Buy vs Build in software development: Easy-to-use checklist

FAQ Buying vs building software

• What are the benefits of building software?

  Developing custom solution provides a lot of important benefits and significant business value:

  • Fine-tuned performance
    Ready-made software is built for many users, so it has general performance standards. In-house solutions, on the other hand, can be optimized specifically for your business's unique needs, improving speed and efficiency, which is crucial in industries where every millisecond counts.‍
  • Meeting regulations
    Some industries, like healthcare and finance, have strict rules. Purchasing software might not meet these requirements right away, and it could need extra customization or be impossible at all. Custom software can be built to comply with all necessary regulations, significantly reducing the risk of penalties.‍
  • Data privacy
    Industries handling sensitive data, like personal information or trade secrets, need strong data protection. Custom software can include specific security measures like data encryption and access controls, ensuring better data privacy and reducing the risk of data breaches.
  • ‍Custom functions
    Ready-made software often has general features that might not meet the needs of specialized industries. Custom software can include features tailored to your specific tasks, improving efficiency and user satisfaction by removing unnecessary functions and simplifying workflows.
  • ‍In house skills
    Developing software in-house helps build your team's skills and knowledge, which can be useful for future projects. This reduces reliance on external vendors and gives your organization control over its technology plans.
  • ‍Competitive advantage
    Custom software development uses an agile approach, focusing on continuous improvement and user feedback. This allows for rapid prototyping and quick adjustments, helping your organization stay flexible and responsive to changes in the market or customer needs making sure that you're always the leader not the follower.
  • ‍Digital transformation
    Many businesses struggle with outdated systems that don't work well with new technology. Ready-made software might offer a quick fix, but it often doesn't solve deeper issues. Custom development lets you gradually update old systems, keeping valuable functions and data while moving to a more modern and efficient setup.
  • ‍Working with other systems
    No matter how specific, your software doesn’t exist in a vacuum. It needs to work well with other systems and platforms. Custom software can be designed to meet industry standards for data exchange and integration, ensuring it works smoothly with other tools your business uses.
  • ‍Knowledge retention
    Building custom software helps your team understand your processes and technology deeply. This knowledge stays within your organization, ensuring continuity even if employees leave or roles change.
  • ‍Avoiding vendor lock-in
    Using ready-made software can sometimes make you too dependent on a single vendor. Custom software reduces this risk, giving you control over the software and making it easier to switch vendors if needed.

• Why do you want to buy software?

  Off-the-shelf offers several software pros for businesses and individuals, making it a popular choice for many applications. Here are some key advantages.

  Low initial costs

  Buying software generally has lower initial costs than bespoke software development. The buy scenario allows users to avoid the expenses associated with developing software from scratch.

  Immediate availability

  Since the software is pre-built, it can be purchased, installed, and used almost immediately. You can quickly integrate software solutions with existing tools without time-consuming development. It's an out-of-the-box digital transformation.

  Reliability

  Off-the-shelf software should be tested and refined with end users' relevant data, which can lead to more reliable performance. Vendors often provide updates to fix bugs and improve security, though the frequency and quality of these updates can vary, and their frequency directly impacts security risks.

  Support and documentation

  Users often have access to vendor-provided support services, though the quality and responsiveness can differ significantly between vendors. Detailed user manuals and documentation are generally available, which can help users understand and utilize the software effectively.

  Wide range of features

  Out-of-the-box software usually comes with a broad set of features designed to meet the needs of a large audience. So, additionally to the must have functionalities you get extra options in the same price. While not as customizable as bespoke software, many off-the-shelf products offer some configurable settings and add-ons to tailor the software.

  Integration possibilities

  New software packages often support integration with other commonly used systems and applications, though integration can sometimes be limited and may require additional effort or third-party tools.

  Community resources

  A large user base can provide valuable insights, share best practices, and offer troubleshooting advice. You can also usually choose from a range of plugins, extensions, and third-party tools are often available to enhance the functionality of the software.

• What are the key factors to consider when planning to own software?

  1. Business requirements and objectives: Understanding the specific needs and goals of the organization is fundamental. Is there an existing solution that adequately addresses these requirements? Or do unique circumstances necessitate a bespoke solution?
  2. Total Cost of Ownership (TCO): While off-the-shelf software may appear cost-effective initially, considering the total cost of ownership over the software's lifecycle is crucial. This includes licensing fees, maintenance, customization, and potential future upgrades.
  3. Time to Market: Speed-to-market can be a decisive factor in today's competitive landscape. Off-the-shelf solutions typically offer quicker deployment, whereas custom development may take longer but can yield a more tailored and scalable solution in the long run.
  4. Scalability and flexibility: Considerations for future growth and adaptability are paramount. Will the chosen solution scale seamlessly as the business expands? Can it accommodate evolving requirements and technological advancements?
  5. Integration and compatibility: Compatibility with existing systems and ease of integration can influence the decision-making process. Building custom software allows for tighter integration with existing infrastructure, whereas off-the-shelf solutions may require additional customization to achieve seamless integration.
  6. Security and compliance: Data security and regulatory compliance are non-negotiable considerations in today's digital landscape. Assessing the security features and compliance standards of both off-the-shelf and custom solutions is imperative to mitigate risks.
  7. Support and maintenance: Adequate support and maintenance are essential for the smooth functioning of any software solution. Evaluate the support offerings provided by vendors for off-the-shelf software while also considering the availability of in-house expertise for custom-built solutions.
  8. Assess business requirements: Conduct a comprehensive analysis of your organization's current and future needs, considering factors such as scalability, security, compliance, and integration with existing systems.
  9. Evaluate cost and resource implications: Compare the costs and resource requirements associated with building custom software versus purchasing off-the-shelf solutions. Consider not only upfront development costs but also ongoing maintenance, support, and potential future upgrades.
  10. Explore customization options: If considering off-the-shelf software, investigate the level of customization and flexibility offered by the vendor. Determine whether the software can be adapted to meet your specific requirements without compromising on functionality or stability.
  11. Factor in long-term scalability and support: Consider how each option aligns with your organization's long-term growth and scalability objectives. Assess the vendor's track record, reputation, and commitment to ongoing support and development.
  12. Seek expert advice: Consult with software development experts, IT professionals, and business stakeholders to gain insights and perspectives on the best approach for your organization.

  In conclusion, the "buy vs build" dilemma is a multifaceted decision that demands careful analysis and strategic foresight. There is no one-size-fits-all answer, as the optimal choice depends on a myriad of factors unique to each organization. By meticulously evaluating business requirements, weighing the pros and cons, and aligning with long-term objectives, organizations can navigate this conundrum effectively and drive sustainable success in software development.

• What's the pricing difference between buy vs build software?

  When comparing the costs of buying versus building software, there are several factors to consider, including initial costs, ongoing maintenance, and potential hidden expenses. Here's an overview with examples for both initial and lifetime costs.

  Please note that price ranges vary widely depending on the tool, project specifications, features, worker seniority, tech stack, timelines, etc. Your mileage will vary, so take the numbers below with a grain of salt.

  Buying Software

  Initial Costs:

  • License Fees: One-time or subscription-based (e.g., annual or monthly).
  • Customization: Costs to tailor the software to your needs, though typically less than building from scratch.
  • Implementation: Costs associated with setting up the software in your environment.
  • Training: Costs to train staff on how to use the software

  Lifetime Costs:

  • Subscription Renewals: Ongoing license fees for software updates and continued use.
  • Support and Maintenance: Fees for technical support and maintenance.
  • Upgrades: Costs for newer versions or additional features.
  • Scaling: Costs associated with scaling the software to accommodate growth (e.g., more users, higher data volume).

  Here’s a generic example of a medium-sized business purchasing an ERP (Enterprise Resource Planning) system:

  • Initial Costs
    • License Fees: $50,000 (subscription)
    • Customization: $10,000
    • Implementation: $20,000
    • Training: $5,000
    • Total Initial Costs: $85,000
  • Lifetime Costs (5 years)
    • License Fees: $50,000 x 5 = $250,000
    • Maintenance and Support: $40,000/year x 5 = $200,000
    • Scaling: $25,000 (over 5 years)
    • Upgrades and Enhancements: $40,000/year x 5 = $200,000
    • Training: $200/year x 5 = $1000
    • Total Lifetime Costs (if license is recurring): $250,000 + $210,000 + $200,000 + $25,000 + $200,000 + $1000 + $50,000 = $936,000
    • Total Lifetime Costs (if license is one-time fee): $85,000 + $210,000 + $200,000 + $25,000 + $200,000 + $1000 + $50,000 = $771,000

  Building Software

  Initial Costs:

  • Development: Costs for hiring developers or contracting a software development firm.
  • Project Management: Costs for managing the development process.
  • Testing and Quality Assurance: Ensuring the software meets requirements and is bug-free.
  • Infrastructure: Costs for servers, databases, and other necessary hardware or cloud services.

  Lifetime Costs:

  • Maintenance and Support: Ongoing costs to fix bugs, make updates, and provide user support.
  • Scaling: Costs for improving infrastructure to handle more users/data.
  • Upgrades and Enhancements: Costs for new features and improvements are typically lower than buying new licenses for off-the-shelf software.
  • Training: Continuous training as the software evolves, though typically lower than with off-the-shelf software due to customized training materials.

  Here’s a generic example of a medium-sized business building a custom ERP (Enterprise Resource Planning) system:

  • Initial Costs (1 year)
    • Development: $414,000
    • Project Management: $144,000
    • Testing and Quality Assurance: $98,400
    • UX/UI Designer: $117,600
    • Infrastructure: $10,000
    • Total Initial Costs: $784,000
  • Lifetime Costs (5 years)
    • Maintenance and Support: $10,000/year x 5 = $50,000
    • Scaling: $5,000 (over 5 years)
    • Upgrades and Enhancements: $10,000/year x 5 = $50,000
    • Training: $2,000/year x 5 = $10,000
    • Total Lifetime Costs: $210,000 + $50,000 + $5,000 + $50,000 + $10,000 = $325,000