Custom Configuration?

One of the trends that I have noticed recently is the number of firms who are challenging the elements of their IT estate that are custom developed or in some other way non-standard. The reasoning goes that anything non-standard costs more to develop and maintain compared to a vanilla out-of-the-box configuration. This is of course quite true but I think there is a more subtle point here.

Against the cost of any element of the IT estate we need to balance the value generated. In general the standard configuration in a packaged application is merely an aggregation of the most common needs of their existing user base. For many sector most firms in the sector will be using the same set of applications, so by adopting a standard configuration, a firm is saying that it is happy to execute its business process in the same way as most of its competitors.

If this business process constitutes a source of differentiated competitive advantage for the firm, by adopting the standard configuration this source of differentiation is being sacrificed and the value delivered by this differentiation lost. In this case firms should think very carefully about the cost of this differentiation versus the value.

If there is no differentiated competitive advantage associated with this business process, it is either a business overhead or a source of cost advantage. Either way the value is not reduced by standardising the business process. So in this latter case it is quite safe to standardise on an out-of-the-box configuration.