Software is a major cost. Although SaaS (Software as a Service) is seriously gaining traction, there are still businesses considering at some point whether it would make more sense to take the software development process in-house.
There are arguments both for and against. Let’s review these first before going on to how you can decide what makes sense for you.
Building your own software
You can build it to work seamlessly with all the other software in your stack.
If you find that it lacks a feature that your business needs, you can add it, without having to wait for a vendor.
You own the code, which means, amongst other things, that you have complete control over the security (no hidden loopholes or back-doors).
Even with an established development team, software development takes a great deal of time, resources, planning, and expertise (both technical and commercial). And as with all development projects, overruns and scope-creep are unfortunately the norm.
Building the software is only the start of the process. You will also be responsible for maintaining the code and supporting users year after year (this accounts for the majority of the costs you will incur).
The software will need to be constantly updated to reflect the changing needs of your business and the regulatory environment. In order to update & upgrade the software, you will need resources that are capable of keeping up with this ever-increasing pace.
Buying software from a vendor
With the right vendor, implementation can be as rapid as a few months (or even a few weeks!) compared with anywhere up to 12 months when building by yourself.
Upfront and maintenance costs are typically much lower.
All support services - training, hosting, maintenance, etc. - are handled by the software vendor, allowing you to focus on your core business.
The vendor needs to have a thorough understanding of your business and regulatory environment to be able to quickly respond to your changing business needs.
If costs are not itemized, but consolidated in monthly or annual subscription fees, it might be difficult to get a clear understanding of what you are paying for.
Companies may be slower to adopt the software if it is perceived as ‘an external project’.
The pros and cons above provide an initial basis for a SWOT analysis of your business, in order to determine which of the two options makes the most sense.
Prior to making the final decision to build your own software, it is worth re-rethinking the decision in terms of capabilities and cost, by asking yourself the following questions:
What exactly do you need the software to achieve? This may seem an obvious point, but it can get missed!
Is there already a product available on the market that can fulfill those needs?
If not, does your IT-team a) have the capabilities to develop the software and b) do they truly understand the constantly changing business user’s requirements (so they don’t build a tool that doesn’t fit)?
How much will it cost you in time, human resources, and financial outlay to build your ideal solution from the ground up?
How much would it cost to buy that ideal software solution from a trusted 3rd party vendor?
What are the ongoing costs for each of these options over the next five years? If the ‘build your own’ option is more expensive, why would you choose this path?
Consequences of making the wrong decision
Now that we’ve looked at the key factors, let’s consider the downside if you make the wrong decision.
The bottom line? If you decide to build software when you’d be better off buying it, you stand to lose a great deal of time and money! And as a result, you will likely fall behind your competition.
That said, if you do decide to buy software from an external provider, you may want to consider a customizable solution, and get the best of both worlds. You will still need the support of a capable development team within your business, but you will be able to (for example) ‘connect the dots’ with the other software products in your stack.
If you follow this approach, you begin by selecting the available option that is the closest fit for your needs, and use customization to fill any remaining gaps with your requirements. ‘Closest fit’ means a provider that knows your business, is aware of its challenges, and has a plan for addressing them.
Shorter implementation cycles will allow you to maintain your competitive advantage. The result will be a tool that meets the exact needs of your business, launched rapidly in the field, and resulting in a significantly higher boost to your performance.
Every business is starting from a different position and has a different set of objectives, so there is no one right answer. If you are unsure which route to take even after extensive analysis, there is a good chance that the middle way may be right for you.
If so, please get in touch and we’d be happy to act as a sounding board! Good luck!