Choices to Make
It may sound risk averse, but arguably there are enough pitfalls in implementing new software without getting into customization. “If you’re not a sophisticated user and haven’t had experience with customization, then you should go plain vanilla, no matter how painful,” says Downey. Later, after users have experienced all the painful part of the new application, the IT department can explore the possibility of customization.
A rule of thumb is the higher the cost of the system and the sophistication of the user, the greater will be the need for customization. The actual decision to customize, however, should be delayed until users have become accustomed to the plain vanilla version and the benefits it delivers. “You’re better off building a business case on plain vanilla, then adding customization later on,” adds Downey.
Then, too, plain vanilla applications have become much more sophisticated, allowing users to fine tune the system without having to monkey around with the source code. In marked contrast to the systems of days gone by, where most functions were hard-coded, today’s applications have become increasingly rules based, meaning that enterprise-specific parameters are entered into the system through the use of tables that can be accessed and maintained by authorized users, without requiring program changes.
“Twenty years ago, customization meant coding,” says Yvonne Genovese, VP, Business Applications and Analyst, Gartner. “Vendors would maintain different images of their source code for every client. Today, software vendors have built multiple levels of customization into their products.”
The decision whether to customize an application has become intermingled with the decision on whether to outsource the application — development, maintenance or both. Partly the decision rests on where the application is being outsourced. If it’s being hosted by the software vendor itself, conventional wisdom says not to customize, but instead stick with the vendor-supplied revisions. Otherwise, the application will inevitably get tangled up between vendor-provided upgrades and customized code. “If you choose to customize, you have to retrofit every time a new revision comes out, and you risk falling eight revisions behind,” says Downey.
The advent of “on-demand” software models, including Software as a Service has greatly affected the decision on whether to customize or not. “Business process outsourcing suites, such as Salesforce.com and SAP’s CRM On Demand, push customers to be on the same release so they can provide economies of scale,” says Genovese. In these relationships, once a customer demands customized features, the business model changes from a standardized model to a hosted model, similar to an application service provider. In this model, control of the software rests predominantly in the hands of the user, rather than the outsourcer. “Hosting is a form of outsourcing where you control the software and pay someone else to run it from a remote location,” says Genovese. “Both the on-demand and hosted models are forms of outsourcing.”
The risk is that by requiring too many customized features, the client will push the envelope on upgrade costs to the point where “you’re in a one-off services model,” says Genovese. “Costs can rise in all categories, including software maintenance, support and hardware [e.g., the need for the software to be run on a separate server as opposed to single server hosting a plain vanilla application],” he adds.
What the Hosts Know
Most of the large applications outsourcing providers have great depth of experience in managing enterprise software implementations, which of necessity entail some degree of customization. HP Services, for example, recently became the first SAP service provider to exceed 50,000 SAP application implementations; half of all SAP customers run on HP platforms, either in-house or in-hosted facilities. SAP and HP have collaborated to build solution centers in Atlanta and Houston, which support migration projects for legacy technologies and platform replacements, as well as demonstrate HP technologies and software designed to complement SAP applications. Oracle has built similar partnerships with HP and other managed-services providers.
In all such agreements, cost is the primary driver. “Companies may be using older technologies or employing large numbers of IT staff, and it’s therefore economically feasible to outsource the application,” says Gartner’s Genovese. But again, contracts can get mired in language around service- level agreements, which can make or break the economic case. “Often, companies will want to take back control of their outsourced environment after they’ve found that their provider cannot live up to SLAs.”
Service providers have built out their offerings to ensure not only that SLAs get met, but that service offerings match the business needs of the customer. They do this by providing extensive upfront consultation and expertise.
Accenture defines services along two dimensions: Scope of services and breadth of applications. Clients can select basic applications-management services (such as break/fix support) or broaden the scope to include application enhancements, upgrades or comprehensive application development. Over the course of time, Accenture will adjust service levels to meet the client’s changing business needs. Also, outsourcing arrangements can focus on a single critical application, a group of related applications, or an entire portfolio of software applications. Accenture will manage custom or packaged software, including enterprise solutions such as SAP, Oracle, PeopleSoft and Siebel.
