Business and technology have become so intertwined that investments in technology solutions have become an integral part of strategic business planning. Technology has leapfrogged so much that for any business scenario, there are multiple technology solutions which could be considered for deployment. Each technology solution will have its own merits and demerits, and a careful consideration of all options is necessary before an investment avenue is chosen for any particular technology.
In a recent survey conducted by Optaros, where more than 400 IT Decision Makers were surveyed, one of the focus areas was ‘what is the propensity to opt for custom application development as opposed to procuring packaged software. The views shared by the respondents were remarkable:
76% in e-commerce, 79% in media and publishing, 80% in customer self-service, 83% in social networking, preferred to deploy custom built software applications.
The key take away message was that custom software still enjoyed an overwhelmingly high preference among these target groups.
Compare this with what the preference was for packaged solutions:
20% amongst e-commerce, 17% amongst media and publishing, 16% amongst customer self-service, and 13% amongst social networking industries.
What this reveals is that despite the proliferation of packaged software solutions, custom developed applications still hold the sway in the industry.
When deciding between a custom application development for his business, or packaged business application, a decision maker needs to answer the following questions:
(a) How niche is the business model? If the business model is too niche to have been sufficiently standardized globally, custom development may the best option to go.
The advantages of custom development include:
(1) Closest fit to business needs
(2) Flexible enough to keep up with changes in business needs
(3) Integrates with existing software solutions that are already in use
(4) Through close process-solution mapping, retains competitive edge in the marketplace
(5) Training internal resources is easier
The greatest concern of custom application development is that the onus of application change management falls on the business itself. The business needs to invest significantly in ensuring that their application is kept up to date in terms of technology, a process which may end up consuming tremendous resources. Beyond a threshold, keeping pace with technology changes becomes so involving that it may divert the attention of the business away from its core areas of business focus.
(b) Is my business model fairly standardized? If it is, it would be ideal to opt for commercial business applications. The primary benefit of such business applications is that an external entity takes care of technology upgrade and change management, relieving the business to focus on its core competencies.
The main advantages of packaged software applications include:
(1) Little to no lead time to deploy, unless extensive customizations are required
(2) Feature rich (on the flip side, buyers pay for features they may never use!)
(3) Large external eco-system for support and ongoing maintenance
The main drawback of packaged software is that systems maintenance becomes an ongoing expense in the company balance sheet. Many a time, such maintenance expenses are significant, calling for a careful assessment of the implications.
Another important consideration relating to custom software development is the choice of development partner. It is important to choose a development partner that:
(a) Has globally recognized certifications
(b) Has a successful track record in your domain
(c) Is able to provide verifiable references
How does one assess the choices from an investment standpoint? We could look at three measures:
(a) Return on Investment (ROI): This metric tells how much returns an organization can expect from any investment.
Return on Investment is a useful measure for both custom development and standardized business applications.
(b) Total cost of ownership (TCO): Another important metric, associated typically with technology products. This metric measure the cost involved in owning the solution over a period, including maintenance, upgrade and related costs.
(c) OpEx Costs: Come into picture when we consider cloud based solutions. Typically, cloud based solutions prove useful up to a threshold, beyond which operational expenses become significant.
The best choice will be driven by your business needs, budget and future plans. Each and every scenario needs careful consideration, and many a time, it may call for an approach which strikes a fine balance between the choices described above.