Whether you are just starting your business or are now building new capabilities for your existing digital offering, sooner or later, you get to this decision. You need to decide if you want to create custom software in-house or work with third-party solutions. After 14 years of working in this field, here are some of my considerations.
But first things first. What is custom software?
Custom software solutions are created for a group of users or organisations. They’re always one-of-a-kind and individualised. These might be pre-existing solutions that have been tweaked to meet the needs and expectations of the user.
Why is custom software recommended for some industries?
I worked in the Telco industry for seven years, and my experience also includes director roles in several start-ups and scale-ups. Talking about specific sectors and software functions, custom-built software is often needed to connect the different API integrations where regular off-the-shelf solutions may be limited. This is often the case for the Telco- Utility-, and Automotive industries.
The software is a primary differentiating factor to outperform the competition and deliver on customers’ expectations. Custom-built is often a better option depending on its function. But even these companies use third-party open source libraries. On the other hand, if you need software in the Consumer Retail goods industry, my experience shows that the right software is very often already built for you in the market.
Custom software can contribute to your competitive advantage.
In this service and experience economy, the digital experience is a significant driver of competitive advantage in your user journey and your organisation’s offering. So the first question you have to ask yourself is, will this software contribute to some form of competitive advantage for my organisation? Afterwards, take a deep look at your company’s needs and the benefits you could find in each option.
Benefits of a ready software solution
1. Reduced upfront costs
Using a ready software solution called COTS (commercial off-the-shelf software) is often cheaper than building it all from scratch. Sometimes you don’t need to reinvent the wheel, and great solutions are available to meet the needs of the stage you are at.
2. Scalability (often due to its SaaS cloud-based business model)
COTS software is very easy to scale due to its success. You can upscale hundreds and gigabytes of server space. You can select a range of advanced software capabilities, from blockchain to Robotics and analytics to front-end web and mobile development.
3. Increased functionalities with no significant investments
In my experience, 3rd party software can quickly help you further grow your business. It makes you more creative and may inspire you to do more than you initially expected.
When I had my start-up webshops in fashion products. I frequently used more of its existing capabilities than I anticipated beforehand. Third party software can give you some options to play and experiment with.
4. Improved customer experience
Thousands of people use third-party software. Therefore, it’s standardised and optimised for the masses. All the hygiene factors of the customer experience are already covered, which puts your customer experience at the next level.
5. Improved implementation support.
As a product lead, there is already a lot on your plate. You are the one who needs to find the right market fit, making it financially feasible and desirable with marketing efforts. Therefore it is a relief that there is existing implementation support for all your open questions.
Benefits of a custom-built software
1. Tailor-made customisations for your users or organisation
Again, think about how you can differentiate yourself from the competition and deliver the ultimate service journey for your users. If it doesn’t exist, just build your dream software in-house.
2. Adaptability and easy software roadmap optimisation
Market factors change your organisation every day. And you want to change with it. When you create your software, it can evolve and adapt to your organisation’s needs.
3. Software can be an excellent long term investment
If you are sure, you will need the software for years. It can be a significant pillar of your company and a substantial asset to your financial balance. So make sure it is in good health, and invest in it; its value can grow with your success.
4. Productivity increase
The more you own the software, the more you can adapt it to your organisation’s individual needs. It is easier to integrate with other programmes and systems. This also means you can speed up the productivity of your operations within the company.
5. Internal maintenance and support
With COTS, it may happen that the support will be concluded before you wrap up your need for the software or shift to another kind. This can also lead to significant security vulnerabilities. With your custom software, this is all under your own control.
However, building your software can also come along with its disadvantages. Let’s see which ones you would like to prevent from coming your way.
High upfront costs.
With custom software, the upfront costs are always much higher than the alternative COTS monthly SaaS business model. Depending on your business and growth phase, this does not have to be a wrong decision, but it is an important consideration and can be a significant con for startups.
You have to maintain it.
One major disadvantage of custom software that many corporate organisations forget is that you must maintain the software after you build it. This is why legacy systems are often a significant problem for existing companies’ roadmap and innovation speed.
You can’t predict unforeseen bugs and delays.
When you build your custom software, you depend on your developers’ quality. And because it is often new software integrations for them as well, it is harder to predict unforeseen bugs. These can cause delays in your aimed go-to-market expectations.
When building your own, you must assess your security and vulnerabilities.
With both 3rd party and custom software, you want to ensure your software is secure and has no vulnerabilities that can jeopardise your users’ privacy or harm your brand. With custom software, you can be more vulnerable, and assessments take more time before launching your software to a production state where your users can use it. So be aware.
Finding talent to work on this software
In this growing global digital economy, finding the right talent with the skills, talent, and motivation to craft your software can be tricky. Additionally, when you have seen them ( which will take at least 3–4 months), it will take weeks before they understand the organisation and the briefing and get them up to speed on the existing organisation people, codebases, languages and libraries. This can limit the speed.
The speed of innovation
Talking about speed, sometimes speed is the only thing that matters in innovation. Depending on your industry, it can be a red ocean or a race to the finish. I see a lot of organisations who want to go for the “best” option straight away, only to miss the market due to long development times. So try to develop lean.
Last but not least, I would like to leave you with one final thought for consideration. there is often momentum within the market and the organisation when the idea is ripe. Losing this momentum or moving power can limit your innovation speed or cause the project never to be able to lift off at all. That’s why picking a custom-built or prebuilt software for your company’s needs is one of many decisions you will have to make, and it should not be scary or a final one. Start small, either with custom or 3rd party software, fail fast and learn fast.
