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When Packages Make Sense

Packaged software works best for commodity functions that are slow to change and are not strategic to your business. The best example is basic accounting. Almost no one writes custom accounting software any more; virtually all packages have the correct core functionality built in. Few businesses should have difficulty finding an off-the-shelf accounting solution that will meet its needs, except for organizations that are institutionally unique in their accounting practices.

Many other business functions also lend themselves to packaged solutions. For example, payroll packages require continuous updating of tax information, and the package suppliers can maintain the tax experts on staff much more cheaply than all but the largest companies. However, if you believe that a function is strategic, or that your business model is unique, beware the packaged solution. Many companies have suffered trying to force-fit inappropriate packages into their operations.

When is a business function strategic? When it's a part of a process used to gain competitive advantage. If your company does some part of its business uniquely to be able to produce or deliver products or services better or cheaper than your competitors, be careful of packaged solutions. For example, Federal Express developed the Powership system to allow customers to quickly prepare their goods for shipment, and to quickly track packages throughout the Federal Express system. FedEx spent millions developing a unique shipping system, both because there was no comparable system available for purchase, and because Powership gave Federal Express a competitive advantage over UPS. If you're using a packaged solution, the business practices embedded in that package are available to any competitor.

Another time to be cautious of purchased solutions is when your industry or business model is uncommon or rapidly changing. Commercial software packages attempt to capture best business practices in their solutions, but they must also keep one eye on their legacy customers and the other on the practices common to the vertical industries they serve. As a result, if you want to move ahead aggressively in implementing a new technology or business practice, you need to carefully select a package that will enable that practice, or be prepared to write your own solution.

Another reason to consider a software package is that it could be an important part of a strategy to use the package to energize business practice improvement in the organization. The principles are simple—find the software package that comes closest to the business practices you want to implement, and then use the package to force the operating business unit to change its processes to fit the package requirements.

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