Build vs. Buy In the 21st CenturyAs outdated assumptions begin to break down, pay careful attention to shifting enterprise application vendor strategies"Create a customer acquisition and retention strategy." "Close the business gap between applications and business needs." "Simplify access to back-end ERP and CRM systems." If you've bought or considered buying packaged enterprise software in the last 10 years, there's little doubt you've heard one of these expressions. The leading packaged software vendors hammer on such messages until they sound more like cliches than the sophisticated software buying rationales they're intended to be. Although the language may seem familiar, its originators may not be who you think. These quotes come not from the marketing collateral of SAP, Oracle, PeopleSoft, J.D. Edwards & Co., Siebel Systems Inc., or other enterprise software vendors, but from Microsoft and IBM Web sites that describe the future of enterprise software and these companies' respective roles in that future (www.ibm.com/industries/businesssolutions and www.connecttoyourdata.com). The IBM and Microsoft sites envision a future replete with custom-developed applications, fueled by IBM and Microsoft's vision of a post-packaged software world. This custom applications thrust is nothing less than an attempt by two industry giants to tip the next generation of enterprise applications in their favor, to the possible detriment of the packaged applications vendors that have dominated the market since the early 1990s. IBM and Microsoft have large investments in the packaged enterprise applications market as well, but whatever else IBM and Microsoft say about their partnerships and strategies in that arena, their message to customers — on these Web sites and elsewhere — is clear: Build the future, don't buy it. The timing of this focus on custom applications is no accident, and its implications extend far beyond IBM, Microsoft, or the packaged software vendors. The enterprise software market is currently working to define and deliver a next generation of applications that will have to build on existing enterprise applications and data and make use of Web services and other emerging standards. The question of whether this is a custom applications market or a packaged applications market is up for grabs. Microsoft and IBM — stalwart partners to the packaged software vendors — will also be competing directly with these vendors on their home turf to define a future direction for IT spending that favors a highly customized approach to next generation applications. Whatever the outcome, customers will need to adjust their strategies accordingly. In Defense of Packaged SoftwareThe irony of returning to the build vs. buy debate of the '90s is that packaged software has never been cheaper to buy or easier to implement and maintain than now. When modern packaged software first emerged in the late '80s with Oracle Financials and then, in 1991 with SAP R/3, the difference in cost between build vs. buy was less obvious. Most packaged implementations included significant consulting costs — for implementation as well as for business process reengineering — that made the software to services cost ratio range anywhere from 1:3 to 1:10. For the most part, packaged software represented a new way of looking at data and business processes. By supporting data and business process integration under a single application umbrella, packaged software users could better integrate their business functions and better manage and scale their internal and external business processes. That was the grand vision, but there were important ancillary benefits to the "buy" strategy that helped further justify the investment. Application user groups emerged as an important factor in the market as the number of users soared into the thousands. Not only were these groups able to influence development and product direction in an unprecedented way, they also became important forums for sharing information about the day-to-day running of packaged applications. Expertise built around applications suites provided an incubator for talent and best practices that had never been possible in the one-off, custom world. As the market grew, CIOs accumulated a track record for initiating big ERP systems that improved everyone's implementation and return on investment (ROI) figures. By the end of 2002, it was safe to say that packaged enterprise applications had, all other things being equal, proven their value vis-à-vis the custom applications built using development tools and relational databases.
|
 |
Most Popular This Week
IE Weekly Newsletter
Subscribe to the newsletter
| |
|
