Most businesses from start-ups to corporates that are scaling will run into the question “should I purchase a license for a ready-made software solution to support my daily operations, should I develop an IT solution that caters to my specific business needs or should I just customize what I may already have?”. Before we go forward, let me give you a disclaimer, the answer is subjective and so there is no wrong answer. However, there are definitely a lot of myths such as “building is expensive and takes too long”, or “buying is simple, fast and easy”, or even “customizing or scaling my current product isn’t worth it”.
In reality, building, buying, and customizing products have pros and cons, depending on the desired outcome. All have the potential to add value. The decision to choose one of the options depends on multiple factors such as cost, timing, effort to implement, use, differentiation, value, and onboarding. Even the most experienced product leaders can find it overwhelming to investigate new products in the market, emerging technology and novel hardware. The easiest way to approach this complex decision is to list what is fact and what is fiction, and then put together an actionable criteria to determine when to build, when to buy and when to customize. For this, we have put together a pros and cons list for each decision.
Buying an off-the-shelf product
Why it is a good idea:
- The initial investment is always less: If cost is a major concern for you and you have limited resources to launch a new product, an off-the-shelf software may be your best bet since it is indeed typically cheaper to buy and implement.
- Rapid deployment: Another pro for ready-made programs is that they should be good to go as soon as you pay for them and load them into your system. If you have very standardized needs and an existing solution perfectly meets those needs of yours, this is a huge plus in favour of buying an off-the-shelf product.
- Regular maintenance: With a third-party provider, maintenance is not your headache. Third-party providers want to stay competitive and so they will keep-up maintenance, and introduce regular updates.
Why it might not be a good idea:
- Lack of control: You don’t own the product, you’re just a user - this means you lack control. The vendor controls the solution’s updates, volume capacity, and functionalities. Key decisions involving all features of the software, UX, and future plans are out of your hand. This could mean that the product may not be a long term solution for your company if you grow.
- Compatibility problems: Pre-built solutions can not be guaranteed as compatible with other products you might be using. Also, any solutions that you may need to implement in the future may not be compatible with your off-the-shelf product.
- The long-term cost: Although pre-built software may be cheaper in terms of initial investment, the costs associated with it may increase over time. Subscriptions and licenses tend to be limited by time, so at some point you'll have to reinvest as they would expire. Moreover, with significant growth in your company, you would always need to add more licenses for new team members which is usually an added cost.
When should you buy an off-the-shelf product?
Even though there’s no straight-forward rule, you could still tell when you need a pre-built solution. If your needs are as standardized as the software you would buy, then off-the-shelf is the best way forward. Generic applications are often designed to support and promote industry best practices and can be used as a tool to improve processes on the go. The developers of such ready-made products have access to extensive user feedback and often integrate that knowledge into the final packaged solution. If you don’t want to make a huge initial investment and need something standard to fulfill your very basic requirements, buying a ready made product is a good idea. For instance, if you are an SME that is rapidly growing and hiring, then buying access to one of the many popular pre-built Applicant Tracking System (ATS) is obviously the best option.
Building a new product
Why it is a good idea:
- Efficient customization and scaling: One of the biggest advantages of your very own custom built software solution is that it will include all the functionality you need to operate in exactly the ways you need. The software you’ll get will be tailored to your own unique business model and challenges. You would have control over the development so you can add any new features whenever needed. The best way is to start with a prototype and grow the software as your revenues and requirements grow. In this way, your employees will be able to give their feedback on what features are essential to streamline their workflows making your whole process very efficient.
- Control of system: As the product owner you will have complete control over all your security measures, features, updates etc. Product ownership gives you the capability to even market the product, offering your software as a service if needed.
- Competitive advantage: With a custom built software, you get a competitive edge with having the most efficient, connected, and scalable technology at hand, helping your business be an industry leader. Your software is made for your needs, so you can differentiate your business from others in today’s fast-paced marketplace.
- Integration: Building your own solution means you can ensure seamless integration with any software, tools, and processes you are using or plan to use in the future.
Why it might not be a good idea:
- Significant initial investment: A custom solution will always cost more than an off-the-shelf product in terms of initial investment. While it is true that off-the-shelf solutions may not always be the cheapest option in the long run, and may end up costing more due to scalability issues and recurring fees. Software that is specifically created and customized to your workflow can improve production and profitability and increase efficiency or business growth, however, this would require a good amount of initial investment.
- Time consumed: It takes time to identify your organization’s workflow processes or requirements to develop a software optimized to your needs. If you are going to get a custom built solution, you need to be ready to spend time gathering this information from end-users so that a custom solution will be appropriate and powerful for your business.
When should you build your own product?
If your line of business or specific operations requires constant customisation and scaling, then it’s definitely better to choose a custom developed software. Custom development allows you endless personalisation options with no need for compromises, as well as constant customisation and scaling so your business keeps running like a well-oiled machine. This does require a larger upfront investment and time that goes into planning, but the solution’s effectiveness will most likely result in better ROI. A custom-built software is shaped to fit your business, rather than the other way around — so it is a great option for established businesses with complex workflows and strategies. For instance, if you want to market your product, offering your software as a service, you must get a custom built software. Similarly, if you are a factory owner with unique workflow processes, to make your production efficient it might be the best idea to get a custom built software. We built a custom solution for German manufacturing company Krah pipes helping them save hundreds of hours in manual work.
A lot of large businesses do use a mix of standardised and tailor-made software solutions. Therefore, it is recommended to develop the product one stage at a time by starting with a requirement that is most urgent. Creating a custom software could leave you dependent on the software developer, but if you choose your tech partner carefully you’ve got the benefit of a software team that truly understands your business.
Customising or scaling your own product
There’s not much of a pros and cons list for this one. It is a basic rule of thumb that if you already have a working product that is either custom-built or bought off-the-shelf, customising and scaling it is the best option as compared to throwing it out and starting fresh, unless your off-the-shelf product allows limited customisation.
Customisations are always developed with a specific user base and new requirements in mind. It is not a quick process and especially customising a licensed solution will limit you to working with a small number of specialists who boast an in-depth knowledge of the licensed software. This is likely to push the costs up by 80%. However, if you have a custom-built software and you want to add features, change something or include new updates because of evolution in your business itself, this is a great thing. An example of this is Hepta airborne that came to Thorgate to ask for updates in their current digital product that Thorgate was easily able to take over and execute. This project is covered in depth here.
It is true that the overall decision for building or buying a product is more complex than reading through this brief article. Therefore, most companies consider a lean requirements workshop to begin with. Thorgate has conducted many lean requirements workshops also known as an MVP workshop. The idea is to understand the end-user requirements, map the user flow and challenges (also how they’re being solved). At Thorgate, we’ve often suggested to our customers to not go ahead with product development after concluding a lean requirements workshop, saving them hundreds of thousands of dollars. Similarly, we have often evaluated that you can save money by reducing some of your requirements which prove to be unnecessary after surveying end-users. These examples are another upcoming blog post to learn from.
Meanwhile, if you are confused about the build or buy decision, you could always book a call with an industry expert at Thorgate who can give you an insightful and honest review about what is the better course of action for your business.