Many companies with varying sizes debate whether or not buying solutions or building solutions is more cost-effective for their business. Knowing when to build or buy a Commercial Off The Shelf (COTS) solution is just as important if not more important than actually building or buying a solution. No one method fits all organizations, but most organizations will likely use a hybrid of build and buy during the course of their business life cycle. Both decisions have pros and cons, let’s explore some:
Building a COTS solution:
- Scalability: For fast growing startups and businesses, building custom software allows you to scale your operations without having to fear incompatibility and impeding growth. While you scale, building a solution allows for customization. This will help your solution address the most pressing needs for your business.
- Ownership: In addition to fostering growth, building a solution allows for ownership of the software without having to give significant royalties and fees to another organization. Depending on your business niche, this can be extremely important because control over data can greatly impact market share and profitability.
- Price: building, maintaining and updating a software solution is a running and expensive cost for any business. Building a medium-sized enterprise software program can cost up to $150,000 and supervision will require more expenses.
- Manpower/supervision: building a software solution will often demand a competent IT department. This might not be suitable for startups or cost-efficient for many businesses.
Buying a solution:
- Less bugs: By purchasing a COTS solution, your organization will save extensive amounts of time that would have been spent dealing with and fixing bugs in your software solution. Most of the COTS solutions available in the market today already have thousands of hours of research and development,allowing them to address most of the bugs your organization would encounter.
- Outsourcing IT: Most COTS solutions will have support from developers. By not having to have an in-house IT team, your organization will save significant money on headcount and support. There’s also significant savings in regards to training your team for building a solution. Additionally, you’ll save significant time in regards to integrating your software solution into many parts of your business.
- Reliance on third-party: Since your organization does not own the software, your data can be seen by the third-party company that provides the software. Additionally, your organization does not retain the rights to the code of the software program you’re using. This can be quite problematic if your organization is growing rapidly and relies heavily on the software. Additionally, COTS solutions developed by an external party won’t be tailored to your business’ specific needs. With businesses rapidly evolving, the software you are using may not be applicable to your business within a few years.
You will have to assess what’s most important to your business and choose whether or not building or buying a solution is the right decision. Factors like control and autonomy can persuade an organization to choose building a solution over purchasing one. Organization size, autonomy and price will dictate which method is most cost-effective for your organization.