No doubt, ERP applications are defining the overall corporate architecture. An ERP application affects the whole corporation; therefore, the decision to build versus buy is very strategic. A misguided ERP selection will hinder a company’s ability to achieve strategic e-business objectives. The ERP selection dilemma is, Do we build it ourselves or do we buy it from others?
Traditionally, organizations had two alternatives when choosing an ERP architecture: a highly complex, custom-designed application to meet the organization’s specific requirements, typically developed in a legacy environment; or an off-the-shelf application designed to be amenable to changing environment and to be implemented more rapidly at a lower cost. While custom-designed apps provide the desired degree of functionally, their size and complexity require lengthy design, development, and implementation efforts. Maintaining, updating, and upgrading these apps require substantial internal resources, and often the assistance of outside consultants as well. In addition, these apps have limited flexibility to support diverse and changing operations or to respond effectively to evolving business demands and technologies.
To address the limitations of custom programming apps, a new breed of software solutions – off-the-shelf apps – has emerged. These off-the-shelf apps aim to provide broad functionality, better integration with existing systems, greater flexibility to change and upgrade, and a lower total cost of ownership. Never run into these packages? Odds are you will soon, because most businesses are adopting them en masse. SAP, Baan, PeopleSoft, J.D. Edwards, Oracle, Lawson, QAD, and SSA offer by far the most popular ERP packages available today.
The build vs. buy decision is being tilted toward purchasing commercial off-the-shelf (COTS) software from third-party vendors for several reasons:
Only organizations with deep pockets can viably maintain the high total cost of ownership and complexity associated with developing and maintaining custom-designed apps.
Installed applications are becoming technically outdated and the ongoing re-design of business processes makes existing software functionally obsolete-even a business impediment.
Off-the-shelf solutions integrate the best business practices from a variety of industries. The ability to import and adopt these best business practices translates into bottom-line improvements.
Companies realize that software development may not be a core competency. It’s estimated that more than 70 percent of internal software projects fail. To minimize risk, companies increasingly outsource development activities.