I am in the middle of an IS class in my MBA and it has lead me to question the true reason for a lot of the things that “just are” in the world of enterprise IT.  One of the most interesting to me, occurred just yesterday.  I was answering a question about why SAP’s decision to create the NetWeaver platform made them a better fit for smaller (but still medium-sized) businesses.  The answer, I found, has to do with the application architectures of companies.  Small companies use almost exclusively COTS software while giant companies use almost exclusively in-house development.  I know this, you know this, but the question is why is it true?



The answer has to do with two fundamental relationships.  The relationship between the size of the organization and its business process flexibility and the relationship between a software solutions’ flexibility and the degree to which it was developed in-house.  As entities get larger there processes get more and more rigid (this is, of course, a general rule; there are ways to combat this).  Think of how easily a sole-proprietorship could change its payroll schedule from weekly to bi-weekly.  It might involve a quick call to the bank, probably less.  Now imagine Walmart making the same change.  Lawyers, bankers, financial analysts, etc… would go crazy over every detail.

This has a correlation to the level of customization of a software solution.  A large organization is less likely to be willing to change its payroll schedule in order to fit in to a specific piece of software, while a sole proprietor is unlikely to spend a week reprogramming his HR tool to avoid a simple call to the banker.  Going back to the SAP NetWeaver example, SAP’s opening of a platform to independent software vendors (ISVs) creates a market of somewhat-customized but somewhat-canned solutions that medium businesses can use.  They may require tweaking their business processes, but they won’t cost as much as hiring an SI to tailor a full SAP integration (a typical SAP installation at a Fortune 500 company requires 600% to 700% of licensing cost in “customization”).

The trick for B2B software entrepreneurs is to look at the size of the companies in your target market and decide how prescriptive you want to be in your recommendations.  If you’re working with small businesses, it is ok to hold their hands through a prescriptive process because they aren’t too attached to their existing one.  If you’re selling to larger businesses, you must ensure that your value proposition can be exploited no matter how a clients’ business process works.