Let’s start out by saying that it’s good to have a choice because many companies are strictly limited to purchasing third party software.  You’re in a prodigious position if you’re weighing whether to finance a customized software solution or purchase one off-the-shelf. There are advantages and drawbacks to either approach.  Oftentimes the debate involves determining the right balance between control versus cost and immediate needs versus long-term opportunities. 

Easy Considerations

If you fall into one of the following scenarios, then the choice is already made for you.

  • The software you need doesn’t yet exist

Its perfectly feasible that the particular solution you need is not yet available on the market.  If this is the case, then you need to build it.

  • You need the software ASAP

If you need a software solution implemented in less than thirty days, then you can stop reading and find a vendor that produces something close to what you need.

  • Your industry or organization is in a highly regulated field

Industries such as financial services are required to use software solutions that have been rigorously tested and vetted in order to meet compliance regulations.  Unless you are a large corporation, chances are you will be better off purchasing.

With that out of the way, let’s look at the advantages and disadvantages of buying an existing solution. 

Advantages of Buying Software

The primary advantage of purchasing Commercial-off-the-Shelf (COTS) software is that it is a known factor.  Whether it’s a fixed or variable cost, the initial price is known or can be calculated up front.  Implementation and deployment is much faster than building.  In addition to the software, your purchase usually entitles you to product guidance, expertise and support from the vendor as well.  This is an important consideration particularly when things go wrong or you need access to a knowledge base for advice.  Finally, bugs are discovered early and often because the software is continually being tested by the other customers.  Bugs are found before they affect your own organization. 

Disadvantages of Buying Software

Innovation

It may sound like an oxymoron, but one big disadvantage to buying software off-the-shelf is the uncertainty of the future.  While the purchased software may satisfy your requirements today, your needs will undoubtedly change in the future.  As a result, you may outgrow your software.  There are also some important questions to ponder. How certain are you that this particular software vendor will be around in five years?  How reliable is the company that you are purchasing from? Will the company continue to innovate and upgrade the software with new technology and features or will they go out of business?  After all, 96 percent of businesses fail within 10 years.  These are key questions to ask because switching between software solutions is an expensive proposition. 

Security

Security is another major consideration as third and fourth-party data breaches have dominated the headlines over the years.  Third-party data breaches over a 12-month period increased from 34 percent to 45 percent in 2018 according to a report by The Ponemon Institute.

Feature Mismatch

While buying is nearly always cheaper up front, you will undoubtedly be paying for features that are not relevant to your particular industry or company.  Similarly, the software is likely to be lacking in capabilities that you wish you had.

Now let’s look at the advantages and disadvantages of creating your own customized software solution.

Advantages of Building Custom Software

Feature Match

The primary advantage of building your own software is that it ensures that you get what you want because you are in charge.  Think of the difference between having your next home custom built from the ground up vs. buying a resale.  The development team creating your software will do so based upon your specific requirements. This ensures your software solution delivers all of the features you want and need

Innovation

What’s more, the innovation process never has to end when you’re building.  Custom software can be modified in real-time, and new features and capabilities can be introduced as needed. As your business changes, so too can the software. You won’t have to wait for a vendor to develop specific feature sets to suit your business requirements – you can develop and implement them as you go. 

Scale

Another advantage to building custom software is that it can grow alongside the growth of your organization and at your own pace.

Competitive Advantage

Custom software can also offer a competitive advantage over your competitors by leveraging the technology that is better suited for your company and your customers. This advantage is even more pronounced if your competitors are operating canned off-the-shelf software. 

Disadvantages of Building Custom Software

Time

The primary disadvantages are time and cost.  Obviously, implementation takes much longer and unanticipated delays can prolong the process even further.  

Cost

While some organizations may have an internal development staff, chances are you will have to hire an outside development team to partner with.  Knowing an exact upfront price for a custom software build project is highly difficult.  The only thing to be certain of is that it will most likely cost more than purchasing COTS software.  While the initial cost may be greater however, custom software can prove less costly in the long run due to the negated risk of switching software solutions as well as the appreciated gains of greater productivity and efficiency. 

The Final Choice is Up to You

There is no clear right or wrong answer when it comes to the question of buy versus build. It depends on your business, your requirements and your resources. Your best option is to choose based upon your particular situation and needs.  A simple equation to remember is that more control equates to greater cost; and lower upfront costs will garner you less control. No matter which path you decide upon, be sure to do your research in order to find a vendor or development team that can provide the solution that best fits with your organization’s requirements.   

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