Once again, contrary to software myths, custom software is not inherently more expensive than package software.  In many cases, it can even be less expensive.  Conversely, package software is not necessarily a faster solution than custom.  There are many things to consider that will contribute to the total cost of ownership and the time a project requires for both package and custom software.  So here’s a blog to help you calculate the true cost and time behind any solution.

As outlined in our last blog, if you can find a package that meets 90%-100% of the core functionality you require, or if you are simply adding a service or function without set processes in place, the package software will probably be faster and cheaper.  However, if a package doesn’t meet your needs to this extent, there are several things you should consider.  If you are looking at a package that meets anywhere from 40%-80% of your requirements, have you factored in the time and cost of customizing that software?  If you have other systems in place, have you considered the cost of integrating the package into your existing operation?  Depending on your objectives, you may also have to train staff to be able to use the new software.  In addition, it’s hard to tell how long you will be able to use package software because new releases could have changes that you won’t want/need.  So the longevity of your investment is uncertain.  Finally, you have to factor in testing, re-customization, and re-installation every time there’s a new release.

So what do you have to consider with custom software?  Custom software will be delivered with all the functionality a company requires and no extra obstacles.  There’s no extra cost to integrate with existing systems, because this is part of the development cost for custom software.  Once it’s delivered, your only remaining cost is the ongoing maintenance fee, which is usually 15%-25% of the project cost (don’t forget, maintenance fees must also be paid for package software).  After the software is in place, it should meet all of your needs now and will typically be effectively usable for seven to ten years.  So you also have the assurance of longevity in your investment.  As with package software, you may also have to train staff with the new system.  So factor that in as well.

A common mistake that’s made when estimating the time that package software takes before it is useable is forgetting to include the time it takes to customize and integrate the system.  With custom software the time you are quoted from the vendor is the time it will take before you can start using it.  Whereas with package software, it may only take three months to configure, but customizing and integrating could take an additional six months.  So in the end, both routes could take roughly the same amount of time.

Here’s a checklist to help you calculate true cost: