Buy, don't modify

Although open source implementations invite all sorts of customization, a clear lesson learned from the ERP wars of the 90s appears to have sunk in: When it comes to commercial software, avoid hacking the system when possible or you'll end up with maintenance costs equal to or greater than those incurred by apps developed in-house.

MCI's Laird says many companies, including his, have made the mistake of rewriting third-party apps until they are essentially homegrown. "If you are going to buy something and make significant changes to fit your business, why bother?" he asks. In areas of the business that are not unique to MCI -- such as sales and financials -- he opts for adapting MCI's processes to fit off-the-shelf software. "[The software] has to be close to our business processes or we can readily adapt our business processes to it."

As an alternative to customization, Lutchen recommends turning to aftermarket products, such as the raft of plug-ins now available for the major ERP packages. "If you can avoid touching the main package, it will keep your maintenance costs down," he says.

SaaS solutions, which deliver applications through the browser, by their very nature, prevent costly modifications. Moreover, SaaS is "a better sales model and return model for the enterprise," says Toby Redshaw, corporate vice president of strategy, architecture, and e-business at Motorola, which uses SaaS offerings from Salesforce.com and Rearden Commerce. In part, Redshaw says, this is because SaaS vendors typically let customers pick and pay for functionality in modular fashion, versus licensing packaged software functionality that will never be used.

Redshaw says the SaaS model will have an enormous impact on enterprise IT. Commercial software may boast shorter time to market and lower maintenance costs than big in-house development projects, but SaaS incurs no hardware or software capital investment and drives maintenance costs lower still. Redshaw predicts a continuing drop in enterprise software prices, due to unfulfilled promises of big ROI, greater customer diligence in purchasing, and increasingly fierce vendor competition.

New, attractive buying options raise the bar to justify in-house development. They may also tip the balance toward replacing aging proprietary apps with tried-and-true commercial solutions.