Many companies avoid hiring someone to create custom software because they think it will cost more than they can possibly afford. Some feel custom created software is difficult to have designed and put into implementation. Granted, buying a pre-packaged product initially seems to be less expensive. Is it really less expensive over time? It may also be a lot quicker to purchase a pre-designed software, but does it do all you need it to do? Let's explore the cost of off-the-shelf software and then compare it to the overall cost of custom software and see which is better for your budget.
Ready-made software is most often less expensive to purchase the initial program. That is something nobody is going to deny. The cost to use it, however, can be rather expensive.
In order to use the software, you must purchase a license. This could be an on-premise license to install in your environment or software you subscribe to (Software as a Service). This isn't a one-time deal. The license normally has to be renewed yearly. In addition, you may be required to pay a fee for each computer the software is installed on. This can add up to a great deal of money. How do you keep track of when each license is up? And as a company grows or contracts, it is possible that you will either purchase more or less licensing than you actually need. As an example, SoftwareOne recently worked with a company to get their licensing costs on track. Imagine the company's surprise when they found they had been spending $9 million per year more than was required for their software. Licensing can be difficult to track and the software vendors are always happy to sell you more.
Software that comes pre-packaged may have many great functions. If you are purchasing it for one or just a few particular tasks, you are wasting money on the functions you don't use. It’s simply overkill for what you need. Some businesses end up having to purchase several different software programs (bundling) to get all the functions they require. That ends up costing more in licenses.
Not all software programs play nicely together. Think about the times you laid out a great deal of cash for a software program you needed only to find it did not work well with another essential software program. You ended up having to either reprogram your current system or purchase additional software. Integration is critical to efficiency and getting the biggest ROI.
Training takes both time and money. When you install a software program, the first thing you need to do is make sure everyone who is to use the program knows how to use it. This can produce a learning curve that requires hours of training, hours that could be spent on productive activities that make your company money. You also need to pay for the hours of the staff members who are doing the training.
What about custom software? Doesn't it require many of the same cash outlays? Let's take a look.
Custom Software Costs
The higher initial cost of a custom software program can be justified when you take into consideration the following things.
This is typically not an issue with custom software. You pay for the software development once and it is yours to use for as long as you want. There are no licensing fees, no limit to how many systems it can be installed on and no limit to how long you can use the software.
Custom created software does exactly what you need it to do. There are no extra bells and whistles sitting on your system and occupying space that can be better utilized. You also don't need to purchase three separate programs to do three tasks that may all be related. One program can be created to do all the functions.
Because it is created to work on your current platform, custom software is designed and tested to seamlessly integrate onto that system. The new custom software is more like a new-found family member to the other programs rather than a random stranger trying to make himself at home. Any compatibility bugs are worked out during the creation process to make sure the software works with every other aspect of your system.
Because employee input is a big part of the software creation process, your employees are able to learn the new software easily and often with only brief training. The learning curve is all but eliminated because you know what the software is supposed to do and how to make it do the tasks. No outside instructors are needed. No productivity-killing classes are needed.
When comparing the cost of the pre-made and custom-made programs, you also need to consider that amount of time that is saved with the programs. Think about the time saved to do certain tasks, the money saved by having certain functions done that may not be covered by pre-packaged software. For example, if downtime, additional employees, licenses and inefficiencies are added to the basic cost of a pre-designed software, you may find you are spending $500K a year. If you have software custom-created, it will eliminate the error and inefficiencies, requires no licensing and may cost $200K to have developed. The first year alone, you save enough to cover the cost and then realize a profit. The following years are all profit.
In the end, the question isn't so much about how you can find the money in your budget to pay for custom software. The actual question you need to be asking is: How quickly will the return on my software investment kick in?