Company Software: When Does It Make More Sense to Build Than to Buy?

Written by Differential on March 20, 2020

One of the most challenging responsibilities for any CEO is balancing resources between a company’s immediate needs and its long-term growth. This daunting task is perhaps seen most clearly in the build vs buy dilemma: should an organization invest resources in developing custom software, or simply purchase an off-the-shelf solution?

Because the initial investment of time and money for a canned solution is generally a fraction of what it would be to develop a custom solution, it’s often seen as the more practical choice, especially to startups and younger companies. Up front, it’s the faster, cheaper, “good enough” solution. While in many cases a canned solution may be the more sensible option, oftentimes long-term considerations fail to make it into the decision process. Below are some questions to consider when trying to decide between building or buying software for your company.

Are you planning on growing your business? While a canned solution can address immediate needs, it can be a hindrance to long-term growth. As an organization expands, processes change, and company vision shifts, the lack of customization and freedom of integration found in off-the-shelf programs can become a huge barrier to scalability. In addition, the costs of software development can be made incrementally more affordable for growing businesses, as the costs will be spread over multiple clients.

Does your company have specialized needs? Off-the-shelf software generally addresses most business needs across the industry. However, within many canned solutions, it’s very difficult or expensive to modify built-in features or add additional components. As a result, if your organization has distinct needs, an off-the-shelf solution might 1) fall short of your specific requirements, 2) leave you paying for features you never wanted in the first place, or 3) give you suboptimal features that still require inefficient manual processes on top of the paid service.

On the flipside, if you own a common business, like a hotel, there is likely a pre-made, market-tested, more affordable software solution currently available for your organization’s purpose.

Is security an issue or could it become one? Finally, off-the-shelf software brings greater security risks because their components are better known by hackers. Weaknesses are more easily identified, which means a small bug could lead to a breach across the whole system. In contrast, custom software is typically more complex, which makes it much more secure against hackers.

The upfront energy, time, and resources necessary for the development of custom software may make a canned solution seem the like the smarter choice. However, if you’re hoping to grow your business to a significant size, the initial higher cost of custom software is a valuable investment that could save you an enormous amount of time and resources down the road.