Custom Deluxe

For much of this decade, the package-vs-custom software decision has been pretty much a no-brainer. Once companies saw the benefits their competitors gained from integrating various information systems into one using a common platform, they were quick to follow. Witness the incredible growth of the market leader for enterprise software, SAP AG. The software giant, headquartered in Walldorf, Germany, had worldwide sales of about $500 million in 1991. SAP's sales last year were $5 billion. SAP hasn't been the only company enjoying the growth of this market. A host of software firms including Oracle Corp., PeopleSoft Inc., J.D. Edwards & Co., and Baan Co. have cashed in on the rush to buy enterprise applications out of a box. Many business benefits can be derived from these integrated software packages. For one, employees in different departments can be assured of using the same information. A global customer is identified the same way in Hong Kong as in Perth or Cairo. A product code is the same in Europe and in North America. But packaged software has some shortcomings. Most common are the kind that force the company using it to change processes or ways of doing things, a bit here and a bit there, to fit the way the software was developed. If you've ever used Microsoft Excel or any word-processing program, you know what I mean. The programmer who built the software code that runs the program thought you should do things his way; it doesn't matter that you have a different -- and often better -- way of doing them. The real weakness in packaged systems comes when those shortcomings represent the difference between a generic solution and an industry- or company-specific one. Manufacturers in several industries -- most notably automotive, railroads, and process manufacturing -- have come up against this problem. Packaged software often doesn't provide the needed depth of functionality -- i.e., the specific capabilities required to run the business. As a result, many auto manufacturers continue to build, modify, and modernize homegrown systems to run their operations. In fairness, software makers continue to add industry-specific packages that go a long way toward shoring up the gaps. SAP, for example, is working with media and publishing firms worldwide to create a version of its immensely popular R/3 software. The goal is to provide a software package that book, magazine, newspaper, radio, television, and even Web publishing companies can use to run their advertising and editorial operations. Actually, the industry-specific package has been around for a while. Banks have had software packages to automate various operations for decades. But the idea of building integrated software to serve as a template to serve an entire industry was an idea pioneered by Andersen Consulting in the early 1990s. Andersen had developed systems for the process industries and utilities that encapsulated the knowledge and experience its army of developers had amassed over the years. The consulting firm's plan to sell a boatload of software was dry-docked when SAP and other software firms came along and undersold them with their popular packages. Andersen merely switched boats, training thousands of its employees to install SAP, PeopleSoft, and other packages. Today, though, the pendulum seems to be shifting in the direction of custom-built software once again. The reason is the Web. Manufacturers are looking for help in crafting electronic-business strategies and creating better Web sites to engage customers, suppliers, investors, and employees. And Andersen, IBM Corp., and just about anybody who can say HTML will, for a fee, put you into e-business. Oh, yes, there are software packages to facilitate e-business. Microsoft Corp., as you might guess, is a leader in the market. For its part, packaged-applications industry leader SAP has resculpted R/3 so it opens up with a flexible menu that makes the software more personal to the user and easier to navigate. So, while the front-end of the software can be personalized, the end result is more like customizing the dash, steering wheel, and interior of a new BMW. It might be more fun to drive, but you still get the stock engine under the hood. Hey, with SAP -- or BMW, for that matter -- who's complaining?