If youʼre considering making an investment in software, an easy way to determine whether your solution should be custom or package is to examine how it relates to your hedgehog. Your hedgehog represents your Unique Value Proposition—the aspect of your business that gives you your advantage and specialization. Generally speaking, if your hedgehog is, or will be, heavily dependent on your software systems, you will need custom software. By contrast, if you just need software to run a generic process like inventory, you will probably do well with a package approach. The different possible routes you can take with software can render drastically different results. So in the next few pages weʼll explore the answers to some critical questions to help you make the best decision for your operation.
Is the process for which you are building software unique to your business, or is it a standard process? This is the crossroads of package versus custom. At first glance, your answer to this question will be a good indicator of which route will ultimately suit you. If youʼre looking for software that will accomplish something fairly standard—a process thatʼs essentially the same in every industry—youʼll do well with package software. An example of this would be accounting software. Thereʼs not much improvement or custom functionality that you can add to accounting software that will yield a significant benefit. So unless you have a business whose goal is to innovate the accounting industry, package software will be the best choice. However, if you are building software that will support a process which contributes to your UVP, consider custom software. Your UVP provides your competitive advantage, and by definition itʼs unique. So to really meet your potential in this regard, youʼll need software that fits the unique requirements of your UVP precisely. Custom software is really the only way to accomplish this effectively.
Is the software going to support an existing business process, or is it intended to run a new business/product line that your company doesnʼt yet know well? This is an important question to ask because you wonʼt want to make a large investment of time and money in building custom software unless you know precisely what you need that software to do. If youʼre building for something new—a new line of work or a new product that you donʼt yet know how to manage thoroughly–consider starting with package software. Package software can give you a preset method from which you can learn and eventually expand/modify. Once you have a foundation for this new line of work, you can move to custom software if it suits your needs. But in the beginning, package software can help get you rolling until you figure out your requirements.
How often does your business go through changes? For some businesses, significant change is a regular part of operation. Products evolve, customer service is innovated, demand shifts, and new ideas constantly take shape. If this sounds like your company, and a big part of your operation depends on software, youʼll need systems that are flexible and easily updated. Perhaps your company finds part of its UVP in its ability to quickly adapt to new developments. In this case, custom software will be the ideal choice because it can provide the scalability and flexibility necessary to meet these types of demands. With package software you are limited to whatever changes the industry wants to make. Package software manufacturers determine updates according to what the industry wants, not what individuals need. If your business relies heavily on its software systems, your ability to change quickly with the environment will be directly correlated to the control you have over your software systems. With package software, youʼre essentially held hostage by the manufacturer. With custom, youʼre in control.
If your systems interact with your customers, how critical is that interaction? Does this interaction represent your hedgehog? This question is relevant to many types of businesses, but especially to those who use e-commerce applications to serve customers. If your main point of interaction with clients is online, the way you present your product and the way your systems interact with your clients could make or break your entire business. Online customers have an extremely low level of tolerance—you typically only get a few seconds to capture their attention and sell them something. They expect a site to be intuitive and to guide them through the entire experience. To do business in this realm, providing an efficient and hassle-free user experience is a basic prerequisite. To be competitive, you have to go beyond this. Even if two businesses have the same look and feel, the customer will remember the one that was faster. And itʼs an ongoing endeavor. It needs to fit perfectly with your business and be able to keep up with changes in the market. It needs to be tested constantly, and feedback from customers has to be accommodated immediately. It canʼt be good enough or close enough– it has to be just right. So if this the focal point of your UVP, custom software is really the only way to meet these standards.
How does the cost of a custom system compare with a package system? 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.
Letʼs start with package costs. If you can find a package system 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, package software will probably be faster and cheaper. However, if a package doesnʼt 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, factor in the time and cost of customizing that software. If you have other systems in place, consider 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 terms of timeline, itʼs hard to tell how long you will be able to use package software because new releases could have changes that you wonʼt want/need. So the longevity of your investment is uncertain. Finally, you have to factor in testing, re-customization, and re-installation every time thereʼs a new release from the package manufacturer.
On the other hand, custom software will be delivered with all the functionality a company requires and no extra obstacles. Thereʼs no extra cost to integrate with existing systems because this is part of the development cost for a custom solution. Once itʼs delivered, your only remaining cost is the ongoing maintenance fee, which is usually 15%-25% of the project cost (but donʼt forget, maintenance fees must also be paid for package software). After the software is in place, it should meet all of your current needs and will typically be effectively usable for seven to ten years beyond that. 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 thatʼs made when estimating the time that package software takes before itʼs 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 should be 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 have potential to take roughly the same amount of time.
If you have any questions or thoughts on this topic, let us know! Weʼd love to discuss it further and hear your ideas and experience.