Build vs Buy: When Should You Opt For Custom-Built Software?
The build vs buy ‘debate’ doesn’t really need to be anything of the sort.
If you’re considering the relative merits of off-the shelf against custom-built software, we’ll let you into a little secret: there is no overall ‘best’ option. It’s all about making the best decision for your goals given your current circumstances.
The first step to making that decision? Disregard any blanket statements that you may have heard regarding the build vs buy debate and start afresh. Statements like ‘custom-built software is very expensive’ or ‘off-the-shelf software will never meet your needs adequately’ are unhelpful generalizations, and more often than not, quite inaccurate.
Start with a thorough understanding of your own situation, map out your requirements and identify the goals you think a software solution could help you achieve – then start to consider whether you would be best served by custom-built software or an off-the-shelf solution.
As custom software developers, we think that there are certain situations in which building your own software solution makes strategic and financial sense – and could even give you an edge against your competitors. If these match yours, custom development could be the right option. Let’s break down how to make this decision:
1. Build vs Buy: Control Over Functionality and Processes
The most important question to ask yourself before making any decisions is ‘what do we want this product to do?’
You might consider:
- Whether the software is for internal use. For example, you might be looking for a new CRM for your sales team, or new people analytics functionality for your HR department.
- Whether the software is going to be customer-facing, and whether it provides a new service or enhances access to a service you offer already.
- Whether you’d like to make money from the software – whether as a B2C solution or to sell to other organizations experiencing the same issues that you are.
If you’re simply looking for an application that completes a specific task with no major revenue generation attached, there’s nothing inherently wrong with an off-the-shelf solution. There are SaaS products covering almost all major B2B business functions more than adequately, and industries from banking to public transportation use white-label products as customer-facing apps.
On the other hand, if you want your app to be a central product offering, your needs are very unique, or you want your app to drive profits in the long run, an off-the-shelf solution can hold you back. Your strategic direction is tied to your vendor’s – you’ll be waiting on their updates, and have to adapt to any changes in business model, integrations or pricing they introduce.
Custom-built software, on the other hand, is yours to develop as you please. You control when to update it, when to add more features, how you market it and how you sell it.
2. Build vs Buy: Building Offers Standout UX Opportunities
Off-the-shelf solutions aren’t limited to ‘internal’ software like CRM. Many companies use them to provide digital services to their customers as well.
‘White label’ solutions are ready-to-go products which companies can add their own branding to and sell or promote to customers as their own.
Do they do the job? In most cases, yes.
Will they provide a standout customer experience that you can turn into a major competitive advantage? By definition no, because they’re used by so many other companies to do exactly the same thing. They’re a great way of bringing a service to market very quickly with an adequate UX, but if you’re interested in leading the pack in this area they’ll provide limited success.
How Taxi Firms Show The Deficiencies of White Label Products
Many local taxi firms now use white-label ride-hailing solutions to try and compete with disruptors like Uber and Lyft.
The issue this creates is that most local taxi firms’ apps offer exactly the same user experience, which broadly speaking isn’t good enough to pull people back from Uber in the long run, or to encourage use from customers who would have previously used the phone. Ultimately, this means that taxi companies end up spending money on something that offers them no real competitive advantage against anyone else.
Use Custom-Built Software to Stand Out From the Crowd
If you’re offering a similar service to someone else but your mobile app is significantly easier to use, who has the advantage?
That’s not to say white label products are a bad decision for local taxi firms, necessarily – they suit a limited budget, can be deployed very quickly and are a great way of exploring new ground without the costs of building a solution yourself.
What this example does demonstrate, however, is that you’ll need to go further than a white-label solution to truly stand out from the crowd. If your strategy relies on being led by a world-beating app, a white-label won’t cut it.
And, as increasing numbers of companies offer digital access to their products and services, a strong user experience is becoming an increasingly important way of distinguishing yourself from your competitors.
A custom-built software solution allows you to do just that, because:
- You have full control of how the product works – you’re not reliant on white-label providers to add features or reconfigure major pain points.
- You dictate how the software works and can design it to fit in with the rest of your brand for increased brand loyalty and CX.
- You can carry out your own user testing to make sure that your customers are getting a positive experience when they use the product, and that features work exactly how you designed them to.
3. Build vs Buy: Build to Extend Your Existing Functionality
In many cases, the choice you’re faced with doesn’t have to be ‘build vs buy’. It could be ‘build alongside buy’ or ‘build to augment buy’.
Consider the two following examples:
- Your sales team would like to extend the analytics functionality available to them, but your SaaS CRM vendor does not offer this feature at your current pricing tier. To upgrade and access the features you want, you’d need to pay the full premium rate for just one extra feature, which you think doesn’t constitute good value.
- Your retail staff have monthly targets, which you set via a manual process. You want to automate this process to save time, and so that employees’ payslips are updated with real-time info from your point of sale (PoS) software to reduce wage error. Despite being otherwise happy with both your PoS and your payroll software, this isn’t a feature that either of them offer.
In both of these cases, finding another off-the-shelf software vendor doesn’t make sense – software selection and implementation projects can be lengthy and expensive, and given that you’re otherwise happy with your provider it seems like an unnecessary risk. In the first example, upgrading to the next tier of provision would result in a limited ROI because they’re paying far too much for use of a single feature.
Custom-built software is great for those times where your existing software falls short in a small but significant way. Creating your own additional software to expand the functionality your major systems offer is a useful way to address this problem without the risk and expense of replacing the system entirely.
The good news is that, given that many software systems are ecosystems of apps, open APIs, add-ons and plugins in their own right, it’s completely achievable to develop a solution that will work well alongside them. For example, leading CRM vendor Salesforce has a whole development platform for creating custom apps, so that you can extend the software’s functionality to suit your business needs.
4. Build vs Buy: Build Around Your Major Business Processes
Pre-built solutions aren’t as ‘off the shelf’ as you might expect. Often, you’ll need some degree of customization to make your vendor’s system work within your organization. The costs of doing so can add up quickly, both in terms of direct cost and productivity losses whilst you implement your new system.
There has been plenty written on the risks associated with software selection projects, but to summarize one key theme: your chosen software package will not deliver the results you need if it’s a poor fit for your requirements.
Off-the-shelf software is designed for a one-size-fits-most model. If your company falls outside of these parameters, it’s worth considering custom-built software. Whilst selecting the nearest possible off-the-shelf fit and crowbarring in a few customizations might seem tempting, a poorly-chosen off-the-shelf solution will cost far more in time and money in the long-term than building something yourself. Accordingly, you’ll see fewer benefits for the money you spend.
When To Custom Build: The Real-World Ugliness of Poorly Chosen Solutions
Supermarket giant Lidl no doubt thought it was onto a winner when it partnered with German powerhouse SAP to implement their new ERP system. What they hadn’t reckoned with, however, was a pretty major quirk of Lidl’s inventory system: whilst most other supermarket chains keep their inventory via the price they sell goods for, Lidl go by the price they buy goods for. SAP’s systems were not set up to deal with this quirk.
Lidl thought that this would just require a small amount of customization to get around. This, unfortunately, was not the case.
The result? An implementation that seemed to never end, thousands upon thousands spent on implementation costs, internal strife and a cascade of finger-pointing that combined to create an ERP disaster with effects still felt years later.
How Not To Be Like Lidl
Lidl’s example might be extreme, but it outlines our main point very clearly: don’t settle for one-size-fits-most software when you know your requirements will be different from the wider market’s.
Do your compliance requirements make working with a cloud-provider risky? Do you need to integrate your new software in ways vendors don’t seem to provide for? Do you run your key business processes differently to the rest of the market as a whole, as was the case with Lidl?
If there’s nothing out there that meets your needs, consider building something from scratch. Initial costs might be higher, but you’ll end up with a system that’s a far better fit for your organization and provides a significantly better ROI.
Is Cost A Limiting Factor?
You might not have to budget more for your custom solution, but you will probably have to budget differently.
The costs associated with custom software development are more up front, with some rolling investments in maintenance and upgrades once the product is built. The costs associated with cloud software – which is typically sold on a SaaS model and billed at regular intervals – are ongoing. Over time you may end up paying more for a cloud solution, but because these are typically billed month-to month, you need less of an immediate upfront investment.
It’s difficult to give a solid answer on which will cost more as it’s so dependent on the situation, but when weighing up your options, remember:
- A poor fit off-the-shelf solution could cost you far more in customization, consultants, implementation and productivity loss than a well-designed custom build.
- You’re not necessarily comparing like for like – an entirely custom-built CRM might cost more than an off-the-shelf solution, but a custom app to extend your current system’s functionality might not.
- Think about the returns you can expect on the software alongside how much it costs. Software built specifically to your specifications might yield a better ROI than a cheaper off-the-shelf solution.
A Few Final Thoughts
To sum up the above into a few useful bullets, a custom software solution might be the right choice for you if:
- You have unique or complex business needs and are struggling to find off-the-shelf solutions that would meet them adequately.
- You’re broadly satisfied with a major internal system, but you want to extend its functionality without upgrading or replacing it.
- You’d like to offer your customers a unique, engaging customer experience that will push your brand ahead of your competitors.
- You’d like to drive profits from your own licensable product and don’t want your strategy to be tied to vendor updates.
Custom software development won’t be the right fit in all cases – like if you haven’t got the user base to justify the initial cost, if you’re currently experimenting with the idea of a digital strategy and don’t want to front up the cash immediately, or if off-the-shelf SaaS software fits your needs without a large degree of customization.
In some circumstances, however, building your own software gets you more for your money. You may get a greater return on your investment than you would do for off-the-shelf software because your solution is tailored to your needs and aligned to your strategic vision. Given the right circumstances, custom-built software can give you a significant advantage over your competitors.
Invest wisely and reap the benefits.