Custom Application Development Practices Paying Off

Custom application development was the only professional service appearing on the list of services that have the highest gross margin, ranking first out of seven. It also ranked first on the list of services that respondents said contribute most to overall profits, and was second on the list of services that make up the biggest percentage of solution providers&' total service revenue.

But while custom application development emerged as the service with the best profit and revenue scores, it ranked only No. 10 when it came to services that VARs currently provide, the CRN study shows.

That could soon change, however. When solution providers in the CRN study were asked how much time and money they plan to invest over the next 12 months in various services to improve overall professional services capabilities, custom application development was listed as the service most targeted for very significant investment.

And it tied for second place with remote managed services as the service in which gross margin was seen as increasing most rapidly.

Still, solution providers that currently count custom application development among the professional services they offer say application development is a niche service to their core business.

Scott Severson, vice president, systems and storage, at Berbee Information Networks, a $225 million solution provider in Madison, Wis., said custom application development is an important specialty service. “We have a team of 25 engineers that do development in open systems environments around e-commerce infrastructure,” he said.

Berbee also has had good success in building custom IP telephony applications. “Most of our [application development] engineers spend time developing applications that extend platforms that are core to our business,” Severson said.

Jim Leslie, CEO of Midwave, a solution provider in Eden Prairie, Minn., said he concentrates custom application development on platform extension, rather than stand-alone custom vertical applications. He said Midwave offers custom application development in ERP deployment and identity and access management.

“For example, we have built our own application that plugs into Tivoli Access manager to simplify password reset,” he said. “It&'s utility development rather than stand-alone application development.”