As an information management consulting firm, we are often asked by companies for advice on whether to buy commercial off-the-shelf software or custom develop software. The answer isn’t always easy to arrive at and usually depends on several key factors, which are outlined below. This is an important decision with implications that stretch out for years, so it’s one you want to clearly think through.
Rule #1: Only build custom software when it makes sense (which may be more frequently than you think). Here are five of those times:
- When your goal is to strategically use the software for competitive advantage and commercial software isn’t available that matches the capabilities. The resulting solution allows you to operate in a highly specialized and very efficient way – and is not easily duplicated by a rival.
- When off-the-shelf software products don’t address at least 80% of the critical user requirements. Emphasis here on what the end users need, not what the procurement department or your IT group thinks is best. The biggest reason for bad software decisions is not having the day-to-day users of the software be an integral part of the selection process.
- When a simplified, native, fully-tailored design is desired. Any software should be easy to use, but software designed for the masses usually takes an ‘everything to everyone’ approach, where ease-of-use gets lost in a sea of configuration choices and unused features. Custom software is, by contrast, designed to function very specifically around your unique business processes.
- When you want to truly own the software and have full control over how it evolves to meet changing business or operational requirements. This is impossible to do with commercial off-the-shelf software.
- When you need software to integrate with one or more legacy systems in order to give you functionality not otherwise possible. In these situations, you’re not looking for software with lots of features and functionality. You are looking for software that interfaces directly with your legacy system and handles very specific tasks.
Rule #2: Take the time to adequately research what functionality your organization cannot live without and what is available off-the-shelf to meet those needs.
Commercial software is a suitable choice for handling many commodity functions, such as accounting. The more common the function across industries, the better the chances of finding an off-the-shelf package that will accommodate 80+% of your critical needs. But even then, there are still three important things to consider that many companies don’t:
- Be sure to plan for the cost, maintenance and support required over the life of the software (average is 7-8 years, and industry estimates are that 70 percent of software costs occur after implementation). This one oversight gets CFOs the most riled up.
- Be careful about assuming the software works out of the box without any customization. Vendors use the word “configure” in place of “customize”, and quite often a minor amount of configuring is all that’s needed –initially. It’s when process changes occur or user requirements expand that the work needed can get more elaborate — writing special scripts, developing new logic, writing custom communication components to bridge systems, etc. This is why most commercial software vendors maintain a system integration group whose sole purpose is to customize the product for clients.
- Customizing commercial software can get costly, and it can also leave you “orphaned” from the software’s product development, resulting in a time-consuming, expensive upgrade process that mainstream clients don’t have to endure.
“Custom” is a word often used negatively when associated with software, in some cases for good reason. Buyers of software are just as guilty as the sellers for this. The buying process is frequently flawed from the start, leading to bad selections and an end result of trying to squeeze a square peg into a round hole. Proper planning and market research — done in-house or by a vendor-agnostic third party — is a minor investment that will pay for itself immediately if you can avoid making a bad software decision that carries with it repercussions lasting years.