If you’re starting a new business or expanding an existing one, you’re likely to rely on some software to drive it. When this moment comes, the usual question you’ll need to ask yourself is whether you should build it yourself, or buy an off-the-shelf product. This is important and will have a major impact on your business from day one. The first thing people look at is the initial cost of buying or developing a custom product. However, this is just the tip of the iceberg. You also need to think about the maintenance costs, future requirements, and how this product will impact your business in the long run.
Suppose you’re leaning toward buying a third-party product off the market. This seems like the easier option, however, it’s not necessarily the best one.
Pros of Buying
You’re Getting a Ready-Made Product
The obvious benefit of buying is that you’re getting a ready-made product. There’s a dedicated team behind it, and, hopefully, a large enough customer base, that helped test and improves the product. When you’re buying their solution, your also buying the team’s experience in this area.
Since developing the product is their business, you can usually expect a richer set of features and better quality compared to software built in-house. A lot of vendors will also offer free version upgrades and you’ll receive new features and bug fixes as they become available.
At some point, you’ll run into problems and you’ll need somebody to help you out. The vendor’s support should include at least troubleshooting and bug fixing. Some vendors will also offer consulting, turn-key solutions, and even custom feature development, but these often come at an additional premium. Product developers also invest a lot into documentation, to help you learn and start using the product. Something you rarely get for on-house software.
When using a well-known product, you can also leverage the support of the community to get help with issues and learning from their experience. Make sure you follow the relevant forums, blogs, and social media profiles.
Less Upfront Investments
Buying a solution can help you get started right away. It also requires fewer upfront investments on your side. You can use the free trial period to familiarize yourself with the product and get a first impression of how well it suits you. But even if you buy a subscription, but decide to back out later, you’re still likely to spend less, than if you decided to abort custom development. You should leverage this to verify a new business idea before making a long-term commitment.
However, this is not always the case. As we’ll see later on, you always need to consider the price of integration and customization, as well as the exit costs.
Cons of Buying
You’ll Need Customization or Integration
You won’t always find a product that fits your use case perfectly and customization comes with a cost. Some products already have built-in customization capabilities, but others might require hands-on technical work and expertise. If you plan to make a lot of modifications to a product, the cost of those can be comparable to developing a new one.
If you already have an existing application landscape, then you’ll need to integrate the new product. This usually involves creating adapters between the new and legacy systems, synchronizing the data, and applying your companies best-practices for security and operations. Depending on the complexity of this task, you might need to build a lot of things around the product to get it working as intended.
Customization Can be Impossible
Sometimes, a product will not allow you to make the changes you need, either because of technical or legal limitations. This can have to kinds of consequences. You can abandon the idea of customizations and change your business model to work without it, but this is just wrong. The business should be developing the product, not the other way around. Or you find workarounds. These workarounds also cost money, and often they are implemented without thinking through properly, which can result in poor technical execution. This can pose a risk for the security or reliability of the system and push you to the bad side of shadow IT.
The major problem of both consequences is that their effect can be subtle and slowly build up with time. Once you start noticing them, it might already be to address the problem.
You Need to Understand All Associated Costs
Before committing to a purchase you need to completely understand what will it cost you to use it in the long run. An this doesn’t just include the one-time or subscription fees you pay now. Check how the price will increase when you need to scale. Once your business start growing, your production volumes will increase, you’ll need to onboard new people and access more advanced features.
Another important thing to consider is the exit costs. How much will it cost you to migrate to a different platform? You’ll need to evaluate any feature gaps between the two solutions, the cost of setting up a new platform, performing the actual migration, and any other risks involved.
Risks of Relying on a Third-Party Vendor
Depending on the maturity of the product you choose, you might be subject to additional risks. If this is a new vendor or product, they might change their business strategy. A feature that you rely on can be removed, or the whole product can be deprecated. Even the vendor itself can just go out of business and perish together with the project.
In case of the vendor going out of business, if it’s a self-hosted product, then you might still be able to continue using it. If it’s an open-source or partially open-source project, you might even still rely on community support or maintain it yourself. However, if it’s a SaaS (software as a service) product, you’ll need to find an alternative quickly.
When to Buy
Consider buying a solution, if you need it as soon as possible, and there’s an offer on the market that can get you started quickly. This way you can leverage a quick start to gain an edge.
Buying a product can also be a good option to validate your business idea. Even if you see, that it’s not a perfect fit, you can bear it to avoid a large upfront investment into custom development. Once you see that the idea has potential, you can migrate to a different platform. Make sure you have a strategy for building up the required IT capacity to not just develop a custom solution, but also maintain it in the long run.
An almost guaranteed fit for buying is software that is not part of your core business. Think of things like accounting systems, CRMs, mailing lists, etc. These are standard capabilities that any business should have, and there are great products available on the market. Unless you a certain you have special requirements in this area, just stick to buying.
What About Building?
We’ll have a look into the pros and cons of building in an upcoming article. Check back with me in several weeks.