Buy versus build
- 01 February, 2002 08:00
Vendors of prepackaged business applications say they hold the key to solving back-end processing and business problems common to large enterprises. While mid-tier customers may buy into this spiel, the larger enterprises aren't so sure.
According to analysts, packaged solutions are often developed on the basis of an 80/20 principle - addressing around 80 per cent of the client's business problems and leaving 20 per cent to the user to solve through internal development.
IDC points to software houses SAP, Oracle and PeopleSoft, as examples of vendors who appear to have adopted the 80/20 rule. Oracle, for instance, offers an e-business software suite, which it says matches a range of key business needs. Initially, the suite focused on business processes like distribution, procurement and order management and financials, but has evolved over the last 36 months with tools for warehouse management, enterprise asset management, HR payroll, and supply chain management.
"Oracle's e-business suite has tripled in its functional breadth and addressed a range of vertical industries to solve 85 per cent of their needs," said Oracle Australia's e-business and industry strategies director, Scott Dawes. He claims that most users could install the complete suite of applications "without having to customise".
Before investing in any piece of enterprise software, IT managers advise that you do your homework. Firstly, review a business process to determine if it is meeting its true purpose. After a review, if the process remains a necessary part of the business, it's safe to investigate an "off-the-shelf" application. The catch is that it must address most of the business problems through standard functions, needing only minimum customising, says one IT professional with Sydney automotive distributor Inchcape Motors.
IDC senior analyst for enterprise and Internet software, Natasha David, agrees. "Rather than fit your business to the software, the software should fit with your business."
While implementing an off-the-shelf application may seem a simple task for the IT unit, Paul Tero, a network and system engineer with IT training consultancy Elmtree, says projects of this kind are "not for the feint hearted".
Organisations will not successfully deploy a packaged solution if the project does not have an internal champion - "preferably one who can sign the cheques", Tero says. In turn, he says managers must keep in perspective the cost of the project, which he says is usually high, and the cash investment should align with the business objective to be achieved. He adds that project owners should also be patient as software rollouts often take a minimum of six months.
According to IDC, there is a "de-emphasis", particularly in the telecommunications and banking sector, on investing in point solutions. "They are seen by their typically conservative management as too cumbersome to integrate into existing legacy systems, most of which have been in place for more than 20 years," David says. "Many banks and telcos tend to have a lot of mission-critical apps lying about that they still use. They aren't buying off-the-shelf software suites, because most of the time the functionality isn't there.
"Instead, large established companies prefer end-to-end business applications, as they see software 'suites' as more capable of solving a wide range of business problems than stand-alone products," David added.
David believes that increasingly it's the medium- to smaller-sized businesses like high-tech manufacturing or family agribusinesses in Australia which see the benefit of using packaged software suites. "Since they tend not to be burdened with old legacy systems, they can more readily build on straight ERP systems with new technologies like MRP (manufacturing resource planning) applications," she says. "They also tend to have good management practices."
Following this trend is the government sector. Last year, 60 per cent of government organisations acquired off-the-shelf business software products rather than redesign their own systems to accommodate changing business needs, David says.
For Shashank Pawar, a software support engineer with Microsoft Australia, the obvious advantage of prepackaged applications is that there is "already a good base on which to build."
"You don't have to start from scratch. You don't have to reinvent the wheel -- the wheels are in place," he says. "You just have to build the body the way you want it."
Ease and speed of tailoring were the reasons why the company's global rollout of Siebel CRM over the last three years was considered a success, Pawar says.
Oracle's Dawes recommends that organisations with users familiar with existing applications should implement off-the-shelf products themselves. "If you can draw upon your in-house resources who understand your own systems, it's cheaper than outsourcing. You can leave the technical support to the vendor," he said.
Teros adds that the trick to ensuring project success with packaged applications is to appoint a project champion, and get management to commit to the process.