The Build Vs. Buy Software Dilemma – What Will Work for You?
The Build Vs. Buy Software Dilemma – What Will Work for You?
Are you struggling to quantify the value of building software in-house versus purchasing an external Software-as-a-Service (SaaS) platform? Plenty of consultants will tell you how building your own software is easier than ever; however, creating your own software program also has a host of problems you need to be ready to tackle, such as maintenance or system failure. Buying a pre-made program from an established is the easiest option for most companies, although this choice can have issues as well, such as less customization.
Today, we're examining the pros and cons of both options to find the right solution for your company.
Build Vs. Buy Software: the Decision Framework
There are prime considerations you need to take into account when deciding whether to build custom software solutions or buy commercial software for your company, which we have set out in this three-part decision framework:
You're bound to face problems in your business. The main thing to figure out is which of your problems are going to solely affect your company or industry and which problems are faced by most companies. If you work in a popular industry, you'll find a host of pre-made software programs for your businesses. If you're in a more specialized or new field, you're not likely to find a lot (if any) SaaS platform and may need to have your employees or an external team work on building custom software.
Building in-house software programs can be incredibly expensive, and you'll need to budget the potential costs accordingly if that's the route you decide to take. You will also need to take into consideration your annual maintenance and hosting costs. On the other hand, pre-made software solutions will only have a one-time, annual, or monthly fee that includes support, maintenance, and hosting.
How quickly do you need the program? Building a software program can take months or even years, depending on the complex architectures you may need. If you need it now, you'll want to buy a pre-made solution that you can have up and running in a few minutes.
5 Key Factors for Your Consideration
Now that you have created a framework, let's dive deeper and look at these five factors to help you evaluate out which option is best for you:
If you want complete control of your SaaS platform, building will be the best choice for you. You'll make all decisions related to your platform, which may sound enjoyable until you realize you have to figure out every single detail from color schemes to margins.
If you're willing to relinquish some control of your SaaS platform in exchange for convenience and ease, buying might be the right option for you. Depending on your needs and industry, you're likely find a platform that meets all your requirements.
Note: If you are planning to buy technology or existing products from a SaaS company, you will never have control over its product roadmap.
2. Monetary Cost
If you have an extremely large budget, you may be able to afford to build your own in-house software; however, you have to bear in mind not only the initial cost of building your platform, but the maintenance costs as well. These can include allocations for support, upgrades, hosting costs, system repairs, platform migrations and keeping up with software industry trends. Depending on the size and complexity of the platform, you may spend anywhere from several hundred to several million dollars.
The SaaS platform of your choice owns all costs associated with building and maintenance, and charges you a subscription fee for ongoing access. Because the SaaS vendor gains efficiencies across a large customer base, they can often charge an amount at the fraction of the cost that you would pay to support a one-off application.
If you have a large budget, you may be able to afford maintenance for a software program you built yourself; however, you must take into consideration what maintenance costs you will face, including: fixing bugs, setting up user profiles and passwords, user training, upgrading and meeting industry standards. If you receive a large uptick in users, you'll need to pay for more bandwidth and staff.
If maintenance seems daunting, buying a pre-made SaaS platform is likely your best choice. Your subscription fee includes all maintenance fees, and you will receive a team of support experts who specifically work with the solution full time.
4. Opportunity Cost
Tying in closely with budgetary concerns is opportunity cost. When you allocate funds for one sector of your business, you are losing funds for another sector. If you create a highly specialized app that takes up 60% of your development budget, you're going to have significantly less funds to spend on other opportunities that may arise.
SaaS solutions cost a fraction of what building software does, meaning you will have more money for other sectors of your business in addition to more time to focus on other aspects of your company.
5. Time to Value
When debating between building and buying a SaaS platform, think about the goals you want to reach using newly-created software. Building a software program internally from scratch can take more than a year. How long will it be before you can make any headway toward those goals? Can you afford to wait that long?
Buying a SaaS platform allows you use the software in a matter of minutes, giving you instant access to a complete program, A SaaS platform purchase provides the fastest window to connecting your goals to actions.
Benefits of Building Your Own Software
Businesses that require a custom solution for a specific demand would benefit well from custom software development. The process of developing software includes designing, creating, and deploying the software platform for the use and functionality in mind.
One thing to note is that customized open source software is different from off-the-shelf solutions. In most cases, the engineering and product teams of the company who developed the existing product would have taken your company's core competencies while coming up with a solution to a certain problem.
Off-the-shelf software is a ready made software that a business can invest in and use immediately. In contrast, custom software development may take several months before it is ready for use.
To give you a better view of whether a custom software solution is the best choice for your company, here's a brief rundown of the benefits of building your own solution.
- You get a product that is specifically tailor-made to meet your business requirements and needs.
- Having your own software allows you to scale your organization better, preventing a loss of productivity and functionality.
- Giving your employees the proper software to support their job needs encourages them to be more productive and have more drive
- Custom software allows your company full control over every single aspect, giving you a competitive advantage over competitors who use an existing solution. In many cases, it is much easier to create a new solution in proprietary software than it is to make purchased software fit your needs.
- Building software gives your company the ability to introduce new features and product upgrades, manage maintenance, gather research, and oversee ongoing maintenance that is mission-critical in achieving business goals. It also allows you to assess the security risks that your product may pose and address them accordingly.
Benefits of Buying Software Solution
Many organizations worldwide struggle with building vs buying software. While building custom software does give businesses new functionality to address a specific problem, many companies find the process tedious. Building software also requires companies to use more internal resources in one area to create, implement and maintain the custom platform.
For this reason, some companies choose to buy software. While building software does have its perks, buying existing software or a third-party solution still has plenty of benefits.
Here's a brief rundown:
- Buying software means you can focus on resources on staying on top of your changing needs and advances in technology.
- An external solution is almost always updated to make it fully functional. This means you'll unlikely need to rely on your engineering team to roll out bug fixes or provide ongoing support.
- The upfront costs of buying ready-made solutions are typically much lower than the cost of buying software.
- You are using the same tool as most businesses when you buy the software. While this may not give you a competitive edge, it gives you access to a community of people who are knowledgeable about the tool.
Before choosing between "Build vs. Buy Software," there are some questions you need to answer.
- How much will each solution cost you? (Consider time, money, and resources)
- How much will each option cost your company to maintain over the next five years?
- How much does it cost to buy software or a workable solution that fits your business' exact requirements?
- What do you need the software to do?
- Do you need to build software to fulfill your business needs, or can software in the market solve the same problem or similar challenges?
- Is your team capable of building software?
Deciding whether you want to build in-house software or buy an established SaaS solution is complex and can feel overwhelming. Let your assessment process be guided by the decision framework and make sure to evaluate relevant factors like control, monetary costs, maintenance, opportunity cost, and time to value. Armed with these inputs, you can make an informed decision for your business.
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