New Reasons to Do It Yourself

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September 5, 2005 (Computerworld) -- Richard Hoffman is not a fan of software licensing terms. "Every time you are on somebody's proprietary [software], they always try to come back and milk you," he says.

But the president and CEO of Hyundai Information Service North America LLC, the IT arm of Hyundai Motor America, has found a partial solution to the problem: building his own software offshore.

"We do a lot more customization and writing of small applications than before," says Hoffman.

That gets him out of annoying licensing situations, such as the time a software vendor wanted to change licensing from concurrent users to named seats. Charging for every user, not just those who used the system at any given time, would have raised the automaker's cost by $3,300 per seat. "You are better off just having some Java coders write it and pay them to maintain it offshore," says Hoffman, adding that most of the applications he has built are for nonstrategic Web services-related processes.

Hyundai's Fountain Valley, Calif.-based company isn't alone. A few other maverick IT shops are bucking the buy trend and building their own software. Their reasons include the perennial problem that off-the-shelf software can't meet their needs, but there's also a new level of annoyance with licensing issues and a new confidence in offshore development.

Off the Grid

Acxiom Corp., a data integration provider in Little Rock, Ark., runs its 6,000-node grid (two processors per node) on software built by its in-house development team.

Acxiom takes a hybrid approach to software, says Ken Archer, product leader for customer information infrastructure. It uses commercial packages where it can but builds its own when it makes more sense to do so.

For example, when Acxiom began building out its grid in 1999, few mature software packages were available. Moreover, many application providers license software in ways that are ill adapted for grid environments. For instance, a license based on the number of CPUs used to run an application isn't suited for a grid environment that can scale across hundreds or thousands of processors, Archer says.

Unlike Hyundai Information Service, Acxiom doesn't use offshore development because it has in-house expertise, Archer says. Moreover, the company is helped by its Arkansas location, where prevailing wages for IT skills are typically below those in major metropolitan markets.

For other CIOs, low-cost offshore development may be encouraging another look at the build option, particularly if they need to customize a packaged product, says Andrew Bartels, an analyst at Forrester Research Inc. in Cambridge, Mass. It may be less expensive to build an application and pay maintenance fees to an offshore developer than it is to buy a license as well as service and support, he says.

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