The choice between an off-the-shelf solution and one that is custom designed is the principal consideration when acquiring new software. Each option has different consequences relating to cost and risk for each step of the project life cycle, which will be examined in this three part article series.
Custom Designed Software vs Off-the-Shelf
Many choices are necessary when acquiring new technology as a solution to pressing business requirements. The principal consideration would be between purchasing an off-the-shelf (OTS) solution or funding the design and implementation of a wholly customised solution.
An OTS solution can best be described as a ready built solution that could be bought ‘off the retail shelf’. These have been designed to provide best-of-breed solutions for targeted industries, and are generally well supported and implemented by established software vendors. They tend to have mature feature sets that have been developed over a longer period of time.
A fully customised software solution is a product that is written from the ground up to solve a specific business need. It can be developed by the staff within the business itself (known as in-house development) or by hired contractors who consult with the business during the product development process. These solutions offer the greatest flexibility and most closely mirrors existing business processes.
This series compares the pros and cons of both approaches at three stages of the project’s life span: Acquisition and Initial Costs, Implementation and Deployment, and Ongoing Maintenance and Evaluation. The driving consideration at each stage would be the risk and cost implications of each alternative. This article will focus on acquisition and initial costs.
Acquisition and Initial Costs
The high level of risk involved in investing in new technology makes acquiring a new software system a daunting task. To minimise these risks, organisations need to consider several key factors in choosing the software solution that would best suit their business needs. Two factors that need to be considered at the initial evaluation and acquisition stage include requirements gathering and total cost of ownership estimations. The outcomes of these factors are significantly different between an OTS system and a custom system.
One of the first tasks to perform when selecting a software solution is to gather a list of requirements that the new system must meet. These requirements can usually be broken up into three categories – must haves, should haves and nice to haves. An off-the-shelf solution will have a more difficult time meeting all the requirements, as they often only contain features that make commercial sense to the vendor. A custom built solution will be designed specifically to meet the business’ requirements and to mirror existing business processes.
This means that OTS systems would cover most of the must have requirements, but that businesses would have to be more flexible regarding should have and nice to have requirements. Custom solutions are designed to cover all business requirements, with features limited only by the creativity and technical capabilities of the in-house staff or the software developer contracted to develop the solution. The choice comes down to the requirements a business is willing to sacrifice when choosing an OTS system over a custom system.
Estimating the total cost of ownership is an important yet usually nearly impossible task when selecting a software solution. Businesses must consider software licensing costs, support and maintenance costs, hardware upgrade costs, training and lowered productivity costs during the transition to the new system, as well as a myriad of other business considerations. There are, however, predictable differences offered by both types of software solutions.
Estimating the costs when purchasing an OTS system is slightly easier than estimating the costs for a custom built solution. OTS systems usually have fixed pricing and vendors who competently scope the implementation can draw on past experience to provide a solid estimation. Estimating costs for a custom system can vary dramatically depending on the scale of the implementation. The high level of flexibility can easily lead to requirements creep – a scenario where software systems are weighed down by nice to have requirements that are added on and changed without adding a significant improvement to the overall performance of the software system. As custom systems grow and adapt to ever changing business requirements, the risk increases that projected budgets can prove to be severe underestimations.
Ideally, an organisation would choose a system that combines the consistency and stability of an OTS while still providing the flexibility and control a custom solution can offer. This solution should feature mature, fully developed business systems that offer a great level of flexibility should the need arise. This customisation should preferably not require a high degree of specialist knowledge, allowing staff to easily make minor modifications as the installation goes into the next stages of deployment.
A product like InformationLeader delivers the stability of a mature system developed over a long period of time, while still providing the flexibility of a custom designed system to capture the appropriate information for your business needs. Find out more about how InformationLeader has helped others achieve growth.