Once a company opts for the homegrown approach, it can be extremely difficult and expensive to move to off-the-shelf applications.
The IT director at bath products retailer Crabtree & Evelyn wants to move away from the homegrown applications that run point-of-sale and back-office systems, but he says hes trapped.
The multimillion-dollar cost of moving to off-the-shelf apps would easily outweigh the cost of sticking with apps that work quite adequately.
The privately held retailer is certainly not alone. When any company makes the decision to craft its own software for key strategic functions, the decision has to be viewed as serious and long term.
Once a company opts for the homegrown approachand all of the advantages and headaches that come along with that decisionit can be extremely difficult and expensive to make the off-the-shelf move later on.
That move is made all the more difficult when the company tries making that move when it is in the midsize revenue range of a company such as Crabtree & Evelyn, said the firms IT Director, Steve Kempain.
The problem is not the current cost or functionality, but the tremendous personnel efforts needed to maintain and support such an extensive system.
With homegrown apps, theres no vendor-paid-for help desk, no legions of programmers trained in those applications and no group of millions of other users who will test the initial versions and endure the pain of discovery.
"A lot of individuals in the company do not understand what we do and what we support," Kempain said.
To make the off-the-shelf move with a major POS (point of sale)/back-office software company such as Oracle or SAP would cost millions of dollars in additional licensing fees and would deliver a product that is likely much less capable and tailored to Crabtrees business than what they already have, he said.
"The vendors that are contacting us dont do everything that we do," Kempain said. "Theres not a system out there that does everything we need."
Crabtrees situation might be more attractive than its executives realize, said Gartner Research vice president Jeff Comport
"Is the grass always greener on the other side of the fence?" Comport asked, adding that most of the companies he talks with are in the opposite position as Crabtree. Those companies are locked into packages from major software vendors and find the hidden costs, frequent upgrades and lowest-common-denominator functionality to be frustrating.
"Many organizations are realizing that its not just a question of Buy versus Build, but that it needs to be a blend," Comport said.
Added Gartner Research Director Brian Prentice: "Its not as black and white as build versus buy anymore. It really is starting to look more like build and integrate along with buy and extend."
Comport said this is all happening against a backdrop of corporate IT execs resisting more and more the standard assumptions from major software houses. "Were seeing lots of people who are really questioning doing upgrades," he said.
Comport argues that the very qualities that prompted companies like Crabtree to initially opt for a custom approach are the same ones that suggest those companies should consider sticking with their homegrown apps.
"If theyre used to having things exactly the way they want them, with specifically the functions they want," they should seriously consider maintaining their homegrown approaches, he said. Not only will the transition to off-the-shelf applications be expensive and less accommodating, but requiring even a small portion of custom adjustments will force companies "to pay for it dearly. Its a matter of compromising on the amount of business agility."
A popular compromise in the buy-versus-build argument is using a Web-based application, which happens to be the approach Crabtree is using for e-commerce.
Although he said Web-based approaches have their merits, Gartners Comport questioned whether they would address the primary IT problems: "Who runs your data centeror having someone else run your application for youneither of these take away your implementation costs."
Paula Rosenblum, retail research vice president for the Aberdeen Group, sees the buy-versus-build issue quite differently. She argues that the off-the-shelf approach is almost always a better option.
"The value of a package is that you get the business intelligence from the other retailers using it," she said. "The question is, What business are you in? Are you in the systems development business or the product business? Generally, youre always better off with a packaged solution."
Next Page: Crabtrees homegrown app training nightmare.
Evan Schuman is the editor of CIOInsight.com's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at Evan.Schuman@ziffdavisenterprise.com.