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Bespoke is more expensive, right?

Expensive things cost money

Developing bespoke software can be an expensive business, so it's always better to “buy versus build”? At least that is a view I often hear. If you business requirement is a well defined commodity, such as financial management of a small, uncomplicated, company, then this is obviously the case. There are lots of inexpensive accounting packages that will do the job with little or no fuss. However if your requirements are more complex, or you are a larger, more complex organisation with valuable, differentiated business processes then the picture is not so clear cut. Even if “off the shelf” solutions are available in the problem domain, they are probably expensive, “Enterprise” solutions that come with large license fees and heavy vendor tie-in. Worse, the accompanying implementation costs to “configure” the solution are as eye watering as the licence fees. Even then, to actually deliver the value that you are looking for you will probably face integration challenges with your other line of business solutions that will look and feel like custom software development. Of course, this is well understood by corporate IT departments the world over. Most ERP packages fit this characterisation. Expensive to procure, expensive to keep and difficult to manage. Corporate ERP teams tend to be large and staffed with highly skilled and suitably expensive staff. Not many companies that I know would argue that they could do without their ERP system or the support structures that are needed to keep it fit and healthy.

Where is the Value?

The pace of change in the IT world is accelerating rapidly. The widespread adoption of cloud based infrastructure and services is enabling new and innovative business solutions at an ever increasing rate. New client-side tools and mobile technology is empowering end-users to access  and exploit these services more quickly and from wherever they happen to be. Devices (“Things”) themselves, whether they are consumer facing or industrial equipment are now the largest user base - it is no longer humans. This “digitalization” trend is not going to slow down.

This brings huge opportunities to organisations looking to deliver more value to their stakeholders. Commoditized services and solutions will continue to improve and benefit everyone more or less equally. Small companies will have increasingly powerful, cloud based accounting solutions available to them on their smartphone of choice. Corporations will continue to see improvements in their cloud based email and collaboration services (you have all moved your email etc to the cloud right?)

But that’s not where you can get ahead.

The things that are unique to your company. Your differentiations. Your bespoke processes. Your manufacturing excellence program, your fully integrated supply chain, your global footprint, your sales channels and first class partner program, your unique R&D capabilities, these are the places where the stakeholder value comes from, and there aren’t “off the shelf” solutions for these. So you can’t just “buy” in. You have two choices:

  1. Buy a solution and “Customize it”.
  2. Build a bespoke solution.

There isn’t one best answer here. It always depends on what the requirements are. How good a fit an “off the shelf” solution is and how much the configuration and customization are going to cost.

Don’t rule out building it yourself. Do the maths and make an informed decision by calculating the total cost of ownership, over the solution’s lifetime for the different approaches.

Factors

Customise “Off the Shelf Solution”

Build it from scratch

One off or recurring cost?

Licence Costs

High

Low

(or Nil, depending on the software and tools you use.)

One off

Customization costs

Low / Medium or High

Depending on the “fit”

Nil

One off

Development Costs

Low or Medium if you need to develop custom interfaces

Medium or High depending on the solution

One off

Ongoing Software Maintenance Cost

High

Low or Nil

Recurring

Ongoing Application Support Costs

Low

Assume difficult problems go to the vendor

Low

Assuming you did a good job developing it

Recurring

Cost of Change

Medium or High

You need to change someone else’s software.

Low

Recurring

 

Of course, “Your mileage may vary” but having a good hard look at what you expect lifecycle costs might be, could be revealing.

Example Case Study - Pricing Solution


One of our clients was facing a large licence and migration cost in order to upgrade an Enterprise Pricing solution. Although the solution was an “off the shelf” tool, it had required extensive customization to meet the client’s needs. Faced with these costs and a complex project they decided to develop their own, simpler tool.

They saved money, reduced their annual licence cost to zero and ended up with a tool that more closely met their business need.

What do most people do?

I see many clients who decide that while the costs for a bespoke solution may be similar to the costs of a customised off the shelf solution, they are concerned by the perceived risks of developing their own solution.

  • They may not have the skills “in house”
  • They assume that it is less risky to customise an existing solution

What might a smart company decide?

I would challenge both these assumptions. Skills can be acquired. In house teams can be trained. External help can be called on, if needed. IT skills are widely available and modern development tools are accessible and extremely powerful. This greatly reduces the risk and cost of implementing bespoke solutions. It doesn’t have to look and behave like a clunky “home brewed” effort, either. These days there is no excuse for building it badly.

There are other benefits as well. If you build it yourself then you can make it 100% the right solution for you. You don’t have to pay for unnecessary, complex features that you are not going to use. You can add specific functionality that differentiates your business and generates unique value. Business changes will be easier to implement as it is your system. You can make it do whatever you want.

If you are using standard solutions in other parts of your business (e.g. an ERP solution), then it will certainly have an accessible API that will allow you to easily integrate your custom solution. If it doesn’t, change the system rapidly! So quickly assembling value add capabilities that build on your existing investments should be straightforward and cost effective.

All solutions require care and feeding over their lifetime. If you bought it you are likely to be on the hook for annual maintenance charges on top of whatever it costs your IT group to keep the system running. That’s money you’ll never see again that could be invested in improving an in-house solution.

The bottom line

Perhaps corporate IT departments would be more highly motivated places if they were empowered to tackle their business’s challenges head on? Rather than being constrained by procurement cycles, long term licensing agreements and misguided assumptions about where business value can be created.

I am not saying that you should always build your own. Most companies will find standard / commodity solutions for most of their day to day challenges and many solutions can be easily adapted to fit a company’s specific requirements. Everyone needs to manage email etc. Most companies aren’t going to write their own ERP system (although I know plenty that have). But don’t assume that there is always a good solution that you can buy or adapt.

Buy vs. Customise vs. Build, you need to decide on a case by case basis. Do consider all the options. More importantly, don’t miss an opportunity to deliver a real difference by building something that nobody else has.

Example Case Study - Customer Portal


The client in question has a global ERP system and a number of key supporting applications. They need to share information with customers and partners. They were able to develop a simple web based portal that integrates with their existing systems. The resulting solution was inexpensive to develop and maintain and fully meets the requirements. Licence costs were zero.  


The key to this solution is a well designed system architecture that decouples the solution from the underlying systems. This protects the company’s investment in its ERP solution, while allowing the data to be used by the portal.