For nearly two decades there has been a race to create customized applications that can fit a particular business unit's needs. For many companies this was viewed as a competitive weapon, a way of adding efficiency and speed into a business process that captured a company's specific needs.
That was considered the pinnacle of progress in computing technology--software to match a business rather than the other way around. But the pendulum is beginning to swing back the other way, and the consequences are likely to be significant.
Already there are signs of upheaval in the enterprise software industry. Case in point:
Looked at in isolation, SAP has a unique set of challenges. But when you factor in SAP's top rival, Oracle buying Sun, a different picture begins to take shape. If Oracle holds true to form, it will begin packaging hardware and software together into a lower-priced bundle that will be optimized for speed, power and cost, not a corporation or individual business unit.
Less visible but equally important is the war being waged below the application layer, where companies like
Collectively these developments allow corporations to take a step back from software lock-in the way they stepped back from hardware lock-in during the mainframe era. IBM's mainframes suffered more because of a concern over vendor lock-in than because of inefficiency or performance. And data outsourcing ended abruptly in the client/server era largely because companies were disgusted with service provider lock-in from companies like EDS.
While concern over lock-in has a long history in hardware and services, it's relatively new in enterprise application software. Companies always figured they owned the software because they put so much work into customizing it. Now, it appears, they are willing to forgo that level of ownership for the ability to move freely among cloud providers for the lowest possible cost or the best security benefits.
This is like constantly shopping around for the best mortgage rate and then refinancing when rates change, and it has never been something most CIOs even considered when it came to software. But the proliferation of an outsourced service model in software is forcing competition that by all accounts will only intensify over the next few years. And for companies willing to do the necessary due diligence--comparing prices, confirming security and managing the various types of data appropriately--it's rapidly becoming a buyer's market. What they lose in software customization they more than make up for in speed of implementation, flexibility and cost.
What effect this has on the industry that has built up around customizing enterprise applications remains to be seen. At the very least, many highly trained programmers will be displaced as demand slumps. At best it will infuse new talent into a market that has been stagnating and contracting for the past couple of decades, potentially with new software models and architectures that no one saw any need to explore while they were committed to customizing applications for their specific business needs.
Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.
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