A couple of developments in the news this week serve as a powerful reminder that there is no such thing as off-the-shelf commercial software. Rather, there is big business in providing services to tailor software to specific business models, the nuanced processes of certain industries, and the unique partner interactions of various business operations.
Dell, best known for its computers and servers, announced on Monday that it would plunk down $3.9 billion to buy Perot Systems. Perot spends a good portion of its time customizing applications from software vendors to fit the idiosyncrasies of clients’ businesses. In the manufacturing sector, for instance, the company offers SAP applications tailored to specific vertical industries.
A year before Dell made its defining move into the services business with the Perot acquisition, competitor HP spent $13.9 billion to buy EDS, a prominent application specialist and systems integrator with a thriving trade in customized SAP applications, as well as enterprise applications from other vendors. This week, HP crowned its integration of EDS by sticking a new name tag on its services business: HP Enterprise Services. “EDS” may be a relic, but the revenue produced by helping companies turn off-the-shelf software into on-the-job software remains big business.
(While the two examples above call out SAP, the challenge extends to nearly all enterprise software providers.)
The business of maintenance has also been under the microscope in recent days, with rumors flying that Siemens will drop a maintenance contract for its enterprise software. Companies opting for on-premise software often face hefty maintenance costs (on-demand purveyors wrap their maintenance costs into subscription fees) to continue receiving functional enhancements and major upgrades to the software. There’s no denying that such upgrades can bring business benefits, but moving to the next significant release of an enterprise offering is in itself no off-the-shelf job. Many companies must enlist pricey service providers just to reach that next level.
The advent of software-as-a-service resurrects the possibility of an off-the-shelf world. In a true multi-tenant model (with Salesforce.com the de facto poster child), all customers dial in via Web connections to the same instance of the software. That saves the vendor money because it develops just one software package and can host it on one system, instead of across many individualized instances within a data center.
With some limitations, then, a company can use the software off the shelf without too much fuss.
Nirvana? Only if you don’t need your IT to deliver competitive differentiation. With true multi-tenant software-as-a-service, we fall into the black hole that Nick Carr predicted more than half a decade ago — that IT won’t matter, at least not in separating one company from another.
And that brings us to the question: Which does your business prefer? True off-the-shelf software that conveys no advantage and doesn’t break the budget or a system highly calibrated to meet your business needs and delivered at a high cost?
Or have you found a middle ground?
“Off-the-Shelf” Software and Other Fairy Tales
A couple of developments in the news this week serve as a powerful reminder that there is no such thing as off-the-shelf commercial software. Rather, there is big business in providing services to tailor software to specific business models, the nuanced processes of certain industries, and the unique partner interactions of various business operations.
Dell, best known for its computers and servers, announced on Monday that it would plunk down $3.9 billion to buy Perot Systems. Perot spends a good portion of its time customizing applications from software vendors to fit the idiosyncrasies of clients’ businesses. In the manufacturing sector, for instance, the company offers SAP applications tailored to specific vertical industries.
A year before Dell made its defining move into the services business with the Perot acquisition, competitor HP spent $13.9 billion to buy EDS, a prominent application specialist and systems integrator with a thriving trade in customized SAP applications, as well as enterprise applications from other vendors. This week, HP crowned its integration of EDS by sticking a new name tag on its services business: HP Enterprise Services. “EDS” may be a relic, but the revenue produced by helping companies turn off-the-shelf software into on-the-job software remains big business.
(While the two examples above call out SAP, the challenge extends to nearly all enterprise software providers.)
The business of maintenance has also been under the microscope in recent days, with rumors flying that Siemens will drop a maintenance contract for its enterprise software. Companies opting for on-premise software often face hefty maintenance costs (on-demand purveyors wrap their maintenance costs into subscription fees) to continue receiving functional enhancements and major upgrades to the software. There’s no denying that such upgrades can bring business benefits, but moving to the next significant release of an enterprise offering is in itself no off-the-shelf job. Many companies must enlist pricey service providers just to reach that next level.
The advent of software-as-a-service resurrects the possibility of an off-the-shelf world. In a true multi-tenant model (with Salesforce.com the de facto poster child), all customers dial in via Web connections to the same instance of the software. That saves the vendor money because it develops just one software package and can host it on one system, instead of across many individualized instances within a data center.
With some limitations, then, a company can use the software off the shelf without too much fuss.
Nirvana? Only if you don’t need your IT to deliver competitive differentiation. With true multi-tenant software-as-a-service, we fall into the black hole that Nick Carr predicted more than half a decade ago — that IT won’t matter, at least not in separating one company from another.
And that brings us to the question: Which does your business prefer? True off-the-shelf software that conveys no advantage and doesn’t break the budget or a system highly calibrated to meet your business needs and delivered at a high cost?
Or have you found a middle ground?