Trends in Commercial-Off-The-Shelf vs. Proprietary Applications

Abstract

ABSTRACT This study examines factors valued by IS managers in deciding if COTS software is a viable alternative to proprietary software. The results indicate managers who anticipate increased usage of COTS packages in 5 years used the same top three factors in the formation of their decisions to adopt COTS as their colleagues who anticipated either zero change in COTS usage or an increased usage of proprietary software used in deciding not to adopt COTS software. Managers anticipating increased COTS usage had a statistically significant higher value for each of those items compared to managers not anticipating growth in COTS software. Keywords: Commercial-Off-The-Shelf, Proprietary, Application Software INTRODUCTION The average information technology (IT) investment reported by organizations participating in the Society for Information Management's 36th Anniversary IT Trends Study was 5.3% of their gross revenue (Kappelman, et al., 2016) and IT contributes up to 50% of total capital costs (Applegate et. al. 2009). IT is essential to survival for most businesses. In the United States (US), President Obama requested a decrease of 2.9 percent in spending for IT projects for fiscal year 2015 bringing total requested IT spending for the United States Government to $79 billion (Information Week, 2014). This savings of $2.4 billion (2.9 percent) attributed to consolidation of commodity IT products and services, reduction of duplication, and cutting waste. Between 2011 and 2014 the Federal Government IT spending increased from $79.4 billion to $81.4 billion. Global spending on IT is expected to have a compound annual growth rate of 3.3 percent per year from 2015-2020 with IT products and services growing from almost $2.4 trillion in 2015 to over $2.7 trillion in 2020 (IDC, 2016). This increase is likely to be driven by demand for new technologies such as cloud computing, software as a service (SaaS) and Enterprise Resource Planning (ERP) packages among others Luftman et al. (2015). Businesses are becoming increasingly reliant upon information technology and are likely to continue to be so into the future. Driven by customer demands and desires for increased effectiveness and efficiency businesses are increasing usage of software solutions. The increased usage is fueling a growth in demand for IT applications and increasing the need for software both in the proprietary and commercial-off-the-shelf (COTS) domains and across ERP and non-ERP use cases. As an example, customers increasingly expect to be able to utilize smart phones and other mobile devices to accomplish an increasing array of tasks that were not previously possible with access to a full computer. This increased demand for more useful and powerful applications permeates an industry to the point that it becomes a basic expectation and any business not keeping current in their technological offerings is at a competitive disadvantage. Cloud computing, IT resource price decline, decreased costs of storage, and the increased processing power available at an affordable price point allows many small and medium size companies to afford IT applications for their organizations when they previously would not have been able to do so (Srinivasan 2013). These factors and others lead to a trend of annual increases in IT investments worldwide. Increased maturity in business intelligence, mobile computing, web-enabled transactions, and other areas are being seen as applications whose usage is beneficial for an increasing percentage of organization. However, limited available of resources is projected to lead to an increased reliance on cloud computing and outsourcing/offshoring services. Companies using cloud computing and/or offshoring/outsourcing, will have a decreased need for employees with higher IT skills (Himmel and Grossman, 2014). These trends in aggregate are expected to lead to a growth in the need for end user computing (EUC), the development and use of information systems by people outside the IS department (McLean 1979), within the organizations (Agrawal, et al. …