buy or develop

Enterprise software: The pros and cons of building versus buying

From order processing and accounting platforms to customer relationship management and data collection tools, the need for enterprise software becomes more and more important as your business grows. After all, your ability to compete in an increasingly complex and dynamic market depends on your efficiency and productivity.
The question isn’t do you need enterprise software but rather, should you purchase software from a third-party provider or develop and maintain your own.
Building versus buying!

Developing your own software gives you the ability to meet the exact needs of your company and use your own identity mark. That said, software or technology purchased from an external supplier can be highly customized to address your needs. Of course, not to the same degree as custom-developed software.

Still, even large global organizations – both public and private – are beginning to migrate to third-party software. This, after having invested millions of dollars in the development of their own proprietary solutions. Why? Because doing so substantially reduces their IT costs and reliance on software and development support.

Ultimately, both options are valid, and the route you choose depends on a number of variables, from cost to functionality and more. Here, we look at the pros and cons of both based on some of five variables.

1. Time to market

With so many cloud-based software solutions now on the market, many companies are migrating away from building their own in favour of buying. In-house solutions can take months to develop. In fact, development projects typically take anywhere from seven to 18 months to complete. To complicate matters further:

  • Only 19% of application deployments are delivered on time
  • Approximately 70% of IT projects fail
  • The larger the development project, the lower the chances of success

On the other hand, most third-party software can be integrated into your existing application in minutes. What’s more, these ready-made solutions can usually be applied easily, with little to no technical expertise required on your part.

2. Total cost of ownership

Ready-made solutions, such as the offline data collection tools offered by Coral Collect, are available at a set price. You get what you pay for at time of purchase. With internal solutions, however, pricing is rarely predictable.

According to a McKinsey survey conducted among IT leaders:

  • Large IT projects run over budget 45% of the time while delivering 56% less value than expected
  • 17% of projects go so badly, they “threaten the very existence of the business”

These high-impact overruns, often referred to as “black swans,” result in budget overruns of 200 to 400% and can result in project abandonment or even bankruptcy.

Also, consider your opportunity costs. Developing and maintaining effective in-house solutions usually requires a dedicated IT team. Here, you have two options. You can:

1. hire individuals who are qualified to take on the task of development and maintenance

2. reassign existing employees to the task and bring in new people to fill their shoes

Either way, you’re going to need to expand your talent pool, which requires both time and money.

3. Features and functionality

In-house development gives you unlimited flexibility to create software that meets your unique goals. You get to include and retain ownership of features your rivals have no access to, which gives you a competitive edge.

However, ensuring these features operate without malfunction can require several months of testing and working through the kinks. Meanwhile, with third-party software, thousands of hours have already been invested in trouble shooting. Furthermore, you have the freedom to shop around and evaluate vendors based on features and functionality.

For the most part, software vendors offer free demos, trials, and proofs of concepts, thereby minimizing risk. You might even be able to negotiate future features in your contract for a premium.

4. Knowledge and know-how

As mentioned above, if you opt for in-house solutions, you need the resources to manage both development and maintenance. Your IT team is responsible for identifying and solving any problems you encounter.

With third-party software, you not only get the technology you need; you get the expertise required to manage it. Most vendors have dedicated representatives who can help you get the most out of your software. At Coral Collect, our experts have worked with clients of all sizes to develop best practices, and can work with you to create a personalized plan for success.

5. Basic skills

Last but not least, you need to ask yourself if you have the core competencies to build great software. And if so, will doing so be faster, cheaper, and/or more efficient than sourcing it from a third party?

If you can confidently answer yes to the above questions, building your own enterprise software will be to your advantage. If, however, you are even a little unsure, delegate the business function that software solves to a third party. Doing so will save you future headaches and mitigate the risks associated with in-house development.

The bottom line is this: deciding whether to build or buy enterprise software is a question of resource allocation. It’s up to you to determine how to invest your time, money, and talent, in order to reap the greatest return on investment.

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