The question of build vs buy is one of the toughest questions enterprises face. There is no easy answer, and in this post, I’ll talk about why this is even more complicated than you might think, with some hidden factors and risks that you should consider when making this crucial decision.
When we engage a client on this (or any) question, one of the biggest things we talk about is risk. Every decision has risk associated with it, and we always think it is important talk about how organizations can mitigate risks regarding their systems and software decisions. By approaching this from a risk perspective, it allows enterprises to fully understand the implications of the various paths, and to evaluate each properly.
The typical scenario that creates the custom vs. off-the-shelf decision point is when a company has developed an extremely specific workflow and process for a particular aspect of their business that works for them but isn’t served easily with off-the-shelf products. Sometimes they will be using simple tools like spreadsheets, low-end systems made for small businesses, or even completely manual tools like whiteboards. As they outgrow these tools, the hunt begins for a better solution.
The Off-the-Shelf Software Option
If you can find a solution that meets enough of your needs at a cost that aligns with your budget, an off-the-shelf system is often the best way to go. Off-the-shelf is an excellent choice when:
If you fit into one or more of those scenarios, then off-the-shelf is probably your best choice, at least for the interim. It gets more complicated when the off-the-shelf solutions:
Where it gets even more complicated is when there are several, or many, off-the-shelf systems that each do some of what is needed, but not all. It then becomes a game as to what system will be closest to what they need without compromising too much.
Customized Off-The-Shelf Software
Sometimes a vendor will offer to customize their core solution, typically for a fee. This can be a good opportunity to get something closer to what you need, and if the cost isn’t prohibitive it could be a smart choice. Of course, there are some risks (as always) associated with this path:
The vendor is in the business of selling their core system, and the lure of the sale may cause them to overcommit to what is easily done. In this scenario, those customizations that were supposed to take 6 weeks, could be closer to 6 months.
After delivery, development teams must now support that customized solution when they should be advancing their core product. Getting further help and support on those customized functions might not be easy, and they could be very expensive.
This next caveat is an immense potential problem, and this risk is one that is often overlooked during the decision process. You now have a system that has deviated from the core product significantly and might not be easily upgraded when new versions to the core product are released.
This problem is far more than just not getting that shiny new functionality – critical bug fixes and security patches might break your customized system. This ugly scenario won’t come to light until much later when you have enmeshed this solution into your enterprise tightly, and the cost and time to pivot to another solution might be enormous. The vendor’s sales team will rarely discuss this (or might not even be aware of it). But you as the customer should address this at the highest levels with your potential vendor prior to the sale.
Comparing the Costs
Evaluating the costs of your software systems isn’t always easy and clear cut. A custom solution that is $75k compared to an off-the-shelf product that is $1500 a month might sound like an easy decision. If we are just evaluating these two choices on cost alone, we typically look at a time window of 7-10 years and would do the math this way:
Custom Solution Scenario
Off-The Shelf Solution Scenario
Those calculations are very simple and of course are not the only costs associated with each path such as price increases for the canned system, or costs for developing major new functionality for a custom solution in future phases. But it is illustrative of how the cost comparison has more risk than you would initially anticipate. The point is the cost analysis needs to be calculated over a reasonable time window and with as many considerations as you can anticipate.
The Custom Software Option
In this article I won’t talk about all the advantages and disadvantages of a custom solution, but I am talking about it from a risk perspective. And while there are factors that introduce risks for custom development, there are clearly scenarios where the custom solution dramatically reduces risks when done correctly.
Custom software can reduce risk when:
Custom Software Risks
The horror stories of custom software projects gone wrong are legendary and endless. While you can’t totally eliminate the risks of developing your own software, there are things you can do to greatly diminish your risks and increase your chances of success.
SMBs often face the highest risk of going the custom software route, and for some particularly good reasons:
So again, while you can’t eliminate all risks with custom software, there are things you can do to greatly enhance your chances of success. The good news is that modern software tools and frameworks make it far easier to develop fantastic software than it was just a few years ago.
You can reduce risk of custom software development by:
In upcoming articles I’ll be writing more about how SMBs can take advantage of custom software development, and how to reduce your risks and ensure success. And feel free to reach out to us for a no-cost consultation on your project. We love talking about problems and pain points, and we strive to responsibly guide you with your decision.