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November 30, 1998

Behind The Numbers:
Enterprise Apps: Buy Or Build?

pie chart

o make or to buy? The question may lack the dramatic flourish of the Bard's "To be or not to be," but for IT managers contemplating enterprisewide applications, it's still a classic problem.

In the age of packaged enterprise applications such as SAP R/3 that are intended to integrate back-office operations cross-departmentally, custom applications are suddenly being viewed in a harsher light. They're riskier. They're harder to maintain.

At least, that's been the rap against custom applications lately. Still, when it comes to producing strategic applications where time-to-market is critical, many IT managers prefer to take matters into their own hands--or at least point their programming staff in the right direction. But this course of action is rife with potential problems, especially when organizations lack a critical mass of properly skilled IT staff.

InformationWeek Research recently asked 200 IT executives with responsibility for their organization's portfolio of applications to weigh the pros and cons of custom and packaged apps. More than half still view custom applications as very strategic and the executives rated their strategic importance as 7.1 on a 1-10 scale where 10 is extremely strategic.

Overall, 55% of all IT applications include some form of custom development, according to the InformationWeek Research survey. The total jumps to 61% at companies that say custom apps are highly strategic to their business processes and falls to 40% at companies that say custom development is not highly strategic.

Nearly four in five IT shops doing custom development say the driving motivation is to gain an advantage over competitors. Two years from now, will custom applications become more or less strategic to your organization? Let us know at the address below.

Rusty Weston
Managing Editor/Research
rweston@cmp.com

This week in Behind The Numbers:

Customized Packages

Java's Growing Impact

Haves And Have Nots

What's The Rush?

Customized Packages

It's highly unlikely that custom applications will fade from organizational plans any time soon. There aren't many generic enterprises, so differentiation is a key to success. That's especially true in the integration of financial and data warehouse- based packaged apps and decision-support systems. Besides, packaged applications such as enterprise resource planning still aren't in wide use in the majority of midsize and large organizations.

Many IT managers often choose to blend custom and packaged applications. Several ERP vendors have indicated that they plan to produce "vertical templates" of ERP applications in the next several years, which could help ease this integration burden.

Java's Growing Impact

As development environments go, Java is a winner. True, it's not used as often as Visual Basic or HTML, which obviously are quite different languages. But as Java gains maturity and is deployed in more business-critical situations, a couple of things are becoming clear: It's not yet an alternative to Microsoft Windows, and Java's cross-platform potential is realized mainly in HTML-based applications over IP.

The fact that Java applications quite frequently are deployed on both the client and server is a testament to its impact on the enterprise. Can you imagine hiring programmers who indicated zero interest in learning Java?

Haves And Have Nots

Larger companies, with annual sales of more than $1 billion, are far more likely to use Java to create custom applications than smaller organizations. While Java is used at 55% of all companies surveyed in the InformationWeek Research study, the total jumps to 69% among large companies compared to just 38% of small companies. One explanation for this sharp difference is that smaller IT shops may not be able to pay the same salaries to Java programmers. Also, Java may be considered more of a risk (or an experiment) in organizations where investment dollars are stretched to the breaking point.

What's The Rush?

Information technology managers blame their business and product-management counterparts for the largest number of problems in custom application development. Internal pressure for speedy development is cited more often than any other factor including cost, complexity, and skills availability among IT staff.

The problem, ultimately, isn't just one of project management. It's the age old trade-off between time to market and quality. Still, even companies that choose to rely on packaged applications will find these products require some amount of customization plus routine maintenance. There's no easy solution to the dilemma.