To build or to buy IT applications?


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The oldest question in IT keeps getting more complicated as new options emerge. Here's how MCI, Motorola, Visa, and others are tackling the problem

It's a question of Shakespearean proportions. Should you license a commercial enterprise application that will meet 75 percent of your needs, or would it be nobler to build your own application, one that will track as closely as possible to the task at hand?

Decades of trial, error, and egghead analysis have yielded a consensus conclusion: Buy when you need to automate commodity business processes; build when you're dealing with the core processes that differentiate your company.

But reality isn't quite so orderly. Creaky, complicated systems developed in-house may handle mundane tasks, but astronomical switching costs may make them impractical to replace with commercial software. And in some instances, packaged software -- even SaaS (software as a service) offerings -- may fit the strategic plans of an enterprise hand in glove. "Buy to standardize, build to compete" may be terrific as an ideology, but the choices that real companies face are a lot messier … and more interesting.

As enterprises from MCI to Motorola to Visa weigh the build-or-buy decision in their projects, two overarching trends emerge. First, as vendors saturate the market from general-purpose CRM to the narrowest vertical solution, the economic pressure to buy and consolidate (or subscribe and let a SaaS provider deploy and maintain) continues to mount. And when companies decide to build, they strive to ensure that the functionality created is as reusable as possible across the organization.

"Everybody knows that the more standardized you are and the more you buy off-the-shelf, the more cost effective it will be for both implementation and ongoing maintenance," says Mark Lutchen, former global CIO of PricewaterhouseCoopers, now head of the firm's IT Effectiveness practice.

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