The ongoing debates between the buy vs build software backers are far from something new. From the very beginning of digital transformation processes, it became clear that a personalized approach is a key factor in the user satisfaction process. This is no longer a desirable feature but an absolute must-have if you wish to keep up with your competitors.
Nevertheless, software vendors are not lagging behind, and today there are a huge number of software solutions that can be useful for various companies. And while many companies make their choice in favor of purchasing software from vendors, it remains obvious that such a solution is not able to solve many of the unique problems that companies face.
Given such a large number of different factors, it becomes obvious that it is impossible to give a clear answer to the build vs buy software question. In this article, we tried to compare both options and explain under what circumstances it is recommended to use each of them. Although this material is still not a direct guide to action, we believe that it can be useful for those who are faced with this dilemma.
When do entrepreneurs face this dilemma?
The situations when businesses need software solutions vary depending on the industry and the specifics of the company. In most cases, such companies first evaluate ready-made solutions since their implementation can be done much faster. When it turns out that none of the ready-made products can truly solve the business problem, the question arises of whether to develop your custom solution.
So, as an example, we can consider an IT enterprise that seeks to optimize its business processes by introducing a high-quality CRM system. There are many ready-made options on the market, but none of them seems to be an effective solution. That's when you need to develop a custom CRM, which will be tailored to the needs of a particular company and will bring value.
And although the decision to create a custom product "just for me" seems to be the most logical and correct, it is not suitable for each business. Before making such a decision, it will be wise to consider several points.
It is absolutely clear that entrepreneurs and business representatives are trying to reduce their costs. Often, the decision to implement some kind of software is explained by the desire to reduce future costs.
Within the build vs buy software dilemma, there are two main arguments most often encountered. First - the purchased solution will start to bring value almost immediately. Second - creating a homemade product can be an overwhelming burden for the company's budget. Both arguments are valid. However, it is hard to say which one is the best for a particular case. A purchased solution doesn't need high costs and is implemented quickly. However, more often than not, it still requires either a single large payment or a monthly payment. You will be charged constantly, and the benefits that off-the-shelf software brings aren't always sufficient.
Moreover, in the case of the subscription-based model, the price of using an out-of-the-box solution may become extremely high in the long run. Since ready-made solutions usually have a basic set of features, businesses may be required to pay for the features they don't use. Therefore it's recommended to compare the price of using a custom and ready-to-use solution in the 10-year perspective or more.
Thus, although developing homemade software will cost more, eventually, it will pay for itself since it will bring business value. At the same time, it is worth making a reservation and saying that you need to sensibly assess your capabilities. It's a terrible mistake to go into debt for the development process if you understand that your business has no opportunity to afford such expenses.
Maintenance & Control
Maintaining the work of any software is a separate stage that requires certain resources. Selecting between the build vs buy software, it is worth saying that the software vendor is most often engaged in maintaining the operation of its product. Thus, any bug fixes, database updates, aren't part of your duties, so you don't need to spend resources on these tasks.
However, this coin has a downside. Since the purchased solution is being supported by the vendor, you, as a client, will have no control over the operation of this software. Thus, any shutdowns, unwanted bugs, or updates will be made regardless of your desire. Therefore, you can face a frequent situation when constant problems with the product or one unsuccessful update drives business representatives to refuse to continue using this software.
Of course, modern businesses, especially those related to the IT industry, have a set of complex tools and processes that harmoniously interact with each other. These can be time & task trackers, CRM, CMS, risk management tools, a bunch of different connectors and communication tools, and so on. That's why the introduction of a new tool often causes coherency problems. Thus, a new solution may conflict with existing tools and require a complete overhaul of present workflows.
This problem can be avoided only by resorting to building a custom solution. By developing software from scratch, you can take this factor into account and build a product that ideally fits into the existing frame and will be coherent with the tools already in use. This is one of the most important points to consider in the build-or-buy software debate.
Customization and Scalability
As you know, off-the-shelf solutions are called so because they do not imply any major adjustments. Yes, there are situations when software vendors make big changes and add new functionality based on the wishes of a large number of customers. However, no one will do it just for your sake. In case you urgently need additional features, you just have to stop using this product and choose something new.
On the contrary, the product developed by you has the capacity to scale and expand from the outset since you can point this opportunity at the design stage. Thus, your product is easily amenable to any changes and scales perfectly in connection with changing business requirements.
These four factors are crucial in the struggle between building vs buying software. Of course, some additional and unique factors are specific to certain companies. However, more often than not, businesses make decisions based on these four considerations.
Since third-party vendors usually maintain ready-to-use solutions, businesses need to share their data. They may be required to send to a vendor's servers sensitive information about their clients, billing data, research outcomes data, etc. All the information should be transferred via the Internet and stored on a vendor's servers. In such a case, there is always a risk of data loss.
When using a custom-built solution, all the information can be stored on on-premises or secured cloud servers. Also, only authorized users will get access to sensitive information.
One of the main advantages of custom-built solutions is that businesses can develop unique products. They can integrate various workflows and develop innovative features to overcome their competitors.
On the other hand, ready-to-use solutions can be purchased and used by everyone. The features they offer can help with business problems. However, they won't help get a competitive advantage over other competitors.
Build vs Buy: The pros and cons of both options
To consolidate the information received, we suggest that you consider the following two tables of buy versus build software pros and cons, which can become a reliable assistant in this dilemma.
You personally develop a solution that will definitely bring your company value and solve a specific problem.
The cost of custom software development is often higher than buying a ready-made solution. For many small companies or startups, this can be an overwhelming burden, so be smart about your business means.
Custom software will ideally fit into the existing tool scope and won't clash with existing business processes and tools.
The risks in the development process are high. Starting from the risk of not meeting deadlines and essentially going over budget, ending with the risk of creating a non-working solution that won't bring you value.
The code you create is your property, which means that in the long term, you can turn your solution into a commercial product and sell it.
Control over the operation of the product remains entirely with you. Therefore, any changes or updates are part of your business strategy and not unexpected occurrences.
Customizing the software you have developed is not something impossible since you might initially have left the option for this. If it seems to you that the software needs some kind of revision or the addition of new features, you can easily make it.
Implementation of a ready-made solution doesn't take much time. Thus, it can begin bringing value immediately.
One of the main disadvantages is complete dependence on the vendor. You aren't the ultimate owner of the product and therefore remain dependent on other people's decisions. Any customization and scaling for your business requirements can become a trouble.
The price of the off-the-shelf software can be much less, especially if it is a monthly subscription model.
Although a ready-made solution is implemented quickly, it doesn't bring any guarantees of solving your issue. Your case may be unique, and existing solutions may not have the necessary features.
All work on product maintenance is carried out on the vendor's side, and you don't need to cram your head and devote your resources to it.
The cost issue is also controversial since, in the long term, the price of a ready-made solution may even exceed the cost of developing custom software. The reason for this is that most often, you have to constantly pay to use the product. Besides, the ready-made software may not solve your problem, and the risks caused by this may entail additional costs up to the collapse of the business.
You're buying a solution that your competitors are likely already using. Thus, even if you manage to solve your problem, you are unlikely to be able to seriously outflank your competitors who use the same tool.
BUILD VS BUY SOFTWARE RISKS
Whether you build or buy a new digital product, some risks should be considered when selecting the best solution for your business.
The most widespread risks you may face when building new software from scratch are the following:
- unacceptable product quality
- lack of expertise to develop unique functionality
- missed product release deadline
- budget overrun
When opting for off-the-shelf software, you may face the following challenges:
- lack of features to solve business problems
- inability to integrate other software
- possible security risks
- hidden fees or unforeseen expenses
- possible security risks
- unexpected and unmanageable downtime
It's advisable to thoroughly analyze all the possible risks and prepare plans to tackle them.
WHEN TO BUILD
Due to the many pros of custom-built solutions, they are widely chosen by businesses that need to solve specific problems. Also, entrepreneurs with a long-term and strategic vision stick to highly-customizable digital solutions.
A custom-built software solution is perfect for established businesses that:
- need to solve specific problems
- want to overcome their competitors
- plan to scale up in the future
- store and process sensitive data
- want to keep complete ownership of a product
- need to integrate it with other solutions
- need to implement new ideas
WHEN TO BUY
Out-of-the-box solutions are easy to set up. Also, they have a lower upfront cost. Therefore, custom solutions are perfect for small businesses and startups that:
- can solve business problems with existing solutions
- don't have industry-specific requirements
- need a cost-effective solution
- need to set up a new tool fast
- can't afford to maintain new software
Summing Up: Consequences
As you can see, build vs buy software analysis implies that each option has its pros and cons that can be useful for certain companies in specific situations. Of course, a custom solution is always a more useful option, but it comes with some additional costs and risks.
We said at the beginning that we would not give a clear build vs buy software assessment. Nevertheless, to draw some line, let's look at several possible consequences of a wrong build vs buy software decision.
- First of all, your problem will remain unsolved. Simply put, the wrong choice won't bring you value, and you just waste your resources.
Also, making a choice in favor of custom development, while the existing solution on the market has all the needed features, you doom yourself to unnecessary waste of money and time.
At the same time, choosing a ready-made solution, while you have a clear understanding of how to build your own software program, you lose the unique opportunity to receive real value, solve your problem, and bypass competitors.
We advise you to carefully approach the question of whether to make or buy software and study your case to make the only right decision for your business.
It completely depends on the specifics of your business, your goals, and your available budget. Creating custom software for your goals will always be more profitable in terms of the future of your business. Nevertheless, not all companies need to invest large resources in building software in the early stages since there are a large number of ready-made software solutions on the market that will fully satisfy the needs of such a business in the future 1-3 years.
The main factor to consider when deciding whether to build or buy software are:
1. Available budget
2. Business goals
3. Future scalability
4. Expected product lifetime
6. Available solutions on the market
The main advantages that software development brings are:
1. Business goals tailored software
2. Full compatibility with the existing tools and processes
3. Full ownage of the created code
4. Updates and changes are fully under your control
5. High customization and scalability
The main advantages of ready-made software buying are:
1. Immediate value
2. Rapid kick-off
3. Lesser costs
4. Product maintenance is fully on the vendor's side