Enterprise technology vendors love to keep their customers ‘on the roadmap’ for as long and as tightly as possible. When the customer base follows a vendor’s release schedule, they upgrade and adhere to the platform (or application toolset) on offer and accept most (if not all) of the features and functions available, even if they don’t make use of every software spanner in the box. Revenues are maximised for the vendor, the customer is happy in the knowledge that they’re using the most up-to-date version of all application and data services (which is usually a good thing for security, compatibility and configuration)… and everybody leaves happy. Well, usually. In reality, many customers start to customise their enterprise technology stacks to get additional functions more closely aligned to their business. This move has clear benefits, but it has a trade-off in terms of compatibility in the long run if the stack becomes too skewed. The question is then, when should companies buy commercial off-the-shelf (COTS) software and when should they customise?
First we need to remember whose decision this is i.e. in the rapidly evolving landscape of information technology, CIOs are at the forefront of a pivotal decision-making process: to build bespoke, homegrown applications or to adopt off-the-shelf COTS solutions.
“The decision between developing homegrown applications or adopting COTS solutions is not merely a technical one; it is a strategic imperative that can shape the trajectory of a company’s growth and innovation,” said Kyndryl SVP & global applications, data and AI practice leader at Kyndryl Michael Bradshaw. “CIOs must weigh the benefits of customisation against the advantages of standardisation and, equally, the allure of control against the promise of cutting-edge innovation. Ultimately, the choice must align with the company’s IT strategy and overarching business goals, ensuring that whichever path is chosen, it leads to the empowerment of the enterprise and the realisation of its objectives.”
Deploying the right technology strategy is emblematic of a broader strategic dilemma facing modern enterprises, particularly those like Kyndryl, an IT services company with approximately 80,000 employees and a revenue of $16 billion, which spun out from IBM in 2021. The Kyndryl CIO recognises the potential of disruptive technologies such as AI and edge computing but he’s also aware that a good deal of additional foresight is needed
Transitioning out of IBM
As Bradshaw has noted before, the company’s transition service agreement (TSA) with IBM provided an opportunity to design a fit-for-purpose technology estate ideally suited for its business model and alliance ecosystem. He openly states that developed over 40 years and customised specifically for IBM’s needs, the legacy systems and tools were unable to support his team’s long-term vision of a lean, modern and secure operating environment.
Kyndryl is not alone; for those who did not undergo a spin-off, nowhere was change more apparent than when rapid decision-making was needed during Covid-19. In 2020, KPMG’s CEO Outlook Survey found that more than 75% of business leaders accelerated digital transformation plans by months or even years due to the pandemic.
“The heightened pace resulted in a mix of both homegrown and COTS solutions, challenging decision-makers to minimise the number of platforms and/or applications down the line – and ultimately choose how to streamline based on the business outcome they identified at the onset of planning,” explained Bradshaw. “As such, its effects on IT’s role in organisational competitiveness may still be impacting companies’ operational efficiencies and ability to keep up with today’s ever-advancing technologies.”
Homegrown applications
Looking at homegrown applications, Bradshaw reminds us that these offer a tailored fit to specific business needs, allowing companies to maintain control over their technological destiny – particularly if a commercial solution does not fit their needs or if developers can augment a solution that helps provide a competitive edge.
“They can be designed to cater to unique processes and can evolve organically alongside the business. However, this approach is not without its drawbacks. The cost of development and maintenance can be prohibitively high… and the pace of innovation may lag, as internal resources are often limited compared to the investments that major software companies can pour into their products,” he said.
The Cost Of COTS
On the other hand he suggests, COTS solutions like those from SAP, Workday, and Microsoft represent ‘a compelling proposition’ many times. Why? “Because these platforms are the product of millions of dollars in continual investment and innovation, ensuring they remain at the cutting edge of technology. For Kyndryl, the decision to align with these commercial applications was strategic, allowing them to harness out-of-the-box functionalities and standardised processes that minimise the need for extensive customisations. This alignment not only streamlines operations but also positions the company to capitalise on strategic platforms to drive business outcomes,” emphasised Bradshaw, making his position clear on the need to align with the big brands, but perhaps also keep a keen eye on the in-house development team for customizations as well.
Given that this discussion appears likely to be somewhat in the balance in a case-by-case kind of way, Gaurav Kumar, business head at LatentView Analytics agrees that it’s never a case of just one and not the other.
A sliding scale of grey
“Between the hardware, software and skills needed to deploy any technology solution, the latter two are central to the buy vs build decision. The right answer most likely shows up on a sliding scale of grey instead of a binary one,” said Kumar. “Assuming the organisation has all the skills, a homegrown application will allow the best use-case fit with command and control over customisation, roadmap planning, feature rollout and role-based privacy controls. The blind spot, however, is the unknown. The organisation may miss out on best practices, feature functionality enabled by new technologies, and upstream-downstream integration opportunities, to name a few.”
On the other hand agrees Kumar, licensing a COTS can still make a lot of sense, especially if the vendor offers microservices and skills-for-hire to deploy and maintain in the customer organisation’s environment.
“Any gaps in the microservices may potentially be filled through the skills-for-hire partnership thus making this option as compelling if not more as the homegrown application option. There is no one good answer to the COTS vs homegrown application debate. Both choices need to be weighed against what the organization has, where it wants to go, and how fast it wants to get there.”
It depends, really
While it might be slightly frustrating to find out that ‘it depends’ is the answer to our question proposition here, that’s probably pretty inevitable given the complexity of modern cloud-native AI-driven IT stacks with their increasingly convoluted data topographies. What is important is that we’ve asked the question and that we know (as procurement directors, CIOs or on-the-keyboard practitioners) that there are choices out there and they may have already impacted the way the IT services we use every day were created.
Free image use: Unsplash – Oxana Melis