Should we buy a software solution off-the shelf or build our own? – a question every enterprise business have to ask at some point – at the startup inception or at some stage of growth.
I was part of one of the startups about 3 years ago, the product was a subscription based with lots of features. One of the most important element of the product was to manage these subscribers, and the key question that the team debated was weather to develop an in-house subscription management software or use a SAAS product available online.
How the Enterprise software business has undergone a change can be seen from this basic fact, 10-15 years ago off-the-shelf or SAAS software were not only expensive but the enterprise had to commit to a wide range of costs into setup, maintenance, consultancy and training. Assessing the pros and cons of build vs. buying off the-shelf software made sense and was in fact a routine exercise in many large organizations. Today, thanks to the explosion of cloud-based software, it seems that there is a cheap, lightweight solution for practically any business problem out there.
So as part of the debate on buying a subscription product, the team realized that it had to be developed on a different platform and would have affected the team’s focus owing to different complexity of the product, the timelines were also prohibitory as it would have increased our time to market, so the idea of developing it in-house was dropped.
So should you build your own or subscribe to a SaaS software instead? The important questions that need to be answered before the evaluation process starts are:
- Is this our development team’s core competency?
- Is there a clear path to ROI, or return on investment?
- Can we absorb resource coverage, time, and financials of the project if it winds up costing 50% more than expected?
If the answers to the above questions are “yes”, an organization’s leaders must then weigh multiple factors, such as the goals of the business, size of their team, revenue, and the problem’s complexity.
The argument for building: how in-house solutions benefit business
In the article that follows we evaluate both options, drawn from decades of experience in IT.
- Degree of customization
- Custom-built: Custom-built software, by definition is fully customized to your needs
- SaaS Subscription: SaaS software meets most needs for most companies, but it won’t necessarily meet all your needs.
But in reality:
The best part of the custom-built software is that all you can include any feature that you want/need. But because of resource constraints, the features get prioritized which in itself is a messy, political process. In the process of trying to satisfy the needs of many stakeholders in the organization, it is not uncommon to end up with overly complex, overspecified software. This hampers the user experience, limits the efficient utilization of the software solution, and diminishes the benefits that the custom solution is supposed to bring. Research has shown that only 17% of the features included in the internal-use application are used and 19% of the features are rarely used.
SaaS solutions help you to avoid these issues, they are usually designed to do one thing very well. Over time they incorporate best practices from many different industries and companies into the product development, to maximize customer satisfaction. After all, their very existence relies on it. In consequence, SaaS solutions typically meets most needs of most companies. Crucially, they often come up with solutions that your employees hadn’t thought of. Today, in most cases it is good to start with SaaS solutions. Once your business outgrows the software’s usefulness, you may want to consider investing in custom solutions. Until then, it makes more sense to choose a SaaS solution.
- Product improvements
- Custom-built: You can improve the custom/ inhouse software as you often as you like
- SaaS Subscription: Competitive pressures forces SaaS companies to continuously improve their software.
Both statements are true, however, there are some important nuances to bear in mind: SaaS continuously incorporate customer feedback into their product roadmap. This is how they maximize customer satisfaction, thwart competition, and ensure business success. Their existence depends on it, so you are guaranteed that the product will evolve over time. What’s more, SaaS solutions usually follow agile development techniques, an approach that favors short development cycles of and new releases every two to four weeks. As part of the process, SaaS companies incorporate extensive user testing to align product specifications with market demands. The costs of all this are baked into their pricing model, so there are no surprise bills for the upgrades.
In theory, the same could apply to custom-built solution. But in practice once the software is built, most of the project team is disbanded and re-assigned to other projects. Even when that’s not the case, every evolution of the product is a mini-project that takes time and money. As a result, incase of custom softwares the cost of upgrading your software could be huge.
- Integration with third-party software
- Custom-built: you can design your custom-built software to integrate with any software you want.
- SaaS Subscription: Open APIs allow most SaaS solution to integrate with a wide range third party software.
These days most software solutions come with ready APIs, the APIs are typically “connectors” that allow two programs to exchange information, which helps facilitate the integration with a wide-range of third party services. SaaS developers can give you all of the information you need to decide whether their programs can integrate with your existing software. If a SaaS solution isn’t compatible, then you shouldn’t buy it. If the developer says that its software’s API can work with your other software’s API, then integration should occur easily..
- Speed of implementation
- Custom-built: Months or years
- SaaS Subscription: Instantaneous
Custom-built Enterprise software projects typically take a minimum of 6 months and can take years, depending on the size of the organization, complexity, number of stakeholders, scope of the project, etc. Getting started with SaaS software typically takes zero to a few days, depending on the complexity of the SaaS software, user training required, etc.
- Last but not least: costs
- Custom-built is expensive
- SaaS Subscription is much cheaper
Custom-built software is more expensive than SaaS. If you go for custom-development, you’ll be spending at least $1 million, from start to finish, to have a software up & running. And then the maintenance costs which are usually in the thousands of dollars per month. None of this takes into account the cost of failure, which typically affects 30% to 70% of enterprise development projects. SaaS businesses distribute the costs of development across many customers. As a result, the costs are much lower. What’s more, with SaaS businesses, the costs are completely variable: you pay a subscription per month which also reduces the risk as you pay as-you -go. You can go for Outsourcing the software development which can be much cheaper option. We will discuss the pros & cons of outsourcing in next blog. I would recommend you to visit www.intileo.com, we are known for our IT services and outsourcing capabilities.
So when should you build custom software? To answer this question you need to ask yourself:
- Is the software part of your core competency and helps you differentiate your product or service?
- Is the purpose of the software to fulfil something for which there is genuinely no solution?
- If you are leaning towards custom software, do you have people inhouse with deep IT experience, an understanding of current technologies, your legacy systems, and the interaction/interconnection between the two?
If the answer to any of the above questions is no, you are almost certainly better off subscribing to a SaaS solution.
You can reach out to www.intileo.com, incase you are wondering about weather to develop in-house or out-source the development of a software.