Best of Breed vs. Single Vendor - Part 2 Technology

Blog
Paul Barber
CEO
Prophix

The take up and use of technology is not the same everywhere and there are significant differences between parts of the world. The ways in which companies use technology is not a black & white issue, but rather encompasses shades of grey. At one end of the spectrum are tech savvy places like California where cloud computing is a standard; at the other end in developing countries the situation is very different.

These differences are associated not only with the adoption of new technologies but also with how companies organize themselves. Many IT departments in North America are regarded as a component of Finance & Admin; IT is involved in providing physical infrastructure such as internet connections and servers, but is not involved in business decisions about software selection except as it relates to IT issues such as technology, security and standards. Because of this, business users can acquire best of breed applications in the cloud that closely meet their business requirements.

However, in other parts of the world there is often a very different view of the role of IT; in countries like India and China, IT will often dictate to business users which software they must use. This dominance of IT and technology makes it very difficult for business users to benefit from best of breed software even if that software is the best for their needs.

In the developing world, for enterprise and even mid-sized companies, IT usually promotes single vendor products from businesses such as SAP that encompass a wide number of business applications. In many cases they do this because using expensive brand name software enhances the image of their company in the eyes of employees and external parties. Another reason is that the professional services needed to implement these systems are relatively inexpensive because of the low cost of labor.

North America was where cloud computing started and where it has taken off. Because of cloud computing (and for other reasons) the momentum in the business applications world has turned away from single vendor products towards best of breed software solutions. As far as use of technology is concerned, the accepted wisdom is that what happens in North America will eventually percolate through to the rest of the world. If this happens, and business users in companies in developing countries start using cloud applications, then this will cause major disruptions in the way those companies manage themselves and IT departments will become less dominant, just like they have in the developed economies.

One factor that may prevent this is the cost of labor. In North America in the 1980s and 1990s, a rule of thumb was to spend 2% of company revenues on IT, whether the IT departments needed the money or not. In many cases the IT departments didn’t deliver – they implemented business applications that were not what the business users wanted. Because of this combination of high costs and non-delivery of solutions, there was a conflict between IT and business users, and the business users won; IT ended up handling just the plumbing.

This may or may not be repeated in the developing world. If lower IT salaries can keep the costs down then IT may be able to keep control of the applications. But it remains to be seen whether business users will be content with single vendor software that has wide ranging but limited functionality instead of best of breed cloud applications. If they are, then the cloud trend that originated in North America may not make its way worldwide. This will mean there is a major difference in the future between the business use of computers in the developed and the developing worlds.

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