At RevGen, we often get asked the age-old question about building vs. buying software solutions. As a technology-agnostic consulting organization, we have helped many of our clients navigate this common decision.
Sometimes, the choice is easy: we’re never going to recommend that you build an ERP, an email client, or a content management system. There are a lot of great choices out there that are designed for common processes with best practices in mind. We’re happy to help you choose between the platforms, but building a similar solution from scratch doesn’t make sense.
Conversely, there are times when there simply isn’t an off-the-shelf solution. In these cases, we love to dive in and help our clients make their vision a reality, building custom solutions that provide a competitive advantage tailored to their specific needs.
However, the answer is often not so clear. Maybe there’s a solution out there but it doesn’t quite meet the needs of your business. It might be inefficient or awkward to use. Perhaps the customer experience isn’t optimal, or it doesn’t integrate well with other systems. Maybe it doesn’t align with your tech strategy, or maybe the long-term maintenance will be difficult given your organizational capabilities.
So, how do you decide when to compromise with off-the-shelf solutions or when to build your own?
A Quick Look Back
The question of build vs. buy has evolved in parallel with the capabilities of commercial software and trends within software development capabilities. It’s helpful to look back over a quick history of software solutions and think about why the market has swung from build to buy and back again.
Early Software Development – In the early days of computing, there were limited options. Most organizations had to build their own software solutions simply because commercial software was simply not available. Hardware vendors provided utilities and sometimes rudimentary applications, but these were generally limited in functionality. Everyone was forced to build the software they needed.
Commercial Software – The commercial software industry began to emerge in the 70’s and 80’s. In 1969, to avoid antitrust litigation, IBM began charging for the software that ran on its mainframes separately and ceased supplying source code. This marked the beginning of the “buy” era when organizations could purchase off-the-shelf software that was well supported and relatively cost effective.
Resurgence of Custom Software – The rise of personal computers in the late 80’s and the release of development tools such as PowerBuilder and Visual Basic in the early 90’s and Java in the mid-90’s led the industry to again embrace custom development. This accelerated as dot-coms emphasized innovation to gain a competitive advantage (and secure financing!) in the late 90’s and early 2000’s.
Although these solutions were indeed innovative, they were often expensive. The rise of open-source software in the late 90’s and early 2000’s further pushed the industry towards custom solutions, reducing development effort and decreasing time-to-market. Around this same time, we saw a broadening awareness of the importance of security across the industry.
Enterprise Software and ERPs – Towards the end of the dot-com era, Enterprise Resource Planning (ERP) solutions began to implement back-office functions at many companies. Y2K drove many organizations to upgrade or replace software, and they often chose ERPs. Vendors like SAP and Oracle were the solutions of choice, swinging the market back to a buy mentality in the late 2000’s and 2010’s.
Organizations didn’t have to have development teams to support these solutions and vendors at least helped with compliance with new regulations such as Sarbanes-Oxley (SOX). However, the cost of licensing and implementing large enterprise applications rose exponentially.
Into the Cloud – In the mid-2000’s Microsoft and Amazon released their cloud solutions, followed quickly by Google and others. Initially very limited, these cloud platforms quickly evolved to support many different use cases and, by the mid-to-late 2010’s, had changed the way people thought about data centers, hosting, and software development. They were largely responsible for moving traditional functions from data centers to the cloud and providing “as-a-service” components that organizations could use to further accelerate development.
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The history of build vs. buy in software solutions over time illustrates some of the motivations driving organizations to custom or off-the-shelf solutions: cost, time-to-market, maintenance and support, competitive differentiation, and security and compliance. These are core factors that you should consider today as you evaluate options for your organization.
Cost – The cost of a software solution, off-the-shelf or custom, can be difficult to determine. Commercial software licensing costs can be straightforward (though not always!), however, additional costs like implementation, data migration, and hosting can be hard to predict and yearly license fees can add up quickly. On the other hand, the initial cost of building custom software can be high, especially if the scope is extensive, and organizations need to budget for ongoing maintenance and enhancements.
Time-to-Market – Building custom software takes time. In many cases, off-the-shelf software may be the faster route.
Maintenance and Support – Off-the-shelf software typically comes with maintenance and support packages provided by the vendor, though usually at an additional cost. With custom software, your organization bears the responsibility for ongoing support, which typically requires dedicated resources.
Competitive Differentiation – The main argument for custom software is that it differentiates you from your competitors. Software tailored to your specific needs, catering to your processes, and building the exact customer or employee experience you want can be a massive advantage. It can allow you to differentiate yourself from competitors with innovative features and functions, as well as provide flexibility in terms of how your business may change over time.
Security and Compliance – Becoming more important every day, security and compliance are real concerns for every organization. Off-the-shelf solutions shift the responsibility for a breach to the vendor, though the consequences remain the org’s purview. On the other hand, custom software can be designed with robust security measures tailored to specific needs. Regardless, your development team needs to stay current on the latest security threats and update as needed.
So, Build or Buy?
The decision of build vs. buy for software is a complex one that requires careful assessment of these and other factors. We have found that a balanced approach is often the most effective. Consider building custom software when it aligns with your long-term strategy and offers a competitive advantage. Be open to purchasing off-the-shelf solutions when time-to-market or short-term cost constraints make it a practical choice. You also need to factor in your organization’s capabilities and resources. Both approaches have their place – the key is to strike the right balance to drive innovation, competitiveness, and long-term success.
At RevGen, with our combination of business and technical experts, we are ready to help you navigate whether to build or buy software solutions. Please contact us to let us know how we can help or visit our Digital Enablement site to learn more about the services we offer.
Come back next month for our thoughts on how modern cloud architectures can bridge the gap between building and buying solutions.
Noah Benedict leads RevGen’sDigital Enablement practice. He is passionate about using technology to advance business and empower his clients to embrace new opportunities.
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