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Off the peg or tailor made?
How will you buy business apps…

By Ollie Ross

Published: Monday 16 June 2008

Fundamental changes are afoot in enterprise apps. These shifts will change the way organisations choose and pay for systems, says Corporate IT Forum research head Ollie Ross.

Earlier this month Microsoft announced it was simplifying procurement processes and would pressure other suppliers to follow suit. The week before, SAP announced it had dropped a lower-priced support service, instead contracting new users to an enhanced and more expensive 24/7 arrangement.

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Coincidence? Or could these major companies be responding to some dramatic changes in the market?

What's certain is that the past year has seen a whole range of new suppliers entering the enterprise market in different ways - Google, Amazon and Salesforce.com to name but three.

What's also certain is that members of The Corporate IT Forum are taking a hard look at cloud computing models hosted outside the company walls.

There are risks to deploying these products, and many CIOs have significant reservations. But big businesses can understand the flexibility such new models might bring. They very much like what they see.

Perhaps the big vendors see this too? Could we be witnessing some pre-emptory moves by key companies in the corporate applications market?

If the cloud computing phenomenon materialises it may well lead to the market opening out and being dominated by two main groups.

At one end of the supplier spectrum would be companies offering one-stop-shop hosted systems that are quick to deploy, flexible to use, easy to access and relatively low cost.

While at the other end would be those suppliers - such as traditional ERP vendors - offering contractually bespoke, complex, proprietary systems carefully aligned to the business and, of course, sold and supported with a high price tag.

Companies at the cheap-and-cheerful end would most likely compete largely on price and ease of use, while companies at the highly complex and bespoke end will compete on quality and reliability.

For the CIO, taking either route involves challenges and risks.

Services that exist in the cloud outside company boundaries make users worry about stability, availability and robustness of hosted applications. Plus there are attendant concerns about security and liability.

With services that exist within the company, users question business value. They also question the long-term implications of running critical business applications that are very expensive to buy and maintain, complex to deploy and invariably tied into a system of supplier-determined upgrades.

For CIOs the question is what will best meet their organisational requirements? Off the peg or tailor-made?

It's a choice you'll need to consider very, very carefully.