With so much ready-made software available for a variety of industries and business processes, why would you ever want or need a third party software company to develop custom software for your business?
There are two compelling reasons to invest in a custom software solution:
- No ready-made software does exactly what you need.
- Control and ownership of the software that runs your business is necessary or desirable as a strategic asset.
Either or both of these may apply to your situation, and within these broad reasons are additional factors to consider. Let’s look at both of these reasons in a bit more detail.
Nothing Quite Fits
If you buy off-the-shelf software, you may have to change your business to conform to the software’s model. Existing software may be close to what you need, but nothing is exactly right for all of your critical features. You may also end up paying for a lot of features you don’t need and will never use. The effort and expense of customizing existing software, if at all possible, can far exceed the cost of the software purchase. In some cases, the cost of customizations to existing software can exceed the cost of custom software!
When choosing an existing software system that isn’t a perfect fit, you have two choices:
- Change the way your business works to accommodate the software.
- Customize the software to fit your business needs and processes.
The first option may be attractive; it may actually improve your business. If the difference between how the existing software works and how your business works is not too great, minor changes to your business operations to accommodate new software may be a prudent option. On the other hand, if the changes are too drastic, too inconvenient, or would affect your business model adversely, then changing your business processes to accommodate software would be unacceptably disruptive.
The second option is not always possible; not all ready-made software is customizable. Sometimes the results of customizing are disappointing, cumbersome, and costly.
When customization is possible, there are 5 factors to consider:
- The gap – what is the difference between how the software works and how it needs to work for you?
- The cost – how much time and money are required to adapt the software to your needs?
- The feasibility – is it even possible to warp the software to fit your requirements?
- The friction – how willing or able is the software vendor to accommodate your needs and modifications?
- The future – what are the maintenance costs and resources necessary to keep the software modifications intact as new versions are released?
If the new software system closely matches the way your business works, and the effort and cost of adapting and maintaining it is acceptable, then the off-the-shelf solution will probably be less expensive than commissioning a custom system.
Another consideration applies if your industry is a highly regulated one such as finance and healthcare. In this case, it may be best to stick with non-customized, off-the-shelf software where the vendor has major incentives to keep it up to date with changing compliance regulations.
On the other hand:
- if your business must work the way you have designed it,
- and off-the-shelf software is incompatible with this,
- or there is no suitable off-the-shelf software in the first place,
- then a custom software solution may be the best option.
We’ll examine the pros and cons of this in the next section.
Custom Software as a Strategic Asset
Software that is specifically tailored to the way your business works naturally provides the least friction and the biggest leverage for your operations. It amplifies your unique operational efficiencies and tactics for best effect, thus becoming a strategic advantage over time. For example:
- More rapid and targeted responses to changes and opportunities in your business or industry – how, when, and what are under your control.
- Every company is different; stock software treats them all the same.
- Enables practical innovation.
- The tendency to just ‘go with the flow’ and work however the stock software works leads to ennui and passivity, secretly hoping that the vendor will come up with something awesome so you don’t have to solve your own problems.
- Because it’s all about your business, it can be tailored to provide a competitive advantage in ways that stock software cannot support.
- Increased self-knowledge for the business – and knowledge is power, the power to change only what you need to, when you need to, in focused and measurable ways.
- The ability to grow, learn, and evolve as the company grows, learns, and evolves, thus increasing returns across the board.
Without its custom software system for routing and delivering packages, UPS would be the U.S. Post Office.
The business decision of whether to purchase off-the-shelf-software or pursue a custom software solution is not one to be made lightly. Many factors have to be considered and weighed against the unique needs and opportunities of the business.
- May force a business to change the way it works as opposed to the software conforming to the way the business works.
- Has an initial purchase cost less than custom software, but customization, if at all possible, can add to this considerably.
- Vendors may not cooperate with adapting the software to your business’ needs.
- May have support discontinued, leaving a changing business with outdated systems and a need to replace the software.
- Provides no competitive advantage as competitors in the same field are using the same software.
- Is crafted to specifically meet the needs of the business for which it is created, unlike off-the-shelf-software that may be bloated with unneeded and unused features.
- Can scale and adapt as the business grows and evolves.
- Normally has a higher initial development and deployment cost in comparison to ready-made software.
- Serves as a strategic advantage over competitors and becomes a business asset.