contacted completed the survey. at out filled About returned two completed surveys for each type of similar, usually differing by only 24 survey; about 75% of To check answers, two managers each firm or facility were asked to respond. extremely the a facility; half the companies the answers were few percentage points, and Other answers represent single responses. were averaged. A factor questions eight procedure with analysis three constituted varimax rotation orthogonal factors indicated with that the eigenvalues rounding to approximately 1.0 (actual 2.91, 0.88, and 0.67); these explained 96.1% of the variance a survey answers. in For each factor, the variables with strong loading (approximately 0.51 to 0.78) were summed and used to test differences in the average Japanese and product type or country origin of the U.S. scores, facility as well as to test if were significantly correlated with the process and reuse scores. The data reported total for eight each variable. in variables Table 6 Table 5 reflects scores for each dimension and the on basis a of 100%, of Table 7 for 4 to summarizes the results of variance tests to determine the effects of product types or country of origin on the scores reported for the three dimensions. 8 of compares the average Japanese and U.S. responses the process, tools, and inputs dimensions. one-way analysis maximum scores with Tables through 10 compare actual reuse rates reported by the Japanese and U.S. facilities, and analyze correlations with the three survey dimensions as well as types of products and country of origin. Since results "^ of in the this sample analysis size relatively is small must be considered the case of Toshiba, a as in absolute no more than single large facility numbers, suggestive of (approximately 2500 programmers) had different departments producing both systems and applications programs using identical procedures and tools, and the manager responsible for technical development. one set of answers and systems and applications Dr. asked that they Yoshihiro Matsumoto, submitted be counted twice, under both facilities. This procedure is recommended by Comrey 1973 and Tabachnick and as a simple data reduction technique 1983. Comrey suggested that .55 (explaining 30% of the variance) were "very good," and .63 Fidell loadings of (40% variance) or over "excellent." 25 the patterns existing at software facilities noted, however, majority of software written and sold most include applications have a the of software, and Japan. surveyed Japanese firms the that the U.S. in largest in It should be account for the vast Japan, and the surveyed U.S. firms producers of computer operating systems, and related services such as data bases, which also large software component.^ Table SAMPLE: n = 44 4: SURVEY AND SAMPLE OUTLINE (23 Japanese, SURVEY PARTICIPANTS: 21 U.S.) Software Development Managers ANSWERS KEY: 4 = 3 = 2 = = 1 = Capabil Capabil Capabil Capabil Capabil ty ty ty ty ty or or or or or policy policy policy policy policy is is is is is FULLY USED OR ENFORCED FREQUENTLY USED OR ENFORCED SOMETIMES USED OR ENFORCED SELDOM USED OR ENFORCED NOT USED The top three Japanese firms ranked by software sales in 1986 were NEC ($507 million), Fujitsu ($389 million), and Hitachi ($331 million). ranked fourth in the world, behind IBM ($5,514 million), Unisys ($861), and The Japanese sales figures considerably understate actual DEC ($560). software development, because Japanese firms included ("bundled") systems software with mainframe and minicomputer hardware prices, although the size of systems software operations corresponds roughly to hardware sales. The largest Japanese producers of mainframes by 1986 sales were Fujitsu ($2,470 million), NEC ($2,275), Hitachi ($1,371), and Mitsubishi ($185); the largest sellers of minicomputers were Toshiba ($766), Fujitsu ($620), and Mitsubishi On the U.S. side, IBM was by far the world's largest producer of ($475). hardware and software; three of its facilities are represented in the survey. Unisys, which ranked 2nd in world software sales, has two facilities in the survey. In services, TRW ranked 1st and General Motors/EDS 3rd; Control Data, Martin Marietta, and NT&T 6th, 7th, and 8th; Boeing and IBM 12th and 13th (Datamation 1987). Other large Japanese producers of software included in this survey were subsidiaries of Hitachi and NEC, including Nippon Business Consultants and Hitachi Software Engineering (Hitachi), as well as NEC Software, NEC Information Systems, and Nippon Electronics Development (NEC) (Kiriu 1986). NEC 26 . SURVEY QUESTIONS: Process Standardization and Control (Score of 12 = 100%) 1) A program centralized library system store to modules and documentation 2) A central production or development data base connecting programming groups working on a single product family to track information on milestones, task completion, resources, and system components, to facilitate overall project control and to serve as a data source for statistics on programmer productivity, costs, scheduling accuracy, etc. 3) A uniform set of specification, design, coding, testing, and documentation procedures used among project groups within a centralized facility or across different sites working on the same product family of labor for to facilitate standardization of practices and/or division programming tasks and related activities. Tool Standardization and Interface (Score of 8 = 100%! 4) Project data bases standardized for all groups working on the same product components, to support consistency in building of program modules, configuration management, documentation, maintenance, and potential reusability of code. 5) A interface providing the capability data bases, the centralized production system project libraries Formal support tools, base and program link . Inputs Standardization and Control (Score of 12 = 6) to data management promotion (beyond the 1(X)%) discretion of project managers) that new code be written in modular form intention that modules (in addition to common subroutines) serve as reusable "units of production" in future projects individual with the will then 7) Formal management promotion (beyond the discretion of individual project managers) that, if a module designed to perform a specific function (in addition to common subroutines) is in the program library system, rather than duplicating such a module, it should be reused. 8) Monitoring of how much code is being reused Total for 8 Variables (Score of 32 = 100%) 27 Table 5: SUMMARY AND RANKING OF SURVEY SCORES f%l Note: Japanese Facilities indicated by * COMPANY/FACILITY Process Tools Inputs Total 93.8 100.0 98.4 Telecommunications Software *NEC Switching Systems *NT&T Applications Mitsubishi Electric AT&T Bell Labs Applications) *Hitachi Totsuka Works *NT&T Systems 100.0 75.0 Table 5 Continued COMPANY/FACILITY Process General Applications *NEC *NEC Mita Information Services Control Data *Nippon Systemware Fujitsu Kamata Software Factory Hitachi Omori Works IBM (Office Products) Martin Marietta/MD Nippon Business Consultants Cullinet EDS/GM Martin Marietta/Denver Hitachi Software Engineering Mitsubishi Electric Nippon Electronics Development Computervision 95.8 Tools Inputs Total Table 6: COMPARISON OF AVERAGE JAPANESE AND U.S. SURVEY SCORES n = 23 Dimension Process (Std. Dev.) Tools (Std. Dev.) Inputs (Std. Dev.) Total (Std. Dev.) Table 8: COMPARISON OF REPORTED JAPANESE AND n = 13 Jaoanese (Std. 33.8% (14.5) U.S. REUSE RATES DISCUSSION The survey appear results there are clearly variations to support two emphasis among software managers, in the strategies and structures of their organizations. of software placed largely as some managers operation, clearly development One hypotheses. at craft, a art, making facilities is that regarding Despite potential views "job-shop" or types similar more emphasis on control and standardization products of of type of processes, basic tools, and reusable inputs (modules of code). Within same product types, the 56.3% to 98.4% in in Real-Time to Control 87.5% a in It total ranged from scores 54.7% to 93.8% in Commercial Industrial Operating Systems; and Applications; Business Applications (Table 5). ranking within example, Telecommunications Software; Operating Systems; 56.3% 90.6% for may be few percentage points; 23.4% to in General difficult to distinguish facilities 28.1% to 91.4% but companies on opposite ends of the spectrums that emerged from the survey rankings must be different and in instructive ways. Moreover, the analysis of variance tests confirmed that product types as defined in this paper had no significant impact on where managers scored on either dimension studied. of Japanese some national A second hypothesis one might generate from the discussion approaches to engineering software differences between the U.S. far as for was measurable this. in and Japan that is in are management emphasis, this limited survey. Among the three dimensions there at least as The data provide some support studied, the t-tests indicated that only the average responses for the inputs variables -- 74.4% for the Japanese and 47.8% for the U.S. 63.1% for the U.S. -- -- and the total scores -- 73.7% for the Japanese and were significantly different 32 (Table 6). This does suggest that factory-type approaches and control rates standardization emphasized process the variables, although different at a in complex U.S. by themselves averages neither higher scores for the to be tools were significantly confidence interval even of 90%. emphasis and processes and variables, The only dimension was Japanese scores also tended (Table 8). (33.8% to 14.3%) higher on rates process Reported Japanese reuse rates were also significantly higher than Japan. U.S. on might be more commonly reusability as well as centering on tools phenomenon has particular a much facility. to reported with reuse That standardization 9). suggests significant not probably and significantly (Table reuse inputs were work flowing through correlated that that reusability do with the Nonetheless, the is of a similarity of analysis of variance tests confirmed that product type was not significant, while country of origin rates significantly (Tables producers, and 7 who correlated with the inputs scores and This 10). clearly are marketing Japanese systems producers, who reusability. In extent Martin the market Japanese applications that customized basic software, sell products, as Marietta/Maryland and TRW, in Japan, as appeared to a lesser be following a But, as noted earlier, particular features which almost universally has demanded customized products, perhaps encouraged firms pursue standardization also well both tend to emphasize the U.S., System Development Corp. /Unisys, and to reusability or customizing strategy. of suggests data reported reuse and in this customization reusable components. 33 country more than relying on the in the U.S. to construction of IMPLICATIONS The survey was emphases among managers This attempt cut" major software at facilities upper end and job shops on the lower end, for The measure differences to a variety of product types. is possible to impose "factory" discipline over engineering and production operations even for Over time, products similar made by firms savings if in not present, the at to facilities produce customized upper end the of semi-customized) (or lower end of the spectrum but at process management or elimination of a lower cost, having to industries such as semiconductors, machine tools, due to "reinvent" This may provide an important competitive advantage, as components. it has and even automobiles. product development and production need to ask themselves Managers of they doing are the at performance to those products (packaged or customized) at the from new and complex technology. relatively a may become able spectrum in case historical which should show how studies of firms at the higher end of the spectrum, it the U.S. and Japan. in value from this research should come from detailed, real in spectrum resembling flexible factories on the across a firms identified "first a all can they to improve their operations. If some firms deemphasize standardization, integration of tools and processes, and reuse components, while individual tool, -- that is, capabilities focusing or the final product, compared to essentially to maximize some the of on the engineer, individual if of the then they may not be fully developing their performance competitors of their -- orQanizational people technical and invested resources. All at such "rationalization" of product and process development depends, least to some extent, on the nature of the marget segments 34 a firm wishes The question then becomes, within those segments, to serve. be more -- efficient example, for components rather than building in tool seem semi-customizing is it products possible to reused from programs from scratch, or simply investing all and process development and then standardizing around technologies that degree The work best. to scale of the facility should be less important than the of standardization of although processes and tools, integration, or reuse rates, may be important scale to investment process the financial justify development. For software, this technology improvements a lingering issue ever can reduced. be Previous programming environments programming techniques, expert systems and graphics innovations automated tools, programming, such artificial Unix as used and developed continually (Cusumano 1987b, 1987c, 1987d) effectiveness in automation, testing , is to work, new in high-powered All of these are software factories although these can probably be used with equal -- if they are applied consistently. influence. A focus from the individual and individual tools and techniques, to the management and process expect with any product and design and production, compared example tools technological change and managerial organization least basic as job shops or laboratories A larger issue shift in leading intelligence-based tools, workstations, and rapid prototyping techniques (Brooks 1987). being of programming productivity include high-level languages, time in integrated sharing, what extent the design complexity to is to suggests the this and not reflects as firms market as earliest is process -- days a of demands movement one might accumulate experience in become better defined, an industry. movement 35 a at But the software necessarily constrained by the . nature of variables a technology or by the simple passage may be managerial strategy and of time. The efforts at implementation, further discussion of this topic must await additional APPENDIX TABLES VARIMAX ROTATED FACTOR MATRIX library central data base uniformity project data base interface design for reuse reuse promotion monitoring reuse Inputs -0.20667 0.27622 0.11185 0.17609 0.29765 0.70171 0.74770 0.51412 Process 0.51709 0.65561 0.65900 0.13763 0.23977 0.12273 0.08013 0.49757 EIGENVALUES AND PERCENT OF VARIANCE Variable library central database project database interface uniformity design for reuse reuse promotion monitoring reuse Factor although research on individual firms Variable/ Factor critical Tools 0.35414 0.11498 0.13972 0.77652 0.62033 0.48046 0.16469 0.05278 BIBLIOGRAPHY William J. and James UTTERBACK, "Dynamic Model of Process and Product Innovation," Omega 3 (1975), 639-657. ABERNATHY, , William J. and Kenneth WAYNE, "Limits of the Learning Curve," Harvard Business Review (September-October 1974), 109-119. 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