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How to Decide Between Off-the-Shelf and Custom Software for Your Business

Every company faces the "build or buy" dilemma when automating its business. The biggest challenge for business executives is balancing the company’s short-term needs with long-term goals for growth.

In the automation process, companies need to decide between off-the-shelf and custom software. Each of these options presents pros and cons businesses should consider before deciding.

Off-the-shelf software is pre-designed for a wide range of customers while custom software caters to specific business needs.

Because off-the-shelf software is designed for all, there is a risk that it might not meet all of your business’s requirements and force you to customize later.

Before deciding which type of software would best meet your business’s needs, you should consider the benefits and limitations of both off-the-shelf and custom software.

Differences in Cost

Off-the-shelf and custom software offer different levels of value.

Off-the-shelf software typically costs less than custom software and you need to only pay a one-time fee to start using it.

This is because the cost is split among thousands of users that buy the same software license, making off-the-shelf software cost-effective.

Custom software, on the other hand, needs to be developed and programmed for your specific business needs which require discussions, drawing out requirements, wireframing, and building the software. This is why custom software is more expensive than off-the-shelf software.

Competitive Differences

Off-the-shelf and customer software offer different levels of competitive advantage.

There is not much space to leverage off-the-shelf software because your competitors are using the same product. They know exactly what you can achieve with it and what your restrictions are.

Custom software is more flexible and can be tailored to fit your business requirements. Custom software developer companies can also modify it as your business evolves.

Think Carefully About Your Business’s Needs

Before you decide on a type of software, think through your business’s needs and consider all of your options. You need a type of software that will help maximize the growth potential, decrease costs, and increase revenue.

Consider Your Budget and Understand How the Cost of Software Is Determined

The cost of software is determined by the project estimation process.

This process consists of 6 steps which include everything from determining software requirements and development to integrating the software and migrating existing data.

1. Determine Scope

The first step is to write down what you want the software to accomplish.

By outlining project requirements, you can get a good idea of how much it will cost because project requirements are directly proportional to the project cost. Be sure to consider all possible deliverables and constraints.

In the initial stages of the project estimation process, BinaryFolks(link is external) sets up frequent meetings with clients to get a complete picture of the software they want to develop. Good software developers strive to understand their clients’ business requirements and then translate it into a technical requirement document that will be used in the development process.

2. Design the Software

Engineers can begin designing the software after the project’s scope has been clearly communicated and your developers have a technical requirement document.

Keep in mind that the software development company will need to allocate time and resources to both user interface (UI) and user experience (UX).

Designers will need to choose a design that represents your business holistically and is intuitive, modern, visually appealing, and simple enough for everyone to use without an extensive learning curve.

3. Integrate New Software with Existing Systems

When the software has been designed, it’s ready to be integrated with the business’s existing systems.

This part of the process is always the most challenging because a lot of unknown variables are involved and requires extensive research and development (R&D) before specialists can dive in.

Designers need to familiarize themselves with the API, data structures, protocols, and user authentication. They will achieve minimal functionality to get an idea of the product and understand its endpoint before integrating the whole program.

4. Development Phase

Once the requirements, information, and UI/UX design get final approval, actual development begins.

This phase needs a lot more manpower and hours than people might expect.

The development phase also includes all the time that is consumed in the form of communication overhead and the timeframe that is committed to the client.

5. Adjusting Software Complexities and Requirements

When interfaces include multiple systems, the software can sometimes become too complex which makes it become too costly and risky to modify.

If this is left unchecked, it can impact projects and leave behind clunky, inefficient applications.

It is normal for the software requirements and scope to change in the development process as more features and workflows are added or removed. Anytime this happens, cost needs to be adjusted as well.

6. Migration of Existing Data

Whether it’s about data consolidation on a single platform, upgrading to a completely different platform, a merger, or an acquisition, your company will likely need data migration.

Sometimes, a group of applications, like servers, files, and databases, needs to be migrated simultaneously. If this is not done correctly, it can result in interrupted service for end users.

What You Can Expect from a Finished Product

There are different types of software, depending on your needs and what the scope of your project is.

Compact Class software ranges between $3k – $10k and includes prototypes, single-feature stand-alone software. Think of this as a software application that does one simple thing and nothing else.
Moderate Class software ranges between $10k – $40K and includes software remodeling, web application or mobile app development that has few critical features, and an MVP.
Extravagant Class software costs more than $40K and includes enterprise software with a rich feature set, cross-platform system, multiple third-party integrations, all of which are flexible and configurable.

Always keep in mind, however, that software development pricing varies among on-site, off-shore, or outsource development and thus, the location. The above estimates are drafted based on outsourced prices.

Software Solutions Are Not One Size Fits All

Good software is designed to meet business expectations and increase productivity. However, the software will not work until every aspect of its functionality is designed, developed, tested, and maintained.

Make sure you understand both the short- and long-term costs of off-the-shelf and custom software before choosing which type to integrate into your business.

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Critical Questions to Ask Before Meeting With a Custom Software Firm

Research shows that poorly executed IT projects can threaten a company’s overall stability. Will your next project avoid becoming part of this statistic?

A large telecommunications company is under pressure to digitalize its services and business processes, but initiatives keep stalling. The main problem sits with five of its business leaders, each with the belief that they’re primarily accountable for the transformation, and each with a different view of how it should be accomplished.

“Digital transformation won’t succeed without a common understanding and a clear vision across the organization,” says Neil Osmond, Distinguished VP Analyst, Gartner.

“When people think about digital transformation, they tend to emphasize technologies such as artificial intelligence (AI), chatbots or automation, as these are the most visible attributes.”

9 Questions to Ask Before Hiring a Software Development Company

1.   What is your elevator pitch?
2.   What type of deliverable do you want?
3.   How involved will you be in the development process?
4.   What is your timeline?
5.   Does the company have the technical experience to complete my project?
6.   Can they provide solid references from happy clients?
7.   Am I prioritizing budget at the expense of quality?
8.   Are they able to speak “business” AND “tech”?
9.   Is there a risk that I will pay for the A team but get the B team?

4 Questions to Ask Yourself About Your Project

Before you think about the development process, first think about the project itself and what impact you want it to have on your business.

1. What Is Your Elevator Pitch?

Without an elevator pitch, your project has no scope or goal.

You should be able to explain what your application can do in 30 seconds.

What is the goal of your project (more website traffic, more members, more visibility, revenue, etc.)?

You should know:

What you want your application to do
Who your target audience is
What your big-picture goals are

If you go into a custom software shop without an elevator pitch, you run the risk of going into a development project blind, which could cost more money in the long run.

2. What Type of Deliverable Do You Want?

Consider the type of application you need whether a website, mobile, or customized software solution.

Each of these applications can help your business achieve different goals and require answering different questions.

For example, if you’re thinking of optimizing your business with a new website, what do you want your site to accomplish? Consider these questions:

Will your website need to be easily editable for content updates?
Will your website be taking payments for merchandise or a service?
Will your website need to integrate with a database or other system?
Will visitors require special admin access to access the site?

E-commerce businesses may want to create or update their website to increase conversions or make a better user experience.

Mobile apps can help businesses reach a different audience. According to Statista, worldwide mobile payment revenue is expected to surpass 1 trillion U.S. dollars in 2019. Don’t let that opportunity pass you by. Consider:

Which smartphone platform will you be using for your app?
Will your app be taking payments for merchandise or a service?
Will your app need an integration to Bluetooth or GPS?
Which platform is best for the app you want to build: native, hybrid or web-based?

By considering the features you’ll want your mobile app to have, you’ll be better positioned to articulate your vision to the app development company.

Businesses that want a large-scale change effort to capture the benefits of a full, digital transformation might opt for a custom software solution also called a line-of-business application.

In a new McKinsey survey regarding digital transformations, more than 80% of companies say their organizations have undertaken such efforts in the past 5 years.

Whether it’s automating paper workflows or optimizing existing digital tools, a line-of-business application is a tailor-made software solution to your unique challenges.

For example, Vocation Plus Connections, a social services and rehabilitation center, faced challenges in keeping their scheduling system updated in real time.

They hired us (Shift3) to create a custom software solution that allowed staff members to update the scheduling system through an interactive dashboard. Through this dashboard, staff members can:

Track mileage of transportation vehicles
Schedule appointments
Get email notifications and alerts
Enjoy both web-page and app accessibility
See reports and analytics
Exchange in-app messages with other employees

As a result, VPS employees spend less time managing schedules and more time working to improve the quality of service to their clients and ramp up their marketing efforts.

If your business needs a custom solution like this, here are some elements to consider:

Will your custom application need to integrate with other existing systems?
How many people will be using this application?
Will security be paramount for your custom business application?
Will your custom application require HIPAA compliance?

Knowing the answers to these questions beforehand will help you communicate your software needs more clearly to the custom software company you hire.

3. How Involved Will You Be in the Development Process?

Shift3 operates with an agile process for software development. This means that we develop in sprints or phases, where our focus is typically on one piece of the project.

We develop first, then have our clients come back in to see what we’ve done and evaluate if it’s on the right track.

Having our clients involved in this process does two things:

It allows our clients to see progress being made in real time.
It allows us to course-correct sooner if something isn’t the way our client envisioned.

We would rather catch issues in the beginning phases rather than wait.

4. What Is Your Timeline?

Timelines are often the one surprising factor when we are accurately pricing and scoping a project. Large projects can range anywhere from six months to a year depending on the size and complexity, while some small websites can be done in a week or two.

Make sure that you’re planning well in advance of when you need the software to be up and running, so your dev firm has the requisite amount of time to build it correctly and with all your overarching goals in mind.

Also, remember to consider your budget when thinking about the timeline:

Do you have funding to begin a prototype?
If you don’t have funding, how much time will it take you to secure it?
Once you have funding, do you have a strategy in place to loop your investors into the planning and dev process?

Also, keep in mind that for every two months of ultimate development time, it takes one week of scoping. For example, scoping can take up to three weeks for a six-month dev project.

Ultimately, a quick scope of work is an uninformed scope of work.

When we scope out a project, we take the extra time to get the inputs and outputs. The scope becomes more about the business outcome a client is trying to achieve and less about the actual MVP.

Questions to Ask the Custom Software Company

After you consider our project, then it’s time to ask potential partners critical questions.

1. Does the Company Have the Technical Experience to Complete My Project?

When choosing a custom software shop, you want to demand experience. Find a company that has a real track record.

They need to have experience in more than just writing code: Your ideal dev shop should have experience leading projects from concept and implementation to support.

Keep these thoughts in the front of your mind:

How much experience do they have in my vertical/market?
How many years have they been up and running?
How many devs do they have experienced in the platform I need for my project?
Are they willing to share with you the resumes of the people actually doing the work on your project?
Will they allow me to screen those devs in a short phone call prior to contract signature?

It’s important that the custom software developer you hire will act as a partner in the project, clearly communicating with you and listening to your expectations.

According to PWC, 50% of the reasons for project failure are attributed to:

Bad estimates/missed deadlines
Scope changes
Insufficient resources

Remember to keep these potential challenges in mind when considering companies and weed out the companies that won’t be able to meet your needs and expectations.

2. Can They Provide Solid References From Happy Clients?

References are paramount. When considering a custom software shop, plan to request a few client references to contact.

You definitely want to vet your dev shop with more than just a few Google reviews.

Make sure they can point to a client that can say, “They were professional and the quality of their work was spectacular.”

When you ask for references (and you should always ask), consider this line of thinking:

Can you give me three clients who can speak well to your track record?
Do you have a Clutch profile with more than 3 reviews? (e.g., see our profile here)
What is your Clutch rating?
Do you have clients who are now advocates for your work?

It’s important to do thorough research to vet which companies would be a good fit for your business and have experience working on similar projects.

3. Am I Prioritizing Cost Over Quality?

In an attempt to reduce costs, companies explore the concept of outsourcing their development projects to international suppliers and developers overseas. Companies in China or India tout a nearly 80% cheaper rate per hour, which is appealing to a startup trying to cut costs.

Though it may seem more cost-effective to go offshore, be aware that total expenditures could end up more than 65% higher than estimated due to several factors and unknown risks.

One of the most painful pitfalls experienced is expecting to receive the same high-level DaaS performance as an onshore dev shop. Equating the two is a mistake.

There are many hidden costs associated with working with an offshore dev firm; those costs don’t always present themselves outright but exist through drastically extended timelines/missed deadlines, communications snafus created by time zone differences, and potentially full-on scoping misses.

If you’re considering offshoring outsourcing, think about these potential risks:

What are the local laws for protecting your intellectual property?
Are the costs and timeframes being promised accurate and realistic?
Is there a full understanding of time frames across time zones?
How will the product handover work – and ongoing maintainability?
Are all legal agreements in place across all international parameters?

Overall, there are many risks to consider with offshore outsourcing. However, if you’re diligent, you can mitigate these risks and successfully complete your project.

With onshoring, it’s much more of a comfort to know that if the project goes awry, you’re at least within the same legal system and time zone to litigate or resolve.

4. Are They Able to Speak “Business” and “Tech”?

Thorough communication is the superpower of any credible vendor.

If a dev firm can’t communicate or explain clearly in business nomenclature – not solely “tech” speak – they won’t be able to execute what they’re offering and the client won’t benefit from partnering with them.

Oftentimes, working with devs who don’t share your primary language can often create a disconnect in communication and conceptual understanding.

More thoughts to consider:

Can they tell me about my industry and the digital tools my business needs to succeed in my industry?
Can they speak development in layman’s terms for our internal team who might not be familiar with the development process?
Will their project managers AND their developers help direct the development process (meaning, will the developers simply code according to spec, or will they bring insights and perspective as the progress progresses)?
Do they speak business and strategy, as well as tech?

Communication is key to any development project so it’s important the company you hire can translate how the tech they offer will benefit your business.

5. Is There a Risk That I Will Pay for the A Team but Get the B Team?

A lot of custom dev shops sell clients the A Team – the team with the most experience and best portfolio – but when the project is acquired, clients get assigned the B team – the team with less experience and not as polished portfolio.

Consider:

Will they ensure I get the A Team – dev and business – on this project?
If I get the B Team, can they promise they’ll perform like an A Team?

It’s important you communicate clearly with the company on expectations of quality of work.

Ask Yourself and the Company You Want to Hire the Right Questions

Planning your next custom software project with a development firm is an investment you want to scrutinize from every possible angle.

From early concept ideation processes and business goals to timeline, scope and final minimum viable product, every step of this process is an investment in time and capital.

By preparing yourself with these questions, you’ll be able to make an educated decision for your business (and your stakeholders) and ensure that the development company you’re engaging is:

Credibly qualified
Bilingual in business and technology
Equipped to expertly manage the project’s scope
Committed to the overall development and success of your project.

We hope these discussion points will lead you closer and inevitably directly to your ideal technology partner.

About Shift3 Technologies

Shift3 Technologies (Shift3) is a full-stack, Development-as-a-Service firm that expertly builds custom enterprise software, apps and websites. The perfect domestic blend of talent and cost, Shift3 provides inspiring custom software development service to the most challenging projects. Focusing on enterprise systems, Shift3’s specialization includes automation, expansion, integration, modernization and installation.

For information on custom software solutions, visit www.shift3tech.com or email info@shift3tech.com today.