After years of debate the answer is in: Buy when you need to automate commodity business processes; build when you’re dealing with the core processes that differentiate your company. Buy when you are using standard practices, customize to your competitive edge. The biggest advantage of custom software is the ability to innovate and invent. That’s why custom software is commonly created for new products and innovation projects. But if you’re looking to leverage software for a common operation or management need (ERP, CRM, financial, compliance, etc.), your choice is not so simple. If an existing viable software solution exists, you must decide whether to build or buy.
If you saw the keynote speaker Don Tapscott at ARDA World 2013 or read one of his many books on the subject of our changing digital world, you are already on your way to educating yourself and sorting out what programs will give you a better ROI and support your goals. There is an ideological value that states you should do only what you do best in-house, and outsource the rest. This will allow you to focus on what makes you more profitable as a company. So what are the points to consider?
2. Custom fit vs. fit into a box
3. Time To Market
4. The Race to Real Time Information
5. How do you leverage a mix of both COTS, SaaS or Build
In the case of software development, it is usually true that the upfront cost of building your own software is cheaper; or is it? Software Engineers are expensive, and if they are any good, hard to keep in-house. What sort of problems could this cause for you? Well, once your software is built, the more eyes that babysit it, the more expensive it becomes to maintain and the harder it is to build additions and customizations. Typically, 70% of software costs occur after implementation.
“Everybody knows that the more standardized you are and the more you buy off-the-shelf, the more cost effective it will be for both implementation and ongoing maintenance,” says Mark Lutchen, former global CIO of PricewaterhouseCoopers. With an existing solution, the software development cost is amortized across many clients. It’s likely that a custom solution (even though it has fewer features) will be more expensive. In addition, existing solutions are commonly sold on a recurring yearly basis that allows an organization to spread out the cost.
Custom Fit vs. Fit into a box:
Building a software in-house will allow you to control all of the moving parts. Custom solutions give you complete control of everything from business rules and workflows to integration with other software solutions that you’re already leveraging. They can be built with a user experience that matches your business, instead of your business conforming to the solution. Yet, existing solutions have been tested and used by other companies which will allow you to skip over some of the functionality mistakes that are found in the development process. It is true there may be some if software development is not part of the company’s core competencies; project management and unnecessary features, based on many opinions on functionality and use and different specs become huge cost issues as well.
Time to market:
Out-of-the box software solutions are immediately available for purchase. Most well-built custom solutions are released iteratively over time and focus on the highest value features first to custom fit your business. When building these it’s critical to thoroughly understand the total duration during the software lifecycle. Custom software can take years to completely integrate. If this is a path that you choose you must prepare for a rigorous lifecycle analysis that realistically estimates ongoing maintenance by in-house developers. This analysis often tips the balance in favor of buying.
The Race to Real Time:
An important component in any business is clearly time. These days as a culture we are so addicted to real time interactions, we can’t stand to wait. We are so addicted to real time flow of information there are currently thirty nine states that have laws preventing texting and driving. We can’t wait to get out of the car to read our texts and reply. The SaaS model can deliver information in real time. When considering buying vs. building consider what impact will real time data flow on your spending or revenue generation.
How to leverage a mix:
You may already have built your system in house. The good news is that your custom solutions give you the ability to select off the shelf technologies that seamlessly integrate with your existing infrastructure. Once you have a software that is fully integrated you may find that some off the shelf software is better at certain pieces of your business. In my next article you will learn of all different types of software and integrations that are possible
In conclusion, we still leave it up to you, but if you watched Mr. Tapscott’ s speech, he mentioned the Chinese motorcycle that is going to cost $1000.00 will be seen in our lifetime. He explained that the reason it is going to be so cheap is that there are many companies that specialize in all the parts that make it up which allow them to produce those parts cheaper than one company building all of the parts themselves. “The industrial revolution is over.” it is time to get outside your bubble. Is your secret sauce really your secret sauce? Or is it just your ego? Is it still better to keep it all in house or use all of the parts that people specialize in to help you be less expensive and allow you to focus on what you are good at so you can make more money.