Generic Vs Custom Built: Avoid The Silver Bullet

by Amit Tripathi    May 10, 2005

In the wake of tremendous growth and competition that businesses face today, CIOs are constantly faced with the dilemma of adopting the most appropriate business technology strategy; whether to purchase off-the-shelf or build solutions in-house.

Dr. Amin Adatia, president, KnowTech Solutions Inc., Canada, and a regular contributor to various blogs on enterprise level IT, spoke to CXOtoday exclusively raising pertinent issues that CIOs encounter irrespective of the type of business they are in.

On COTS Vs Custom Built Approach

Adatia prescribes certain best practices approach for CIOs in the case of an IT product implementation. He says, “Analyse the needs and assess the gaps in what is currently available in-house. This will provide a framework against which to judge a commercial off-the shelf (COTS) or custom built. Why throw away everything for a yet another new and improved ERP package?”

He explains further, “COTS assumes that you will adapt to the practices inherent with COTS and that it does actually meet a vast majority of the requirements. Else you will be customizing COTS through the vendor at the usual inflated consulting fees.”

Apart from strategy related issues, there can be other roadblocks to technology deployments too. Adatia informs, “An ERP always brings a certain degree of change in the organization. Some of the employees / management will not be able to cope with the kind of change required and may actively work against the project. If the person(s) are at the senior management cadre, then it may be difficult to get past the road blocks put up.”

Expressing his views on the changing role of CIOs in these times of mergers and acquisitions, Adatia says, “These companies are in the business to make money for the shareholders. If a CIO thinks that just because his/her company has bought a particular ERP, that vendor is bound to remain in business for ever or at least until the CIO changes his job, the CIO is not exercising best judgement. Also, a CIO would ditch a piece of software if something else came along with a perceived better value.”

On the ERP implementation process

Adatia considers ERP to be much more than just an IT initiative of an enterprise. He elaborates, “Implementation of ERP, and I think even the term itself, has lost focus. ERP is a way of life, much like Buddhism. How can you make someone into a holistic person? If the focus is on being able to reduce data entry time/effort, then the point of ERP is not understood. Knowing all the ways of meditation does not get anyone to nirvana and the same is true of ERP. Until everything works in unison, there is no ERP as such; only many dis-jointed pieces each pulling in their own way, albeit in the industry best practices manner and a so-called successful implementation.”

According to Adatia, the success and efficiency in enterprise level IT deployment is dependent on the top managements’ proactive role. He says, “For ERP to get implemented, the organization needs to know its business functions and the various processes it has implemented to get the business function done. Not many organizations are willing or dare I say, capable of understanding / analyzing this function / process matrix.”

Thus the supposedly wise management, buys into the ERP silver bullet seeing only the glitz of the dashboard and hoping that all those will be achieved.

On ROI

Not understanding anything about the underlying IT framework / infrastructure and the background effort / knowledge, the management buys the ERP package and calculates the ROI. Managements need to understand that a project of this magnitude must go through a cash flow, which will have sign changes over the period of implementation. The only way to select IT projects (and in fact any other kind of project) is through the calculation of the net present value (NPV) and then applying the asset allocation principles using linear algebra, to determine the value of the project to the company.

Thus it becomes necessary for business heads to spend time on these aspects rather than seeking and grabbing a silver bullet.

Tags: ERP