VSD Empirical Investigation – HERMES SoftLab, Slovenia

HERMES SoftLab (HSL) was born in the first wave of business start-ups after a change in the prevailing social order. Based on the experience of working with Hewlett Packard (HP) from 1984–1990 (a period of self-governed socialism), the four founders – Rudi Bric, Tomaž Schara, Andrej Kuščer and Zoran Zagorc – started a software engineering company in October 1990, with the main business activity being creating software for others. At its high point in 2002 the company grew to 700 employees and absorbed an important percentage of available software developers in Slovenia, establishing branches at home and abroad.

Honesty in software programming was the main motivator for Rudi Bric to follow a certain set of values in HSL software development. This honest approach to software development was based on an experience Bric had with regard to a bug in a piece of software made by a foreign company that he encountered while working for ISKRA Računalniki in 1980, long before starting HSL.

The bug in system software actually enabled the American company Control Data Corporation (CDC), which produced CYBER-18 mini computers and application software, to gain a position of power against the buyer of the software, the Mexican company Diconsa. Diconsa had to pay to “resolve the bug” repeatedly in order to be able to continue using the application software. Moreover, the bug was not actually fixed by CDC, which preferred to accuse the Mexicans of being ignorant users. Bric knew exactly where the problem was, and how to solve it. Ultimately the problem was solved by ISKRA engineers, but the dishonest relations between some big companies and their customers made an impression on Bric, as well as the idea that you have to fully understand all the implications of the use of the developed software in order to adequately control and assure the quality of software development. This experience led Bric to implant, years later, into HSL’s culture the value of responsibility in development, as expressed in the saying “Good Work Creates New Work”.

HSL’s first really big client was Hewlett Packard (HP). In the 1990s it was considered the standard in terms of high-quality software development. HSL thus started to form its own development process according to how this was done in HP. Bric was interested in finding out if the company was capable, organized and knowledgeable enough to be able to compete in the field of software development with anyone in the world. Approached from an engineering perspective, HP was taken as the gold standard, as explained by Krajnik. Already at the very early beginning of HSL specific people were brought in whose role was to think about the software engineering process and all related aspects, with the aim of being able to produce software that could compete globally. Here, much knowledge of such processes was transferred from the relationship between HP and HSL, defined by Bric as a lucky coincidence that involved the founders of HSL, people from the previous company HERMES (already the distributor for HP in Yugoslavia), and Prof Zvonko Fazarinc and Dr Franc Rode, senior scientists employed in HP (and personal friends of both Hewlett and Packard). In 2000 HP bought a 5% share in the company itself. This in-depth relationship combined with the vision of good work led to the transfer of work practices into HSL.

As explained by Miro Germ, Director of Quality Control at HSL, who came from HERMES Plus, these practices³⁸ of HP were transferred through the HP Yugoslavia representative company into the mindset of people creating HSL. HP recommendations were used in creating business strategy and quality control processes through the Total Quality Management (TQM) tool, as well as Total Quality Essentials by Sarv Singh Soin, the TQM Director of HP Pacific.

The HP Way, which defined the corporate objectives of HP and “the way things are done around here” (Lacy and Mullins, 2002) was also fully transferred, as the management was working for HP Yugoslavia in Vienna. The HP Way clearly states the following as an aim with regard to uncompromising integrity as a company and goal for employees:

“People at every level are expected to adhere to the highest standards of business ethics and must understand that anything less is unacceptable.” (HP Alumni, 2022)

This can be understood as the explanation of the 7th corporate objective, citizenship, which is defined:

“To meet the obligations of good citizenship by making contributions to the community and to the institutions in our society which generate the environment in which we operate.” (HP Alumni, 2022)

Germ also made a presentation at the European Organization of Quality (EOQ), showing that HSL was included in the quality conversation at that time, and later also served as assessor of quality in different quality management societies. Primož Krajnik, CEO of Zaslon (a Slovenian company in the field of banking software that HSL bought in 2000) was the youngest assessor of business quality for the European Foundation for Quality Management at that time. HSL had a very defined quality assurance process which came first, and only after this did the programming work begin. At one point a project dashboard existed for each project, where quality managers signaled if the project ran in adherence to the rules defined before the start of the project. This process was also transferred from HP.

Another important notion set out by Bric was the fact that it was not only thought about how to set up the process, but also how to develop people to properly manage the software development process and the management of people who were part of this process. This led to the creation of an engineering culture where constant learning, development, sharing of best practices, improving of mistakes and focus on excellence in quality shaped teams into a formation of equals working towards a standardized goal. At the same time the diversity of teams was high, as at one point there were 14 different nationalities within the company (Tagesspiegel 1998).

In 1998 the Republic of Slovenia’s Business Excellence Prize (PRSPO) was awarded to HSL, making HSL the first winner of such a prize in Slovenia (Rozoničnik and Valenci, 2017) and an example of a company showing excellence on the EFQM model of excellence.

Besides the recognition from the industry and different quality management associations, the idea behind HSL – as explained by Krajnik, the person who was in charge of transferring the HSL “way” into Zaslon – was to create work that has the client’s best interests in mind, rather than simply trying to get the most profit out of the client, and instead to really solve the client’s problem through software solutions and ensuring their independence. Any resulting profit was the effect of this focus on high standards of quality software production.³⁹

As explained by Zoran Zagorc, a founder of HSL, this high-standard practice of project management was based on the know-how developed through the work of the founders and the quality control management practices set out by Germ. This differentiated HSL from others, and helped realize the goal of delivering high-quality software to international clients, which was the starting vision of the founders. Their initial idea that good work creates new work focused on overdelivering on deadlines and quality, which then translated into know-how with regard to project management, development and quality control. HSL had full control over software in terms of development, and an advantage in development knowledge that gave it the opportunity to do whatever it wanted with software, which could lead to moral issues. But going against the clients’ interests was not the mindset of the company. As Zagorc explains it, the individuals working for HSL and the founders were themselves ethical people, due to differences in the ethical component of society at that point in time. Zagorc also mentions the need for ethics in the case of HSL creating software for privatization in Slovenia, and for public sector use. In this case ethics were central to the development process at HSL, leading to software that secured the role of the user and not the owner of the software. This also gave Zagorc insights that could give him an unfair advantage, which his ethical character and honesty prevented him from abusing. It also signals the presence of moral character in the company, which has also been noted by others.

An important notion expressed by Luka Renko, Chief Technologist of HSL, is the fact that HSL was doing product development in which the final users’ needs, and not the company that bought the software, were of greater importance to HSL. The focus was on delivering the most value to the user, which could lead to differing perspectives between HSL and the client. This led to HSL being proactively attuned with the needs of the market⁴⁰ and users sooner than the client, and this produced many fruitful business relationships between HSL and its clients for years to come. The wish for the greater independence of clients led to hybrid teams and the intellectual property of software being in the hands of clients and not HSL. HSL was, due to its values and quality standards, able to develop software for competing clients by keeping teams separate, so they did not know what the others were working on. But there was no other direct competing client with regard to HP for which the company was developing software. What is important to note is that within the company there was a friction between the cultures of how work was being done for international or local clients, where the difference was between product development for international clients or local client servicing. The notion of responsible software was not actually a defined issue or concept, as at that point consumer software was not the standard of how software was used.

HSL in its essence tried to achieve in its development the values of good work, and independence, which could be retroactively translated into the VSD values of ownership, universal usability and autonomy values allowing us to start the VSD conceptual investigation (Žorž, 2017).

Current conclusion

The VSD analysis on the case study of HERMES SoftLab (HSL) shows a series of issues with regard to analyzing the values of past software.

The first is the fact that the historical background – context – shaping the people’s culture at that time is no more. As mentioned by Zagorc and Krajnik, the values of the software industry at the time of HSL were the values of a certain period and cultural background, where everyone had been raised to believe that what is best for society is more important than what is best for an individual. As mentioned by Bric, the HP Way was similar to the belief model that was promoted in Slovenia and Yugoslavia, the societies in which the founders of the company and employees actually grew up.

The other issue is that due to the fact that HSL was sold to Comtrade in 2008, we are actually unable to run a VSD technological investigation as additional research should be needed to determine which software could serve as the artifact representative of HERMES SoftLab.

From this we can conclude that values in software development are time-critical and hard to store, due to the shifting nature of software, usage, and ownership, as well as documentation practices and standards.