When should a small business develop its own software in-house and when is it usually best to buy off-the-shelf solutions?
As small businesses become more and more tech savvy and as their needs grow, an often-asked question is whether to build or buy software. Are custom applications worth the cost and time spent in development? Or is it better to buy off the rack?
The answer to the buy or build dilemma may be yes -- to both. This is according to Matt Holtle, a vice president with Gartner, the Stamford, Conn. research group. In the long run, this question becomes roughly immaterial because many companies will be doing a bit of building and buying, he says. "Composite applications," says Hotle, "are the wave of the future."
Right now, here are some factors to consider when making the software call for your business:
How does it stack up
If you can find off-the-shelf functionality that meets 80 percent to 100 percent of your business process needs, then you should buy the software, Hotle says. "The problem is that when most people buy functionality externally it doesn't meet their needs and then they customize the heck out of it," he says.
People will often say that they buy, says Mike Gilpin, research director at Forrester Research, of Cambridge, Mass., but that may not be entirely true. The buyers will make the purchase and find that it only satisfies about 50 percent of their needs. So, then they buy and find themselves doing a surprising amount of development, as Hotle says. There's a lot of blending. Even if you buy there may be some tinkering involved. "Delivering applications to customers is no longer the model of a product showing up on the customer's desk and never getting changed," says Gilpin. The sellers have embraced service. The timing couldn't be better, he says, because the buyers want to be in control of the architecture.
Look at your industry
Hotle points out that in healthcare and insurance, for example, certain business processes, such as back-office functions, are common enough so that vendors offering software solutions can meet the majority of a buyer's needs with commercially available products.
That's why it's key to understand your business requirements. If you're going to buy software, make sure you're buying something that fits. "Ultimately, the customer should have a good idea of what they need to achieve," says Sanjay Murthi, president of SMGlobal Inc, an Apex, N.C. maintenance management software vendor.
Evaluate the costs
Buying saves you about one-third to one-half the price of a software solution, estimates Hotle. And all the development being done offshore today is leading to a competitive pricing environment that will drive the cost down domestically. However, with off-the-shelf buying there may be costs down the line, including your time. Think about it -- everyone's heard about nightmare software implementation stories, he says.
There are cost factors to consider on the development side, as well. More technology staffers know how to write or retool software these days that custom development may not be such a far-flung idea -- even for a small business. "Every thing is getting cheaper," says Gilpin. "At the same time, development tools getting easier to use and more powerful."
Where is your support system
One thing to consider is that when you build it yourself, help is just one inter-office phone call away. When you buy off the shelf, help means an 800 number which may or may not have someone available to help you or they may charge for tech support.
But, on the flip side, not every company has the IT staff to build a solution and if they do chances are the IT staff may be over-taxed with everyday work. Whatever you choose for your business -- whether to build or buy -- the good news is that the business is likely to get more bang for buck from more sophisticated software. By upgrading to superior software, you are improving your business, increasing your potential to grow revenue and hopefully bettering the experience for your customers.