By Steve Short, President, NetLink Resource Group
We live in a world of convenience that caters to our immediate needs and whims. As technologies have become ubiquitous forces in our lives, we have grown to expect quick results that lead to instant gratification.
In the business world, organizations searching for system solutions often look for instant gratification by preferring to use turn-key software because the initial costs of implementation are sometimes lower than creating a custom solution. I am speaking specifically about the question of using Commercial-Off-The- Shelf (COTS) solutions versus the development of custom solutions.
The reality is that this choice is not black and white. The decision to use COTS versus custom software should always come down to the business goals of the effort, as should all technology decisions that an organization needs to make. This means that business requirements and overall costs/benefits must be considered to determine the best choice for the final IT solution and having a bias toward a specific option could cause you to make a bad decision that you will regret in the long run.
In the world of web-based applications, which are usually the preference for organizations looking for a new system solution, new COTS offerings are continuously becoming available in the marketplace. This is to be expected, for just as IT needs moved from the mainframe to client-server and the desktop in the past, we can anticipate more turnkey offerings as the market for web apps matures. This will especially be true for solutions that address common functions which are performed across many enterprises and therefore provide the economies of scale for web app providers to build a product that can be sold to a large market. Some of these solutions are now being offered in “the cloud” and are the most efficient choice for a given need.
In many other cases—usually those in which the complexity of the need is greater—the decision is not so simple. For example, when organizations have highly specific needs or their websites/applications have to interface with numerous other systems, a more customized solution is usually required. And here is one of many areas where the question of COTS versus custom apps goes from black and white to grey: oftentimes custom solutions utilize some level of turnkey products to accomplish the ultimate goal. So, it’s better to think in terms of the best solution rather than have a bias toward COTS or custom software.
So, which choice is better? The answer is that it depends on the problem you are trying to solve and you will only come to the right conclusion if you invest the time to define your goals. Regardless of what technology is ultimately used, the point is that many IT projects have a level of complexity that require an IT team that has the expertise to understand the business goals and formulate a solution that meets the need. And if you are partnering with an outside provider, it’s important to determine if you need them to have the expertise to help you with this decision or whether your organization is capable of doing so.
Now, before I provide my thoughts on what to consider when determining a solutions provider for your specific project, I want to give you my overall perspective on the importance of IT solutions from a strategic business standpoint…
A firm will only gain true advantages in the marketplace if it embraces at some level the use of custom IT solutions that will allow it to differentiate itself from its competitors.
Think of it this way: If all competitors in your market used the exact same systems applications as your firm, do you believe that you would significantly outpace them with what your organization offers to your customers? Perhaps your other assets, such as your people, product, distribution channels, etc. would provide a competitive advantage. However, don’t you want your people — especially your management team and knowledge workers — to have unique tools with access to pertinent information that will allow them to make better decisions than your competitors?
My point is that the IT systems your organization uses can be an integral means for providing a competitive advantage and that viewing pure turnkey apps as your best solution can limit your ability to differentiate your offering to your market. Stated differently, while saving money in the short run, you need to be careful that the use of COTS solutions may ultimately make your firm’s IT infrastructure converge towards being a non-differentiating commodity that will not greatly establish a competitive advantage in your marketplace.
Keeping this philosophy in mind, here are my suggestions for determining a solutions provider for your next IT project:
1. Define your goals / requirements– As Stephen Covey suggests in one of his “Seven Habits”, begin with the end in mind. Make sure you invest the time to define your business goals and put them into a written document that represents the requirements of the effort. Doing so will give you the discipline and means to evaluate the options presented by the service providers you consider and will prevent you from buying into the hype that a pure COTS / turnkey solution will meet all of your needs.
2. Be realistic about the level of complexity and associated costs—The more complex your needs, the more likely you are of requiring outside help and you may need the assistance of more than one solutions provider. In addition, the greater the complexity, the greater the chance that custom solutions are required, even if some turnkey elements are used. Both of these will likely translate to higher initial project costs than if a pure COTS solution is implemented. Be realistic about these factors and make sure you can commit to making the right decisions about them.
3. Determine the expertise you need and choose a solutions provider that has it—If you have already made the decision to implement a pure COTS product, then you may just need a provider that has the best product and they don’t need to do anything more than give you access to the application. But if you realize that some level of a custom solution is required, be sure that you pick a solutions provider with expertise in the area required. Can they build a custom solution from scratch or do they just help implement turnkey products (often referred to as an “integrator”)? The greater the sophistication of the effort the more you need to lean toward a custom solutions provider.
4. Don’t make a decision solely based upon the initial IT cost—Of course you need to consider the solutions provider’s proposal costs, but you also need to think about achieving the goals of the project, which may include enhancing revenues or operational cost savings. So, the longer term net benefits to the business should be the ultimate consideration in determining the solutions provider(s) you choose, rather than the initial hard-dollar implementation costs.
There is also the element of risk that leads to costs that are sometimes difficult to quantify. For example, going with the low-cost provider may seem good on paper, but if they don’t have the expertise to do the best work, the hard dollars you save may impact your bottom line in ways you didn’t consider—through internal resource usage, delayed deployment dates, and a poor final solution—and you are likely to feel that you have invested in a solution that fell short of your expectations, one for which you may need to live with for many years.
So, the bottom line is that the bottom line should be the driving factor in determining the best solution, as well as the best solutions providers. Invest time upfront in considering all of the business drivers before you make your decisions and you are likely to have a favorable outcome. In doing so, you’ll probably find that it’s not a simple black and white decision to determine if the solution should entail COTS versus custom apps and which provider(s) you use. Instead, it’s likely that the decision will entail a grey area that requires the appropriate level of expertise that will determine if the end results put you in the red or the black.