The True Cost Of Off-the-Shelf

In the early days of IT, we would never suggest to users that they should adjust their operations to the requirements of the software that we were developing. It was always the other way around. We wrote software so that it worked exactly as the users requested. After all, the users were the clients, and IT was trying to automate their departments, not make life easier for itself.

Somewhere along the way, this whole theory changed. It may have started with the rapidly escalating cost of custom development, or with one too many missed deadlines or busted budgets. It may have started with the onset of ERP systems that established best practices for the entire organization. It may have happened when companies realized that they had outsourced so much of their IT operations that they no longer had competent development staffs.

Regardless of the origins of this change, the state of the art today is that users must bend their requirements to conform to off-the-shelf packages. The result: In his controversial article in Harvard Business Review a few years back titled "IT Doesn't Matter," Nicholas G. Carr told us that because so many companies use identical software, IT no longer provides any competitive advantage (see "Get Over Yourself," May 12, 2003).

Isn't it ironic that the very systems that are promising great value to companies are causing IT to be less strategic? Is this really what business wants?

Misinformed business executives and timid CIOs have allowed these look-alike systems to proliferate. On the surface, it always appears easier to install an outside package and not have to deal with the problems associated with customized development. Cost overruns, missed deadlines and unfulfilled expectations are no fun. It's a lot easier to be wined and dined by the ERP vendors and be convinced that this is the best way to accomplish your objectives.

Unfortunately, IT doesn't do a good job of explaining to the business the shortcomings of these new systems, the hardships encountered when users really need IT to make a strategic change, or the true cost of supporting and implementing off-the-shelf software today and into the future. Ask any CIO about the cost of outside support for one of the major ERP systems.

But perhaps more important is the cost of opportunities lost by using software that everyone else uses. If you have custom software, you can usually accommodate a new requirement at a reasonable cost. With an off-the-shelf package, this is often impossible. If a strategic initiative can't be accomplished because of the shortcomings of the packaged system, then the cost could be incalculable. This is the true cost of off-the-shelf. You must learn to use the software the same way most everyone else uses it.

I wonder if Dell could have developed its logistics system under this type of constraint. I wonder if FedEx and UPS could have revolutionized the shipping industry when faced with this type of scenario. I wonder if Cemex in Mexico could have become a high-tech cement producer using this approach.

Call me old-fashioned, but I think that there are still opportunities for companies to differentiate themselves through creative approaches to the marketplace that require the development of innovative IT systems. Perhaps, for example, Web services will enable companies to develop a much more customized software suite than is currently available through local installations of packaged enterprise systems. By skillfully interfacing some disparate elements, a creative CIO may be able to achieve some competitive advantage.

This opportunity may already be lost, however. The significant outsourcing and offshoring that companies are doing may deprive us of the talent needed to customize a Web services system or develop unusual systems.

Perhaps the dire predictions of the demise of internal IT have scared off the good developers. Perhaps Carr's thesis has become self-fulfilling, and IT is destined to subside to the role of a utility.

I'm reminded of the story about the head of the U.S. Patent and Trademark Office who submitted his resignation in 1899 because "everything that can be invented has been invented." Although probably apocryphal, it does serve to emphasize the danger of second-guessing the innovative mind. I think IT has a great opportunity to bring new and exciting ideas to business that will enable companies to develop innovative processes and products. I think our brightest days are still ahead of us. But we can't be afraid, and we must be able to do some customized development that will give our companies that elusive competitive advantage.

Paul M. Ingevaldson retired as CIO at Ace Hardware Corp. in 2004 after 40 years in the IT business. Contact him at

Copyright © 2006 IDG Communications, Inc.

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