The race between prepackaged and tailor-made software: implications from industry IT lifecycle

Abstract

Should firms invest in designing software tailored to their needs or directly buy prepackaged software from the market? The race between prepackaged and tailor-made software has been long concerned by IT scholars and practitioners. However, our knowledge has been relatively fragmented or even contradictor y and empirical evidences are sparse. Drawing on studies on the industry lifecycle, we propose a new framework for understanding the race between them. Using industry-level data for U.S. private industries from 1998 to 2013, we empirically find that the relative advantage between these two kinds of software would change as industries evolve from ferment towards maturity along the industry IT lifecycle. Our findings provide insights on understanding the race between these two kinds of software and offer lessons for the users and policy makers.