Technology, Media & Telecommunications PracticeDeveloper Velocity:
How software
excellence fuelsbusiness performance
The businesses that are achieving the greatest returns from theirsoftware investments are those willing to tackle entrenched culturaland structural barriers.
by Shivam Srivastava, Kartik Trehan, Dilip Wagle, and Jane Wang

© Ngampol Thongsai/Getty Images

April 2020

With technology powering everything from how
a business runs to the products and services it
sells, companies in industries ranging from retail tomanufacturing to banking are having to develop a
range of new skill sets and capabilities. In addition tomastering the nuances of their industry, they needto excel first and foremost at developing software.
It’s a big leap for many, yet a large number ofbusinesses are working hard to make it. At theGoldman Sachs Group, for instance, computerengineers make up about one-quarter of the total
workforce.¹ Within retail, software development is
the fastest-growing job category.² Indeed, of the
20 million software engineers worldwide, more

McK TMT 2020
Developer velocity
Exhibit 1 of 4
1than half are estimated to be working outside thetechnology industry, and that percentage is growing.
However, for the vast majority of businesses, theseinvestments have not led to meaningful performance
improvements. Launching a new product or feature
can still take months. Leaders still struggle to scalepromising sandbox innovations. We often hear CEOs,
chief technology officers, and chief information
officers lament that their software-development
spending is a “black box.”
Improving business performance through softwaredevelopment comes down to empoweringdevelopers, creating the right environment for themThomas Franck, “Computer engineers now make up a quarter of Goldman Sachs’ workforce,” CNBC, April 30, 2018, cnbc.com.
	LinkedIn Talent Blog, “Data reveals the fastest-growing job in retail (and it’s not sales),” blog entry by Sharqua Abdullah, April 19, 2018,business.linkedin.com.

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Exhibit 1

Companies in the top quartile of the Developer Velocity Index (DVI) outperform others in themarket by four to five times.
Revenue CAGR¹ by DVI quartile, all companies,² 2014–18, n = 239, %Select sectors, %²
Software9
4th–2nd quartile17
Top quartile

Financial services

5x
5

1

4th quartile

3rd quartileLow

1

4th–2nd quartile

Top quartile

Retail (including CPG)

2
1

–1

–1
4th–2nd quartile

2nd quartile

DVI³

Top quartile3
Top quartile

Automotive, manufacturing and resources²

High

–1

8

4th–2nd quartile

Top quartile

1
Compound annual growth rate.
² Includes companies and verticals with n>15 for available public data; n for verticals shown: software equals 25, financial services equals 30, manufacturing andresources equals 36; retail equals 44; companies were split into DVI quartiles based on DVI score and industry ranking.
³ Includes automotive, manufacturing, oil and gas, and energy.

Source: Capital IQ; Developer Velocity Survey

2

Developer Velocity: How software excellence fuels business performanceto innovate, and removing points of friction. Industry
leaders refer to this capability as “Developer
Velocity.” This goes beyond the definition of velocity
as it relates to agile methodologies—meaning it isabout not just speed but also unleashing the fullpotential of development talent.
To gain a more precise understanding of the factorsthat allow organizations to achieve Developer
Velocity, we conducted an in-depth survey of senior
executives at 440 large enterprises, more than
100 expert interviews, and extensive external
research (see sidebar, “About the research”). As
a result, we created what we call the Developer
Velocity Index (DVI), which pinpoints the mostcritical factors (related to technology, working
McK TMT 2020
Developer velocity practices, and organizational enablement) inachieving Developer Velocity, as well as those that
Exhibit 2 of 4
are not nearly as important as many executives andobservers might believe.

What really does (and does not)account for business successOur research reveals that top-quartile DVI scores
correlate with 2014–18 revenue growth that isfour to five times faster than bottom-quartile DVI
scores (Exhibit 1). Top-quartile companies also have
60 percent higher total shareholder returns and20 percent higher operating margins. In addition,
top-quartile players appear to be more innovative,
scoring 55 percent higher on innovation thanbottom-quartile companies. These businesses
also score higher on customer satisfaction, brandperception, and talent management (Exhibit 2).
Similar patterns hold within specific industries
and sectors. For example, top-quartile software
companies saw revenue grow almost two times
faster than other software companies in the same
period. In financial services and retail, top-quartile

Exhibit 2

Top companies by Developer Velocity have an innovation edge.
Correlation between Developer Velocity Index (DVI) and key business performance indicators, n = 440
1=highest positive correlation, –1=highest negative correlation, 0.5+=strong correlation
Overall¹

0.6

DVI vs innovation+55%
Innovation

0.6
Innovation

Customersatisfaction

0.5

Brand
perception

0.5

Developer Velocity Index
Companies with top-quartile DVI score 55% higher on innovation thanbottom-quartile companies

Talentmanagement

0.4

Innovation measured by ability to innovate faster and beat competition
through innovation led growth and adoption of new technologies(self-scored by executives)²

Average of innovation, customer satisfaction, brand perception, and talent management.
² Measured by an average of new technology adoption (level of adoption for artificial intelligence, machine-learning, Internet of Things, augmented and virtual reality,
fifth generation, blockchain, digitial twins, robotic process automation, edge computing, and autonomous physical devices) and McKinsey innovation quotient metrics(an organization’s innovation-led growth as well as innovation speed and perception relative to competitors).
1

Source: Developer Velocity Survey; expert interview

Developer Velocity: How software excellence fuels business performance3

About the research
The Developer Velocity Index (DVI) takes
into account 46 different drivers across 13
capability areas (exhibit). To develop andvalidate this list of drivers, we conductedinterviews with more than 100 chief
technology officers, chief information
McK
TMTand2020
officers,
other senior engineering
Developer
leaders. Wevelocity
then asked technology
Sidebarexhibitexecutives
at 440 large organizations
across 12 industries in nine countries torate their company’s performance. DVI
scores are calculated as a weighted
average of scores across the drivers, withequal weight given to the three broad
categories—technology, working practices,and organizational enablement.
Our analysis examined the impact of DVI
scores on revenue, total shareholder
returns, and operating margin. We also

looked at four nonfinancial businessperformance indicators: innovation,customer satisfaction, brand perception,and talent management. Finally, we
ran statistical correlations of businessperformance against the various
dimensions of Developer Velocity. We used
the Johnson’s Relative Weights analysis
to quantify the relative importance of thecorrelated drivers of DVI scores.

ExhibitDeveloper Velocity involves 46 different drivers across 13 dimensions.

Technology

Working practices

Organizational enablement

Architecture

Engineering practices

Team characteristics

Culture• Software architecture• Technology debt

• Autonomous scope• Psychological safety• Limited context switching• Collaboration and• Data architecture

management practices

Infrastructure and platform• Public cloud adoption• Coding guidelines• Cross-functional teams• Code reviews• Colocation of teams• CI/CD practices²(IaaS, PaaS¹)

Security and compliance• Infrastructure as code

• Security practices

Testing• Compliance practices• Test automation• Test-driven development

Open source and InnerSource• Open-source usage andTools

contribution• Planning tools• InnerSource adoption• Collaboration tools• Development tools

Agile team practices• DevOps tools• Work-in-progress management• Low- or no-code tools• Agile ceremonies• AI assistance in development• Definition of done

Product management• Product management
capabilities• Continuous improvement culture• Servant leadership• Culture of customer obsession
Talent management• Product telemetry• Incentives• Product vision• Capability building• Linkage between strategy and• Recruiting

team metrics• Team health management• Rapid prototyping• Employee value proposition

Organizational agility• Dependency management• Funding mechanisms• Portfolio management

Infrastructure as a Service, Platform as a Service.
² Continuous integration/continuous development.
1

4knowledge sharing

Developer Velocity: How software excellence fuels business performance• Engineering career paths

McK TMT 2020
companies saw positive revenue growth while
Developer velocity
average revenue declined in the other quartiles.
Exhibit 3 of 4
While the link between Developer Velocity andbusiness performance cuts across all industries,

not surprisingly, sectors that are more digitally
mature—including software (naturally), discrete
manufacturing, and financial services—have higher
DVI scores overall (Exhibit 3).

Exhibit 3

Developer Velocity (DV) maturity varies widely across industries.
Relatively low DV
Softwaren = 30Discretemanufacturingn = 57

Financialservicesn = 49Retailn = 39Healthn = 49Automotive
n=9Energyn = 58Relatively high DV

Consumergoods
n = 16Media andcommunicationsn = 30Overall Developer
Velocity Index
Technology

Architecture
Infrastructure
and platform
Testing

Tools
Workingpractices

Engineering
practices
Security andcomplianceOpen source orInnerSource

Agile teampractices
Organizational Teamcharacteristics
enablement
Productmanagement
Organizational
agility
CultureTalentmanagement

Source: Developer Velocity Survey; expert interview

Developer Velocity: How software excellence fuels business performance

5

McK TMT 2020
Developer velocity
Exhibit 4a of 4

To take it a step further, we analyzed 13 capabilities(composed of 46 individual performance drivers)
to better understand the specific conditions thatcreate high Developer Velocity. We found the fourwith the greatest impact on business performance
are tools, culture, product management, and talentmanagement (Exhibit 4). These four areas arealso strongly correlated with each other—that is,

Exhibit 4

Tools, product management, culture, and talent management have the greatest impact on
Developer Velocity and business performance.
Relative importance¹ to overall business performance indicators,² %Technology

Architecture

Foundational drivers, R² = 0.6, n = 440

Software architecture
Data architecture

Infrastructure and platform

Public cloud adoption (IaaS, PaaS³)
Infrastructure as code

Testing

Test automation
Test-driven development

Tools

Planning tools
Collaboration tools
Development tools
DevOps tools
Low- or no-code tools
AI assistance in development

Working practices

Engineering practices

Technology debt management practices
Coding guidelines
Code reviews
CI/CD practices⁴

Security and compliance

Compliance practices
Security practices

Open source or InnerSource

Open-source usage and contribution
InnerSource adoption

Agile team practices

Work-in-progress management
Agile ceremonies
Definition of done

Calculated using Johnson’s relative weights: percentage of importance is relative importance of driver on business outcomes. Higher percentage indicates a stronger
impact on business performance.
² Average score for innovation, customer satisfaction, brand perception, and talent management.
³ Infrastructure as a Service, Platform as a Service.
⁴ Continuous integration/continuous development.
1

6Developer Velocity: How software excellence fuels business performance

Developer velocity
Exhibit 4b of 4

Exhibit 4 (continued)

Tools, product management, culture, and talent management have the greatest impact on
Developer Velocity and business performance.
Relative importance¹ to overall business performance indicators,² %Organizational
enablement

Team characteristics

Foundational drivers, R² = 0.6, n = 440

Autonomous scope
Limited context switching
Cross-functional teams
Colocation of teams

Product management

Product management capabilities
Product telemetry
Product vision
Linkage between strategy and team metrics
Rapid prototyping

Organizational agility

Dependency management
Funding mechanisms
Portfolio management

CulturePsychological safety
Collaboration and knowledge sharing
Continuous improvement culture
Servant leadership
Culture of customer obsession

Talent management

Incentives
Capability building
Recruiting
Team health management
Employee value proposition
Engineering career paths

Source: Developer Velocity Survey; expert interview

Developer Velocity: How software excellence fuels business performance7

top performers with high scores in one capability
tend to also have high scores in the other three.
The companies that have mastered Developer
Velocity focus equally on empowering thedeveloper, anticipating critical enablers, aligninginvestments with customer value, and minimizing
barriers to productivity.
Interestingly, these findings fly in the face of
conventional industry wisdom. For example, manyof the business leaders we interviewed assumed
agile ceremonies at a team level would be among
the top enablers of software development. But while
agile team practices are helpful (especially in lifting
performance among third- and fourth-quartile
players), our study finds they do not play an outsizedrole in advancing DVI scores beyond that.
The other outlier was developer tools. Our researchshows that best-in-class tools are the top
contributor to business success—enabling greater
productivity, visibility, and coordination. Yet only
5 percent of executives recognized this link andranked tools among their top-three software
enablers. The underinvestment in tools acrossthe development life cycle is one reason so many
companies struggle with “black box” issues.

How to improve Developer Velocity
Why the disconnect between what leaders thinkdrives software success and what actually does?
One answer is that relatively few leaders understandthe day-to-day developer experience. Anotherchallenge is prioritizing investment among thelarge and diverse set of levers. Several actions canhelp address the four biggest factors in Developer
Velocity: tools, culture, product management, andtalent management.
Empowering developers with world-class tools
According to our research, best-in-class tools
are the primary driver of Developer Velocity.
Organizations with strong tools—for planning,

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development (for example, integrated development
environments), collaboration, and continuous
integration and delivery—are 65 percent moreinnovative than bottom-quartile companies. The
ability to access relevant tools for each stage ofthe software life cycle contributes to developer
satisfaction and retention rates that are 47 percent
higher for top-quartile companies compared withbottom-quartile performers.
Top-quartile companies give developers a degreeof choice—usually between two and five options toaccount for different needs and preferences—butrestrict ad hoc tools from being added. Leading
companies also use tools to unleash Developer
Velocity by investing in low-code and no-code
platforms. These platforms enable the averagebusiness user to develop applications without
any software experience, freeing up seasoned
developers to focus on the most challenging tasks.
For example, one pharmaceutical company grewits low-code platform base from eight users to
1,400 in just one year. Business users outside of
IT are now building applications with thousands ofmonthly sessions. The companies in our survey thatempower “citizen developers” in these sorts of ways
score 33 percent higher on innovation comparedwith bottom-quartile companies.
Creating a culture that fosters
psychological safety
Organizations that enable software teams toexperiment, fail, and learn in a safe environment
see consistently better results. Knowledge sharing,
continuous improvement, a servant-leadershipmindset (that is, managers viewing their role asempowering their teams to be successful rather
than simply overseeing them), and a customercentric philosophy are all correlated with superiorbusiness performance. But far and away themost important cultural attribute is psychologicalsafety—a shared belief that risk-taking in the
pursuit of innovative problem-solving is permitted
and protected.

Developer Velocity: How software excellence fuels business performanceOrganizations that enable software
teams to experiment, fail, and learn
in a safe environment see consistently
better results.
Although most executives recognize the importanceof psychological safety, only 20 percent believe
their organization has succeeded in creating thisculture. The chief information officer of a leading
multinational bank told us that learning how to
fail was the most difficult part of the company’stransition to mobile banking.
Companies that perform best at this aspect of
cultural change also invest in systems that canabsorb and minimize the cost of failures. These
investments include capabilities such as controlled
releases, feature flags (the ability to turn featureson and off without redeploying code), andautomated rollbacks, as well as postmortems
and retrospectives that allow teams to reflect
constructively on what worked and what did not.
A software leader at one top-quartile company
said, “You need to implement safeguards in order
to embrace failure, so we build contingencies aspart of the software-development process. For
example, we install a new version side by side withthe stable version.”
In addition to promoting psychological safety,
companies with high DVI scores more frequently
recognize employees for their achievements,
publicly acknowledging individual and team efforts
and rewarding outstanding contributions. They alsobuild strong communities of practice through, forexample, regular, brown-bag meetups on specifictopics. And they create processes that allow teams

to engage more directly with the customer—for
instance, through demos and site visits.
Creating a comprehensive
product-management function
Product management means more than simply
ensuring on-time and on-budget releases. It is
about ensuring that the right products are built
in the right ways to deliver a compelling customer
experience.³ The importance of delivering this kindof experience is why the product-management
function has become so critical over the past
decade and why these capabilities rank as thethird-leading driver of Developer Velocity.
Our research examined six dimensions of productmanagement—customer experience, strategic skills,
business acumen, technical skills, leadership skills,
and organizational enablers (such as mechanismsthat assist with strategic prioritization, funding, andthe adoption of product telemetry). The results
show that DVI scores are less sensitive to individual
attributes and far more responsive to an integrated,balanced product-management function. The
product-management team not only needs relevantbusiness and market knowledge but also a strong
technical background. Companies with aboveaverage performance across the six dimensions
have DVI scores 1.5 times higher than companies
with top-quartile performance in just one or two
dimensions. It is important to note that excellent
product management is also not about the discrete3	Ralph Breuer, Harald Fanderl, Tjark Freundt, Nicolas Maechler, Stefan Moritz, and Fransje van der Marel, “What matters in customerexperience transformations,” July 2019, McKinsey.com.

Developer Velocity: How software excellence fuels business performance9

product-management team; developers and othermembers of an agile team are increasingly wearing
the product-manager hat to understand how
their work is aligned with business priorities andcustomer needs.
Focusing talent management on thedeveloper experience
The world of technology has long been fixated on
the idea of rock-star developers: individuals capableof producing at ten times the rate of the averagedeveloper. While debate exists over the size of the
exponential, there is little question that the mosttalented developers are engines of velocity in theirown right. With developers and related roles inhigh demand, the challenge is how to attract andretain such talent and create the conditions that
ensure their continued success. Our study foundthat the talent factors most correlated with highrates of Developer Velocity—in addition to theimpact of tools on talent outcomes as discussed
earlier—are incentives, multifaceted recruiting
programs, a rich program of ongoing learning, welldefined engineering career paths, and an active
measurement of team health.
Leading companies are resourceful when it comesto keeping software talent happy and motivated.
One leading telecom company offers a wide rangeof skills certifications or “microbadges,” frombeginner’s-level mobile development to machinelearning. It also created a Developer University
to provide developers with fresh learning
opportunities and the chance to apply these skillsin their workplace.
Best-in-class companies also recognize the rolethat team health plays in boosting productivity andretention. They take the pulse of their developer
teams on a regular basis—for example, after every
one or two sprints. Surveys, whiteboard notes,
and visual dashboards provide instant feedback
that teams can use to address issues and refine
processes quickly. Comprehensive annual or
biannual employee surveys augment the more

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frequent check-ins, going deeper into topics such as
shared vision, leadership, motivation, and incentives.

Beyond the foundations: Open-sourceand public-cloud adoption and a set of
emerging drivers
While the four core drivers apply across the entire
group of companies surveyed, a different driveremerged as the biggest differentiator for companies
within the top quartile: open-source adoption. For
organizations that already have a strong DVI score,
open-source adoption acts as a major accelerator.
The data show that top-quartile company adoptionof open source has three times the impact oninnovation as compared with companies in otherquartiles. Top-quartile DVI companies are especially
active adopters, scoring 36 percent higher on
open-source adoption than the next quartile—thehighest delta on any dimension studied. We foundthat building an open-source culture is about
more than using open-source software within thecode; it extends to encouraging contribution andparticipation in the open-source community as
well as adopting a similar approach to how codeis shared internally—that is, strong InnerSource
adoption.
Another notable distinction is that DVI leaders
are more advanced in managing open-source
development securely. Many are using centralized
security management and automated tools thatcan scan open-source components and remediate
vulnerabilities before deployment. Comparedwith these leading adopters, less than 20 percentof companies are employing these advanced
security measures.
Public-cloud adoption as a catalyst of Developer
Velocity is especially strong for nonsoftware
companies—public-cloud adoption has four times
the impact on their business performance than it
does for software companies. Developer Velocity
benefits are also sharply correlated with thedegree of adoption: companies in the top quartile

Developer Velocity: How software excellence fuels business performanceof public-cloud adoption have DVI scores that are
32 percent higher than companies in the bottom
quartile. By comparison, a partial shift returns
significantly less benefit: companies in the third
quartile gain only a 2 percent DVI score advantage
over the lowest adopters.
The analysis also identified emerging drivers withthe potential to accelerate DVI scores over the
next three to five years. Top-quartile companies
are increasingly exploring the use of artificial
intelligence (AI) and machine learning in developer
tools. For example, some have begun using AI to
perform aspects of pair programming (in which
typically one developer writes code while anotheralmost simultaneously reviews it), providing
automated code reviews and using natural language
processing in low-code tools. Additional areasthat executives believe will accelerate softwareinnovation and impact in the future include
increased usage of product telemetry to makeproduct decisions and automation in detecting andremediating production issues.

Improving Developer Velocity is a journey, nota race. The businesses that are achieving thegreatest returns from their software investment
are those willing to tackle the entrenched culturaland structural barriers that are often the hardest
and most nebulous to address. Companies thatexcel in providing the right tools, culture, productmanagement, and talent management not only
develop software faster but also deliver significantly
stronger business outcomes.

Shivam Srivastava is an associate partner in McKinsey’s Silicon Valley office, Kartik Trehan is an associate partner in the New
York office, and Dilip Wagle is a senior partner in the Seattle office, where Jane Wang is a consultant.
The authors wish to thank Santiago Comella-Dorda, Paul Dupenloup, Matias Garibaldi, Chandra Gnanasambandam, Steve
Jansen, Eric Kutcher, Ling Lau, Rahul Mangla, Matteo Pacca, Aishwarya Singhal, Matthew Tesfalul, and Steve Van Kuiken for theircontributions to this article.
The authors would also like to thank HashiCorp, Microsoft, Pivotal Labs (part of VMware), and Red Hat (part of IBM) for theircontributions to the research.
Copyright © 2020 McKinsey & Company. All rights reserved.

Developer Velocity: How software excellence fuels business performance11