21 February, 2014

Single-vendor versus best-of-breed

When it comes to buying software, most large enterprises have a defined strategy of buying all their software from a few big vendors. The whole idea really stems from the more generic idea of single sourcing. Companies can get much better deals by pooling similar purchases into one vendor agreement. This works great for commodity-like products with limited innovation such as office furniture and factory supplies. But in areas where innovation is ripe and newer and better options are continually becoming available, this strategy fails miserably. The problem is that the large vendors are less incentivised to build good quality products with validated functionality since they can sell it solely based on the "strategic vendor" argument. Another argument for the single-vendor approach is the ease of integration. In reality though, most vendor portfolios these days are a mishmash of acquired products that don't always play together as nicely as the vendor claims.

Buying best-of-breed applications is quite the opposite strategy. Rather than just buying whatever your "strategic vendor" is offering, you are scanning the market for the best-of-breed applications that will deliver the most value to your business. Often these applications are discovered by people close to the problems in the business. At the end of the day, the business will always prefer a best-of-breed application because it is, well, the best of breed. Best-of-breed used to be much more commonplace before the emergence of the all-singing, all-dancing ERP suites from companies like SAP and Oracle. Over time, however, the more the mega-vendors succeeded in pushing their "one suite for everything" message, the more best-of-breed as a strategy lost its legitimacy. This is changing again though. I am now seeing a trend where best-of-breed is fighting its way back into the strategic conversations.

I have observed this trend in two areas that I have been close to in the last 5-10 years: collaboration and data management. In collaboration SharePoint was on a long lasting winning streak by providing a "Swiss army knife" that could address a wide range of collaboration, content management and portal needs. It successfully spread like wildfire in most large enterprises, often driven by the business but also loved by IT because of the "one platform for many use cases" argument. However, speaking to many analysts, there is definitely a consensus that for SharePoint "the glory days are behind us." SharePoint is no longer perceived as the magic silver bullet and we're starting to see a best-of-breed trend where companies are mixing and matching different products for different purposes. E.g. using Box for file storage, WordPress for websites, Jive for collaboration, etc.

Another area where I have seen this trend is in data quality and management. Large enterprises have for a long time been buying whatever their large vendor of choice (e.g. SAP, Oracle, IBM, Informatica, etc.) would throw at them to fill these needs. But working for Winshuttle (bias alert!) has taught me that the single-vendor strategy leaves significant open gaps in many important areas. At Winshuttle, we've been very successful in providing best-of-breed capabilities for desktop data management and data governance process improvements, filling vital gaps in those areas.

It reminds me of what's happened in the grocery industry over the last 50 years. It used to be that we would shop for our groceries at individual specialty shops. We would buy our meat at the butcher, our fish at the fishmonger, etc. Then along came supermarkets, offering a much more convenient option where we could get everything under the same roof. But we are now slowly realising that we are actually getting sub-standard food products this way. More and more specialty shops are reappearing offering quality foods and collectively catering to a much wider variety of demands. Like with best-of-breed applications, specialty food stores offer exactly what we want and it's usually much healthier too!

The reality is that both strategies have validity in different areas. We're still going to the supermarket for commodities like washing powder and cling wrap. Companies will still be buying the "commodity capabilities" from their primary vendors. But companies are also increasingly selecting best-of-breed applications in areas that are strategically important to their business and where the need for innovation is driving rapid change. In other words, we shouldn't really be having a fundamentalist argument about whether single-vendor or best-of-breed is the better strategy. We should rather talk about how to best implement a hybrid of the two.