A discussion of COTS versus GOTS Solution costs
Many government agencies today are working to migrate systems that have their original development rooted in the late 60s and early 70s. Over the past 30+ years these systems have been upgraded, migrated and reconfigured to support ongoing business processes that, many times, are very specific to the government agency. With the changes in technology over the past 30 years agencies find themselves faced with a critical decision as they review an existing system for update or replacement. Do you replace an existing system with a custom developed solution, commonly referred to as GOTS or do you utilize Commercial Off the Shelf software (COTS) and make changes to the existing business processes, as needed, to emulate how global corporations function today?
For some agencies the answer is simple, their business processes are far to unique to utilize a COTS product. However, for the majority of agencies the decision is not as clear. When business processes are reviewed and compared to similar commercial processes it is discovered that there is a high degree of correlation. That is not to say that government is just like a commercial company, but many of the business processes are identical or very close.
The decision to purchase a COTS solution and configure it to the governments business processes or to effect business process changes that enable the agency to utilize the advantages of the COTS solution must be made with the total lifecycle costs in mind.
Let’s review the advantages and disadvantages of each solution. GOTS offers a solution that is specific to the agency’s needs. GOTS being a custom developed solution takes advantages of requirements documents and business processed that are defined by the customer. The resulting solution provides a 95%+ fit into the needs of the agency with typically the remaining >5% being left out due to development costs.
GOTS having been developed to specific customer requirements has a unique advantage of requiring the lowest level of business process change. Many times poor or obsolete business processes are incorporated into GOTS solutions simply because “that’s the way we’ve always done it”. To eliminate these concerns many system integrators will perform a business process review to document the current business processes and then conduct a change analysis, determining what processes need to be updated or changed and then incorporate these changes into the solution requirements. These business process reviews are typically an added cost to the project as well as time consuming.
Once a solution requirements document has been completed, incorporating all the new business processes, a system architecture is defined and a development project is begun. Technology changes at a very rapid rate today and commercial software vendors are tasked with establishing a method to constantly stay informed on the latest architecture capabilities and to integrate them into their products while, at the same time, supporting existing customers and providing an upgrade path for those customers. GOTS fortunately does not have any of these concerns. Once an architecture is defined for a GOTS solution it becomes static. There is no need to define an upgrade path to technologies of the future, since this is a specific solution that is developed to specific requirement. Unfortunately, this can be a detrimental side effect.
Often the development timeline for a GOTS solution is several years. During this time not only does the hardware technology change but software and system architectures and infrastructures change. Consider the changes that have happened in just the last five years in the area of web and enterprise services. A GOTS development project that took three years to deliver would not have the advantages of the technology changes that occurred during the development period. Rather it would be delivered on three year old technology.
After considering technology changes and how they will affect the long term life of a defined project, it is necessary to consider support and upgrade costs. Since a GOTS solution is specific to the customer support is typically provided by the system integrator that developed the solution. Support costs cannot be negotiated, compared, sourced to a alternative company since the system integrator is the only company that is intimate with the solution, and as time goes by the cost of supporting a GOTS solution increases proportionally.
Another source of hidden costs is when new enhancements to the solution are desired. A development project must be defined and funded usually being undertaken with the original system integrator, since they are the only company that understands the solution. In addition to each enhancement/upgrade being a new development project, the agency does not have the advantage of gaining any enhancements any other company or the industry may have required.
Provided an agency doesn’t change its procedures or desire to add additional features the costs of enhancements and upgrades can be avoided. However, history demonstrates that no matter how static the agency’s processes change is necessary. This may be change to take advantage of new technology, new operating systems, databases, and even enhancements in the agency processes. Given the pace of change in technology today, being able to accommodate change for a current solution is more critical than ever.
COTS software on the other hand is developed to industry requirements rather than a single customer’s needs. Many COTS solutions today provide methods to configure the solution, incorporating the customer’s business processes without requiring changes to the core software. While these solutions, out of the box, may only meet 70 – 80% of a customers requirements, with these configuration capabilities the percentage of match can easily be increased.
So what advantages does COTS have over GOTS that justify the configuration efforts and changes in business processes within an agency?
As we’ve stated COTS solutions are developed to industry needs, they are also developed to follow industry standards. As new standards within the community are defined and released, COTS vendors have to consider them, understand which ones are going to become the adopted standards and migrate their solutions to incorporate them. All of this has to be accomplished while providing a support and upgrade path for their current customers. Commercial companies spend large sums of monies to implement solutions from the large COTS companies. These customers demand a future path for these investments, so they are not trapped into an obsolete solution after a few years. Any COTS company that does not provide this path for their customer base soon realizes their customers are migrating to the competitive solution that does provide an upgrade path. So competition in the market between these software providers insures their customers of a future direction for the solutions they purchase and a guarantee that as technology changes they will gain the advantage of incorporating those changes with minimal impact to their company as well. Government agencies can take advantage of the demands imposed by commercial companies to insure that they also have a path to the future when they utilize COTS solutions.
As time moves forward so do most industries. They add enhancements to their products, expand into regional and global companies with each of these adding demands for additional capabilities to support their businesses. Software solutions for those industries move forward as well. Many early solutions do not incorporate the low level details industries need, simply because it costs to much to develop all the details before releasing a product to the market. COTS vendors continually build new enhancements into their product not only to provide additional capabilities to the industry but also to remain competitive. If a vendor did not continually enhance their solutions, to include market defined capabilities, they would soon find their customers migrating to the competitive solution that did provide the best capabilities for the industry. Government agencies can take advantage of these industry demands as well. Not only taking advantage of capabilities added to a solution that are demanded by the commercial world but as more and more agencies adopt COTS solutions, specific government versions of the solution are developed, adding capabilities that are needed by the government industry.
As with capability enhancements support for COTS solutions is driven by a competitive market. There is an entire industry that has sprung up around the large commercial software companies that is focused strictly on supporting these products. These companies inject competition into the support market reducing support costs. Customers are not limited to the vendor that developed or sold the solution to them anymore. Because the software provided by these large vendors has become so standardized and reliable, 3rd party companies can easily provide an alternative for the needed support.
Along with the support needs, competition exists in the implementation and integration market. Systems integrators establish entire businesses around the implementation and integration of the large COTS vendor solutions. This works to reduce the integration costs. The COTS vendors provide training classes to both their customers and the system integrators to insure that the people implementing their solutions understand the product’s capabilities and how to properly implement it. This significantly reduces the risk of implementation for a project, not only a hidden but a hard to define cost.
The trade off of having a GOTS solution that tightly fits the agencies requirements versus a COTS solution that meets a large percentage of the requirements but not all of them, is one that must be considered carefully. In the commercial markets, as well as the government, during the 1960s and 1970s there was no option but to build a software solution yourself. Commercial companies quickly learned that there is value in software purchased from a vendor that builds a repetitive solution for the industry. During the 1990s commercial companies migrated to COTS products in order to remain competitive. These companies could no longer support large IT staffs dedicated to building custom software for their business. Instead they saw the advantage of leveraging the same software solution their competitor was using, because it reduced their overhead costs and allowed them to compete where it counts, in their product lines. The vendors that supply solutions to these markets have demonstrated that they have the ability to build highly complex solutions that can be configured to many industries, releasing specific configurations of their products targeted to these industries.
Government is the next logical step for COTS solutions. With the reduction in budgets and the ever increasing demand to supply constituents with commercial style capabilities that follow today’s high tech trends, the adoption of COTS solutions make sense. Government agencies can leverage the cost savings by reducing the hidden and long term costs associated with GOTS solutions by moving to COTS based solutions and accepting that business process change is mandatory if you are to improve your business and service to your constituents.
Interesting thoughts although you could argue that even for COTS solutions you sometimes run into the technology upgrade scenario while deploying. I have seen this occur a number of times on multi-year SAP implementations.
Of course Government organisations seem to be completely unique organisations, they always seem to pay over the odds for everything .
$10,000 for a wrench ? Sure go ahead, oh and why not drop the COTS scenario and build us something from scratch while you are at it.
Valid points. We as both citizens and contractors to the government have the obligation to help drive out the costs, by working to move them to COTS.
I agree that technology upgrades can effect COTS implementations as well, but even when this happens the overall cost when viewed in the long term perspective is still minimized.
I agree with your assessment. There are many additional pros and cons that can be discussed. This quote from Foresster (an independent analyst firm)sums it up quite well.
“ Commercial off-the-shelf (COTS) software applications can be the most economical and effective way to automate government agency processes by replacing manual solutions or legacy applications.”
IT Opportunities and Issues for Government: COTS Software by Independent Analyst Forrester July 2003