Many Firms Develop Business Software on Their Own

Two thirds of Baden-Wuerttemberg companies from the IT and media sector and selected IT applying sectors which use enterprise software, rely on standard products available on the market. A considerable amount, about 40 percent of the companies, however, also develop software on their own. The major reason for this is that available standard software packages on the market do not exactly meet companies’ individual requirements. This is revealed by the fifth representative FAZIT company survey which has been conducted in Baden-Wuerttemberg by the Centre for European Economic Research (ZEW).

Business software includes programmes which support and control business processes. Examples are systems for the support of the Customer Relationship Management (CRM systems), systems for the management of the company’s resources, or Enterprise Resource Planning, (ERP systems), and cross-company software such as Supply Chain Management (SCM systems) which coordinate the data exchange between all companies involved in a value chain.

Of all branches included in the survey, 65 percent of Baden-Wuerttemberg companies use software which supports and controls business processes. The banking and insurance sectors as well as technical service providers are the branches with the highest share of companies which use enterprise software with 83 percent each, followed by the manufacturing sector with 78 percent. As expected, the share of companies using business software increases with the companies’ size: The need for control and coordination between parts of a company increases with the firm size and thus makes the use of business software not only fruitful but even inevitable.

For about 67 percent of the interviewed companies using enterprise software, the acquisition of a standard solution is the predominant way to obtain business software. However, the survey also reveals that about 40 percent of the companies develop their own software. In particular, this applies to the banking and insurance sector (47 percent), to companies from the manufacturing sector (45 percent), and to companies from the IT and media sector (44 percent). "The main reason for companies to develop software solutions themselves, and with 78 percent of them mentioning it, is that often there are no products on the market that fit well enough", says ZEW expert Bettina Müller. "60 percent of the companies which develop enterprise software on their own would like to remain independent from suppliers and for 57 percent it is simply cheaper to program the software themselves." By contrast, the creation of company-specific solutions by external suppliers is hardly adopted. Only about 6 percent of the companies contract with external suppliers to program software which is specifically designed for the individual needs.

Only some companies make use of free products such as open source software or of the possibility to lease software whereby the software is installed on the producer’s or on a third-party provider’s servers and is accessed via the internet. It is only in the banking and insurance sector where free software and leased software has made inroads with 30 and 29 percent saying they have adopted these solutions.

Nearly 1,200 Baden-Wuerttemberg companies from the IT and media sector as well as from sectors which use IT and media technologies participated in the fifth FAZIT company survey. The IT applying sector includes companies from the manufacturing sector, the banking and insurance sector, and the transport sector as well as technical service providers. The data now available for analysis were collected at the end of 2007.

Contact

Dr. Bettina Müller, Phone: +49/621/1235-352, E-mail: bettina.mueller@zew.de