Off-the-shelf vs. custom-made software

Here’s what to consider when looking at how to fulfill your new software needs

As more small and medium-sized businesses seek to increase efficiencies through purchasing and implementing software systems, many look to purchase pre-existing software packages without considering all of the options available.
That approach makes sense when looking at standard software, such as accounting, sales force automation or industry specific applications. However, for specific workflow process applications, many firms don’t consider having custom software built.
The case for building vs. buying software is complex, yet if explored can provide significant value in making the correct decision for your company moving forward.
At the heart of the decision is a question of balance – a balance between the design and implementation of the system vs. meeting the business needs and controlling costs.
The following key decision criteria are simple to identify but are not at all easy to evaluate. By carefully evaluating these criteria, the correct balance can be obtained for your decision.

  • Does software that fits your business process already exist?
  • How much will your current business process need to be altered to fit the software?
  • Is there a significant benefit to the company for selecting one course of action over another?
  • What is the time frame within which the software solution must be delivered?
  • What is the total cost of ownership?
    Many companies prefer the strategy of buying pre-existing software whenever possible. This option may be desirable when purchasing standard packages or when adequate numbers of software products are readily available in the market. The typical advantages are lower longer-term cost, ease of ongoing support and maintenance and reduced time of delivery. When considering purchasing software, all of those advantages must be confirmed.
    An exception to this strategy may occur when pre-existing software in the market does not fit a company’s business process or needs very well. Implementing a pre-existing software solution when that is the case often leads to interrupted workflow, frustrated users, morale problems or employee turnover.
    Those consequences are a significant cost to the business and should be considered when analyzing the purchase. In addition, companies often will purchase a larger, more robust solution than is needed, and end up paying additional money for functionality that does not fit their business needs.
    When existing software in the market does not exist or does not fit, often companies look to custom software development as a flexible solution to satisfy unique requirements and to maintain or grow a competitive advantage.
    Building software is a sophisticated process that requires more time and commitment from a company. Having a manager or employee that understands the business requirements sufficiently to define the process is crucial.
    Partnering with a software development company that has experience in assisting in gathering requirements and that can translate these into a technical solution can be helpful.
    Custom software projects can run over budget and over schedule, due to the lack of experience in building and managing the effort. Having a framework and experience in building software can alleviate those issues.
    This process is similar to the process used in the construction industry in meeting budgets and deadlines. Ongoing support and maintenance should also be considered.
    The decision
    It is not a good practice to make a decision based primarily on which option appears less expensive. Comparing the benefits of your options, rather than the costs is more likely to lead to a good decision. Consider the following: What exactly is the software going to accomplish?
    Situations favoring buying packaged software include:
  • There are a generous number of software packages on the market that could meet your business needs.
  • The business process is flexible and adaptable to changes in established process required by a new software package.
  • Employees and users are trainable and open-minded in adapting to the system.
    Situations favoring building new software include:
  • A very custom software program is needed for your organization to fit your workflow process.
  • The business will gain needed insight in the process of gathering requirements, building and maintaining the system.
  • A competitive advantage will be gained over others in your industry.
  • Your company can survive with a longer time frame for delivery of the software.

    Another key consideration should be the total cost of ownership of the prepackaged software or the custom software, including license fees, maintenance fees, hardware requirements and support personnel.
    When you have made a decision that is appropriate to fit the business needs and strategy of your company, test the decision before engaging a vendor.
    With technology becoming an important part of the strategic direction of most businesses today, having a more sophisticated approach to making software decisions is crucial.
    By assessing business needs and looking for multiple software solutions, small and medium-size companies can save money and gain competitive advantages.

    Marlin Strand is the manager of delivery and Tom Flierl is the director of business development at SysLogic, Inc., a custom software and consulting company headquartered in Brookfield.

    Sept. 13, 2002 Small Business Times, Milwaukee

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