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A Build Mentality Is Re-emerging in Business Applications
21 August 2003
Scott D. Nelson

Document Type:  Research Note
Note Number:  SPA-20-7537
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Enterprises have always wanted to build their own applications, but it was easier to buy. This is no longer true. Expect to soon see a trend toward 20 percent of enterprises creating their own business applications from scratch.


What You Need to Know

Build vs. buy is again moving to the forefront of IT decision making; however, this time, build will have some real possibilities for the right types of enterprises. Those with a process focus, a strong IS department with application development skills and unique business models will find build to be an attractive alternative. For the rest, buy will still be the strategy of choice; however, the growing number of enterprises that will be building their own solutions will cause vendors to notice. This will change business applications for the better during the next three years.

Analysis

Strategic Planning Assumptions
By 2008, 20 percent of all new business applications will be "homegrown," as opposed to commercially available solutions (0.8 probability).
By 2008, 20 percent of enterprises will write some components of business applications — including ERP, CRM or SCM — themselves (0.8 probability).

Gartner research consistently shows that about 25 percent to 30 percent of enterprises would prefer to build their own business applications, as opposed to buying best-of-breed solutions or an integrated suite. Nonetheless, with only a few exceptions in functional areas such as call centers, very few actually move forward with this plan. Traditionally, enterprises have given several reasons for this dichotomy:

However, in the past 12 to 18 months, thinking on this issue has changed. As Gartner talks to clients, a trend toward writing in-house, custom business applications is clearly emerging, even though many areas — such as enterprise resource planning (ERP) and customer relationship management (CRM) — are quite mature, and adequate solutions abound. This change in mindset has several causes:

Hence, although Gartner research shows the same 25 percent to 30 percent of enterprises looking to write their own applications, what's changing is the growing percentage that actually follow up on this desire. This trend can be expected to grow more prevalent. By 2008, 20 percent of enterprises will write some components of business applications — including ERP, CRM or supply chain management (SCM) — themselves (0.8 probability).

Although this trend does not represent the death knell for packaged applications, it will change the landscape. Gartner expects vendors to react in the following ways:

Key Issues
How will ERP II technology and architectures evolve?
What is CRM, how will it evolve, and what drivers are emerging to force its adoption?
How will SCP and SCE support current and emerging business models, and key enterprise business initiatives?


Acronym Key

CRM customer relationship management
ERP enterprise resource planning
SCE supply chain execution
SCM supply chain management
SCP supply chain planning
SI systems integrator
TCO total cost of ownership