Software Development Gold Rush

They might not be fated to rewriting the same line of code for all eternity, but the simple fact remains: A developer's work is one IT job that is never truly done.

And that's good news for VARs. With so many tasks at hand, plenty of enterprises are counting on a network of integrators and solution providers to assist or lead their software development work. In some cases, they outsource it all. And by the look of things, such business won't abate in 2004. In VARBusiness' annual State of Enterprise Spending survey, enterprise executives said they will continue to spend more or the same on software projects, including Web services.

Executives surveyed placed application development, integration and maintenance tops among their software-based budget priorities for the year. Forty percent of those surveyed identified application development as their single most important application-related IT service they will need this year. Application maintenance landed second on their list of software services, with 32 percent of enterprise executives ranking it as important. Both categories topped other software spending areas, such as managed security services, IT consulting and business-process outsourcing.

Among those surveyed, enterprises with between 5,000 and 9,999 employees--the middle-tier category--yielded the highest percentage of respondents, 45 percent, who ranked application development and integration as their most critical software spending priority in 2004. Of that same group, 38 percent identified application maintenance work--the epitome of the never-ending project--as key.

"The pattern I see with customers compared with one year ago is that it is now all about growing their market and expanding their business, where in the past it was cost savings and internal productivity," says Don Awalt, CEO of RDA, a Baltimore-based Microsoft Solution Provider Partner that specializes in custom application development for Fortune 2000 firms.

Picking a Platform
Robert Edwards is a CIO who has made software development and infrastructure a cornerstone of his IT agenda. He heads IT for The Rouse Co., a $1.3 billion real-estate investment trust that develops and operates such places as Boston's famed Faneuil Hall Market and other upscale malls and housing communities nationwide. Since 2002, Edwards has been spearheading a multimillion-dollar project to standardize on a single development and deployment platform across the company's vast holdings. No small feat, considering Edwards counts more than 100 different business processes running across six system platforms that include an older version of Lotus Notes, several dinosaur-age DOS databases and a stockpile of AS/400s. To boot, each system sports unique business rules and data definitions.

Over time, the lack of integration between systems has resulted in mounds of paper and an inefficient morass of data entry, clerical work and poor collaboration. It has become problem No. 1 for Edwards, who has committed 20 percent of his overall IT budget to dealing with this one software project.

"It's what we are working on. It's very high priority," he says. And it is complicated: Edwards discovered early in the assessments phase that an out-of-the-box commercial software package would not help. "We knew we'd have to do this ourselves, so we started talking about what language we would write it in," he says.

That discussion, of course, serves as one of today's biggest forks in the road for enterprises trying to decide between the J2EE and .Net platforms. Edwards picked .Net, a big endorsement for the Microsoft environment in the enterprise space. Edwards contracted with a consulting firm and also with RDA to handle the architectural and development ends of things. RDA helped Rouse develop different application modules that run across their systems and supply chains and address accounting, leasing and other functions. The development work was done in .Net, while RDA also created a Microsoft Office 2003 front end that provides tighter connections between front- and back-end systems for the transfer of documents and other collaborative needs.

The .Net decision isn't all that surprising when you look at the results of our State of Enterprise survey. A whopping 71 percent of enterprise execs said they are or will be deploying Windows Server 2003, which includes the .Net framework, in their enterprises in 2004. This compares with 35 percent who said they will be using Java, and 30 percent committing to pure XML. Fewer enterprises said they would be deploying SOAP development tools (12 percent) or UDDI servers (5 percent).

For Edwards, choosing .Net was a matter of finding the glove that fit best.

"We didn't need the heavy lifting of Unix or a mainframe," he says. "For us, the best choice was .Net because its tight integration and XML base will pay dividends for us." In total, the project has come in somewhere between $5 million and $10 million, and internal numbers so far show it to be reaping high ROI for Rouse, Edwards says. The .Net rollout is due to wrap up this summer. Next in the pipeline for 2004: replacing its JD Edwards financial applications that had been housed on the AS/400 systems.

A Plethora of Options
Application development and integration work ranges wildly from routine, but seemingly endless, maintenance of code to sophisticated new technology rollouts. A few things are hot right now, such as portals. But this work is not as simple as publishing content to an intranet, however. Portal development and integration require deep understanding of user requirements within an organization, access rights and how data fits into specific business processes--which all adds up to a lucrative opportunity for VARs in both consulting and development, says Jon Rymer, industry analyst at Forrester Research. Furthermore, to see portals done right, many CIOs are reaching out to VARs that have vertical expertise in their particular businesses.

"One of the biggest topics among customers is solutions," Rymer says. "Part of making portals and B2B work is to make it fit with the way we work as a company. It's hard and painstaking work on data formats, processes and rules. And if you don't have vertical knowledge, it will take a dog's age to learn all of it."

In the past two years, IBM alone has seen a 60 percent increase in the number of customers creating solutions on top of its WebSphere Portal infrastructure product. Of those projects, which comprise a range of applications both internally and externally facing, well over half involve services work beyond initial installation, a job that many CIOs turn over to integrators, says Tim Thatcher, program director of WebSphere Portal at IBM.

Meanwhile, CIOs are looking to provide their bosses with even greater business insight through other types of app-dev projects. Business intelligence, analytics and real-time reporting mark another trend in software investment, as companies seek to gain business advantage by gleaning instant meaning from the data and processes floating around their enterprises. On the more mundane side, CIOs are updating or extending valuable, yet proprietary, legacy systems for the Web or replacing them altogether with open-systems platforms.

Then there's integration. Tying applications and systems together to enable the free flow of data across supply chains and call centers is top of mind for many CIOs. None of these is an easy task, and VARs and integrators who master the connectivity game can cash in.

Those responding to the State of Enterprise survey placed integration as a top priority, driven by both compliance concerns and the desire to wring the most return out of their existing IT investments. It also drives new technology investments.

"I believe integration is a never-ending animal," says Mark Barnard, CIO at NASCO, a nationwide services firm that processes insurance claims for Blue Cross/Blue Shield, including such accounts as General Motors, Ford and Eli Lilly. "If you look at NASCO's performance in 1998, we were processing 45 million claims, and now we are up to 115 million this year. We have to be smart about how we handle the growth and tap new markets to go after. So we refresh our technology all the time, and with that comes all the integration work."

Of the "tens of millions" NASCO spends each year on IT, more than half of it is earmarked for integration, Barnard says. Its HIPAA-compliance solution alone, which involved deploying translator technology from Sybase that ties health-care information back to a mainframe, carried a $20 million tab. Barnard says the company's philosophy is to buy and integrate best-of-breed software solutions--as opposed to building in-house. It outsources development work and hosting to IBM as part of a 10-year contract worth $350 million; IBM subcontracts a good deal of the work to partners such as Bristol Technology, Danbury, Conn. Bristol has provided NASCO with a solution that helps it track the type and performance levels of its vast web of transactions in real-time.

Jean Blackwell, senior vice president of business development at Bristol, says NASCO's needs and the solution Bristol created--a transaction-monitoring system that generates Web-based reports to a dashboard-like console--exemplifies the kind of software solutions enterprises are clamoring for. And several trends in the marketplace are driving CIO spending on more complex development projects, she says, including the increased volume of transactions, rising customer expectations for shorter settlement times on payments and other queries, and the desire to get a better handle on today's complex, distributed environments.

"The more complicated the environment, the higher the value proposition for our software solutions," Blackwell says. She says Bristol, which focuses exclusively on enterprise business and partners closely with IBM, has seen an uptick in customer spending, evidenced by the company's own quarter-to-quarter growth since Q3 of last year.

"For a small company like us that's targeting large companies, it has been difficult the past couple of years," she says, "but that's starting to improve."