Deciding Between Custom Development and Purchasing Off-the-Shelf Solutions
Buy or make? Lessons from Etisalat, EFG-Hermes, Beltone, ITWorx, and Inetum on when custom development pays off and when an off-the-shelf tool wins.
In the realm of business operations and technology implementation, the dilemma of whether to opt for custom development or to purchase off-the-shelf solutions is a common one. This decision is not inherently about choosing a good or bad option but rather understanding the specific needs and strategic implications for your organization.
Understanding Your Needs Before Making a Decision
The adage "Let's find out our needs first before buying an app" is a prudent approach. Custom development can lead to highly tailored solutions that, while perfectly fitting your immediate needs, might become burdensome in the long run. For instance, implementing a custom Customer Relationship Management (CRM) system, when CRM isn't your core business, might not yield the anticipated benefits. A case in point is Etisalat, a major telecommunications company, which opted for custom development only to face challenges such as slow delivery of features, bugs, unstable platforms, and poor user experience.
Starting Small with Core Business Applications
If the application is central to your business model — the primary source of your revenue — it makes sense to start small and possibly consider custom development to cater to unique needs that give you a competitive edge. EFG-Hermes, a leading financial services corporation, began with a simple application to automate stock-related tasks. This initial step evolved into a significant investment in a custom app that distinguished them in the market. Conversely, Beltone, another financial firm, became overly dependent on a vendor for critical business operations, which placed them at a disadvantage during price negotiations and contract renewals.
Automating with Caution
The notion that "We are a development company, let's automate it" can lead to overextension. ITWorx, a professional services firm, created a dedicated team to develop an internal system for managing various administrative tasks. This resulted in a large team responsible for a system that faced support challenges and lacked clear ownership. On the other hand, my experience with Inetum showed that using an off-the-shelf solution like Zoho HR for similar needs can be more efficient and cost-effective.
Leveraging Custom Development for Competitive Advantage
There is a strategic advantage in intentionally developing customized solutions for core business functions. EFG-Hermes, for instance, saw the development team not as a liability but as a key asset, even considering the potential of selling their proprietary application as a product. This underscores the importance of viewing custom development as an investment in your competitive edge, particularly for businesses where technology is a central part of the offering.
Cost-Benefit Analysis: A Crucial Consideration
An essential lesson from my time at the telecommunication company revolves around conducting a thorough cost-benefit analysis. Before committing to either custom development or purchasing a solution, consider the effort, cost, and potential return on investment. This analysis should extend beyond immediate costs to include the value added to the company and whether it justifies the expenses, including salaries and resource allocation.
Conclusion: Balancing Immediate Needs with Long-Term Strategy
The choice between custom development and buying an off-the-shelf solution should be guided by a deep understanding of your business needs, the core functions of your operation, and the strategic benefits of each option. If the application is central to your business, investing in custom development with a strong product team and close feedback loops may be the best path forward. For non-core functions, starting with a cost-effective off-the-shelf solution can provide the flexibility to scale and adapt as your business grows. Ultimately, every decision should be weighed against its potential to add value to the company and its alignment with your long-term strategic goals.
Where Taqdim fits
Buy-or-make is a fit question — and fit questions are what we built Taqdim for, on the job-seeker side: does this role actually fit you, before you invest in applying? Taqdim is in closed beta. Join the waitlist.
Originally published on Medium on 17 Feb 2024.