New Software Considerations - Build vs. Buy

In today’s competitive business world, technology is often considered as a necessity or a means to improve operational efficiency and effectiveness. Introducing new software is one way to automate routine functions such as employee payroll or introduce new capabilities such as offering data analytic services. To meet this business need, companies small and large are often faced with the decision to either build custom software or buy a commercial off the shelf (COTS) vendor product. This decision should not be underestimated as it will probably have many short- and long-term implications for your business. 

There are times when selecting a COTS product is a quick and easy decision. Office productivity and financial management software (e.g. Microsoft Office, Quicken) are good examples. Using your company’s valuable resources to build a custom word processor, spreadsheet, or basic accounting program probably does not make good business sense. COTS products are typically targeted to large audiences to address business needs across one or more industries. There are other times when your core business needs may be too unique for a COTS product to sufficiently satisfy them or a custom software solution may give you a competitive edge. If you are in this position, there are several important factors to consider in your build versus buy decision.

Functional and Non-Functional Requirements: This is the most critical factor to consider. The technical solution should fit the requirement needs and not the other way around. Functional requirements are those that describe what the software should do for your business. There may also be non-functional requirements that relate to regulations, security, scalability, availability, and/or performance. Requirements should be prioritized as critical, high, medium, or low.

Total Cost of Ownership (TCO): TCO is a financial concept that accounts for all costs related to hardware, software, operational, and long term expenses including decommissioning. It would be misleading if the upfront costs for software acquisition and implementation were the only costs considered. TCO includes elements such as change management (i.e., introducing new business workflows), training, documentation, and support costs (i.e., licensing, personnel). TCO may also be used to estimate your return on investment (ROI).

Timeline: If the timeline is a driving consideration, this will prominently factor into your decision as COTS solutions are much quicker to implement than custom built solutions. For example, you may have little choice but to select a COTS product if you have a Federally mandated deadline that is quickly approaching and it has complex regulatory requirements that can only be feasibly met with a technical solution.

General guidelines to be aware of when comparing COTS products to custom developed ones:

 

Commercial Off The Shelf (COTS)

Custom Built Software

Requirements
  • May not meet all your requirements and will likely have extra features that you don’t need
  • May change your business workflows to suit the software
  • May be a challenge to obtain future functions and features to meet new business requirements
  • Will be tailored to meet all your requirements and business workflows
  • May provide a competitive advantage

 

Costs
  • Anticipate lower upfront costs
  • Anticipate ongoing license, subscription fees, and/or upgrade fees
  • Anticipate higher upfront costs
  • May have costs for future enhancements

 

Time
  • Anticipate a quicker implementation turnaround time
  • Anticipate a slower implementation with an option to start with critical requirements
  • Anticipate more time and energy to go thru the development cycle of refining requirements, design, development, testing, and training

Other
  • Anticipate opportunities to join a user group for helpful support
  • Anticipate relying on developers, analysts, trainers, and/or super users for support

A checklist of your requirements is recommended. This can be used to identify a short list of potential options. When assessing vendor products, make sure to consider vendor financial health and viability for a long-term partnership.

There are likely other considerations that apply to your specific situation when evaluating alternatives. For example, your existing technical infrastructure may need to be factored in. Ninestone offers expertise in strategic planning, technology review, solutions, and support. See our website for more information about technology strategies and services we provide. Contact us today to help assess and implement a technical solution that will meet your specific needs.

Tammy Chu, Senior Ninestone Consultant

August 2017

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