Market consolidation will see 'best-of-breed` lose favour

Software, in all its guises, is essential for running a business. That much is a given, but when organisations have to take into account the cost and resource utilisation associated with what has essentially become a commodity, decisions around applications are best not relegated to "best-of-breed".

"IT departments are under enormous pressure to reduce the total cost of ownership (TCO) of their systems, something that`s not going to be achieved with best-of-breed and custom-developed applications that have a higher TCO due to the cost of their integration and management," says Mike Coppin, application software sales director at Oracle South Africa.

"With analyst houses measuring that more than 80% of IT budgets are spent on maintenance and integration, the obvious place to drive down IT costs is in software systems that require no integration, and do not need customising," he adds.

There has been a significant upturn in applications sales in SA, with interest coming from companies that are looking at systems consolidation. "IT departments have to cut their costs and their manpower, especially as business decision-makers today are more aware of the fact that IT does not necessarily deliver a competitive-edge to their organisation," says Coppin.

He believes that integrated and mature ERP software has best business practice embedded, and that companies are beginning to accept this and change their approach to application software. "Companies have used information technology to merely automate manual processes, processes which are not necessarily best business practice. When implementing an integrated suite of applications, they are finding that changing their business processes to fit the application software delivers greater efficiencies."

The vigorous merger and acquisition activity among application software vendors is also likely to see the emergence of a few major players in the South African market, offering integrated suites of business applications. This will leave little room for the "best-of-breed" software vendors, who are already beginning to feel the negative effects of flat IT budgets. "A number of software vendors no longer have a direct presence in SA, and companies acquiring application software have to consider not only the functionality and cost of their software applications, but also the long-term future of their chosen software vendor," he concludes.