Our clients are requiring more custom applications than ever before, and our experience seems to reflect an industry trend.
According to Forrester Research’s report of global tech spending, investment in software for the enterprise grew 43% over the last five years, going from $431B in 2011 to $615B in 2015. This growth in the software category is significant, and ahead of the 37% growth in the overall tech products and services market.
The breakout software category, however, is one that rarely gets much attention: Custom-Built Software by Contractors. To the surprise of industry pundits everywhere, it grew 216% over the last five years from $43B to $136B. That represents a 33% CAGR from 2011-2015. That is almost shocking when compared with the Computer Equipment category where spending grew just 9% over that same period.
So what’s driving demand for custom apps? Has the thinking (or economics) changed on the classic “buy vs. build” decision? Is this somehow connected to the accelerating move to the cloud? How does the growth of the SaaS market impact this? What are the reasons why an enterprise might opt for custom software?
In August 2014 Forrester conducted a study of the custom software market. A key finding is that businesses prefer custom systems, believing that custom software better fits their needs and gives them a better opportunity to innovate and differentiate their products and services. Looking closer at that finding, it’s clear that companies see custom software as a means for innovation and differentiation both in attracting customers and finding and retaining talented employees.
But why now?
It seems likely that businesses have always preferred custom software but its high cost and longer delivery schedules have been overwhelming obstacles for many. That’s where emerging technologies have radically changed the math. The broad adoption of open source components and tools to build software; the adoption of agile development methodologies; the ease of delivery brought on by the cloud or the SaaS delivery model; and the adoption of continuous delivery to greatly improve the integration of development and operations have all combined to turn the old assumptions about custom software on their head.
It’s interesting that cost and delivery schedules weren’t found to be major obstacles in Forrester’s 2014 study. What they did find is that the biggest challenge cited by business in developing custom software is finding the right combination of technical, development, and delivery skills. This is exactly the capability that a technical services company like Datalink, with its broad range of skills across the full technology landscape, is ideally designed to help with.
National Director, Software Services