You need to open up a new market, cut costs, or automate a process. New software can help solve this problem, but which software meets your needs?
There are three main categories of software: 1) packaged software, 2) software as a service (SaaS), and 3) custom software. This article covers the pros and cons of each and can help you make the right decision for your business.
A useful starting point is to ask whether the process you are trying to solve is a competitive advantage or a commodity. If competitors in your industry all handle the same process the same way, a packaged solution built for that process is probably the right choice. If the process is part of what makes your business different, owning the software that runs it is worth considering.
When is packaged software or SaaS the right choice?
If you want a word processor, email client, or accounting package, it's been done. The products are numerous, mature, and range from free to very reasonably priced.
More and more business software is falling into this commodity space, such as enterprise content management solutions, document management programs, and customer relationship management (CRM) software. These tools have a single purpose and are usually very good at what they do.
Cost wise, buying software is usually cheaper than building custom software. As we'll see later on, there are some caveats to this, but this conventional wisdom is often correct.
This is where most software evaluations end. It meets your requirements and it's cheaper. Make the purchase and move on, right? Well hold on a sec.
There are some risks to packaged software and SaaS that are often overlooked:
They often include modules you don't want and may not be an exact fit for your business. Adding the modules you do want is extra. So is implementing the software and customizing it to fit your business.
They work in functional silos and are usually from multiple vendors. You've got to be sure it will integrate with your other systems.
They may not let you get the data out the way you want it.
Your users may not be as excited about your choice as you are.
Let's take a closer look at these problems and when they may ultimately push your decision to the custom software side.
Get just what you want, no more, no less
Buying software off the rack is the way to go if the package meets all your business requirements. But most of the time, you're buying functionality you don't need and missing functionality you do need. You shouldn't have to change your business to match the software you've just purchased.
The common answer is to have consultants implement a solution and customize it to your business. If the packaged software is a good fit with your requirements, this can work well. You just want the consultants to round out the corners, not rewrite anything. They configure it for your organization and maybe integrate it with some of your existing systems.
But at some point, and it should be pretty soon after the install, the consultants should finish and go home. If they need to stick around for lots of customizations or integrations, you may have already lost the justification for buying instead of building.
Here is the part that catches organizations off guard: those customizations do not stay done. When the vendor releases the next version of the product, every customization has to be reviewed, tested, and often reworked to survive the upgrade. Companies that customize heavily end up dedicating ongoing development resources just to keep their customized version current. You have not bought software at that point. You have rented a starting point and hired permanent staff to maintain the divergence. Custom software costs more upfront, but you are not carrying that ongoing customization debt.
Get deep integration with your existing systems
With packaged software, integration with your other systems ranges from simple to a painful implementation project. For example, if you purchase CRM software and want to load all your existing customers into it, the tool should provide this. Most consultants can do this work quickly. Painful integrations are when you can't get the data out, or you can get it out, but only through a vendor API designed to make full extraction difficult.
If the new system is one piece of a larger process, or if it will be the system of record for your enterprise data, you will have many integration points for data coming into and out of the new system.
With custom software, those integration points are built in because they are part of the original requirements. The software integrates deeply with your current enterprise systems. If done right, the new integration APIs are written in standard ways that are discoverable by any new applications that may come online in the future.
How stable is that vendor? What is your exit plan?
The main value proposition of packaged software is the functionality you get for the price you pay. But that value disappears if the vendor goes out of business, gets acquired, or decides to reprice once you are too embedded to leave easily. And the more you have customized their software, the harder it is to get out. That is not an accident.
SaaS companies are particularly good at this. Low introductory pricing gets you on board. Integration with your other systems and years of data stored in their platform raises your switching cost. At contract renewal, you are negotiating from a weak position.
Many SaaS platforms also have no standard API that competing products support, which means your exit plan involves a migration project, not just a decision. Before you sign a multi-year contract with any vendor, understand exactly how you would get your data out and in what format. More importantly, test it. Run the extraction in a non-production environment and confirm that what comes out is actually usable. Most organizations never do this until they need to, which is the worst possible time to discover that the plan does not work.
With custom software, your business owns the code and the data from day one. There is no vendor to negotiate with and no proprietary format to escape from.
Where is the data stored?
With packaged software, the data is often stored in a proprietary database. Even if it's in a more common format, many vendors will not support direct queries against their data store or will charge extra for reporting access.
If you're using SaaS, your data is in the cloud, on infrastructure you do not control and in a jurisdiction you may not have chosen. For some organizations that is fine. For enterprise clients operating under GDPR, industry-specific data regulations, or internal security requirements, it is a real constraint. Regulators do not accept "the vendor handles that" as an answer when something goes wrong. You are responsible for your data regardless of where it lives.
Custom software puts the data where the organization needs it because storage location, access controls, and compliance requirements are part of the original specification. You can satisfy a security audit because you know exactly what the answers are.
Get user buy-in
The typical IT buying process is to identify the requirements and find the packaged software that best fits. This evaluation is often handed over to a technical person to confirm the software works from an IT perspective.
The problem comes when a package is selected and the users are told that starting next Monday, they will be in training, and the Monday after that, they will be using the new system. If the users haven't helped choose the software, they may reject it or undermine the implementation.
With custom software and custom integration projects, users are involved in requirements early on, and the new system is built to their specifications. They are the most critical stakeholders and can set the tone for a successful adoption throughout your organization.
Conclusion
Software purchase decisions can be as complex as the problems they attempt to solve. Decision makers need to consider the short and long-term costs and risks of buying packaged or SaaS software as-is, buying and customizing it, or going with custom software from the start. The easy answer is not always the best answer when all the risks are considered.
Contact Volare Software for more information about building custom software for your business.
