Business software seldom delivers what you need out of the box. Every organization’s business processes are unique, and even the best software or web applications must be adapted to handle specific business needs. According to a McKinsey study, 70% of the top companies use custom software to differentiate themselves from the competition. The question isn’t whether to invest in software to drive business; it’s how to adopt new software.
Does it make more sense to develop a bespoke software solution designed to your needs or license an off-the-shelf Software-as-a-Service (SaaS) application? This is the classic dilemma – build it or buy it? Which type of application will best meet business needs? Which approach will cost more in the long run? Which approach is more sustainable? The answers to these questions are never simple.
Deciding whether to develop custom software or adopt a SaaS solution depends on many factors. For example, committing to a specific tech stack sets the path for future deployment since migrating to a new tech stack can be time-consuming and expensive. Other considerations include the cost of migrating historical data and retraining staff to use new technology. If the technology is critical to business operations, the wrong choice can result in lost productivity, wasted time, and lost revenue.
Deciding to Build or Buy
Choosing to develop custom software or adopt a SaaS solution requires analyzing multiple considerations, including scalability, customization, data security, and business alignment.
The SaaS market is rapidly growing and is expected to reach $700 billion by 2030. New players with new software applications continue to emerge, but that doesn’t mean they offer the best solution to meet a specific need. While SaaS applications may be faster and less expensive to deploy, they may not meet an organization’s long-term needs. Although it is impossible to see the future, corporate executives should consider long-term business goals to determine the best software approach to meet future technology needs.
Ultimately, it boils down to whether it makes sense to rent or buy: OpEx versus CapEx. SaaS solutions are OpEx, which means they incur short-term costs for immediate productivity gains. Custom software is considered CapEx, a long-term investment for ongoing returns. Either approach has merit, depending on where the business value lies and the ongoing needs of company stakeholders.
Considerations for Decision-Makers
Any business looking for growth needs a solid technology platform as a foundation. Use the following key consideration to simplify the decision to build custom software or buy a SaaS solution:
Scalability – Can the software grow to accommodate changing business needs? Will rapid business growth strain the software? Custom solutions are highly scalable. Simply add more cloud capacity. Of course, adding more capacity still incurs costs. SaaS companies also rely on cloud capacity, but individual organizations have little to no insight into a SaaS’s platform architecture or load limitations.
Scalability isn’t simply a matter of load speeds for online tools. Any organization can run into scalability problems in its processes. For example, one fitness organization was experiencing tremendous growth, adding more clients, more locations, more classes, and more administration. Their back-office relied on spreadsheets and outdated software, which meant manual processes. Their growth was limited by their tools. With custom-designed gym management software, they could more readily scale back-office processes, including automating class management and payments.
Customization – How much customization is required for specific business processes? Will a SaaS platform be able to adapt to current and future processes? Are there unique business needs that bespoke applications would better serve? Another way to think about the question is workflow compatibility. Are there incompatible workflows within the organization that need to be reconciled? Can they be integrated using a SaaS solution, or will custom software offer a better approach now and in the future? SaaS applications are often modular and offer some customization, where custom software can be designed to suit the need.
For some businesses, the customization options offered in SaaS products match their needs. After all, many SaaS products are designed to solve specific problems and there’s no business sense in “reinventing the wheel.” For example, Salesforce has built its business by providing CRM services to customers with add-on modules and third-party solutions to make SaaS a viable option for most businesses. However, there are businesses that will require custom-built functions. For example, a global bank may need a CRM system that integrates with its financials, including conversion rates, data security, custom analytics, and regulatory compliance across different jurisdictions. Depending on the requirements, it may be possible to extend an existing SaaS solution, or it may be more practical to develop new software.
On the other hand, some processes are an organization’s unique selling point. Trying to fit their tried and true workflows into off-the-shelf boxes risks losing their “special sauce.” This is where custom software comes in.
Data Security – Using custom versus SaaS software significantly impacts security. In the current age, cyberattacks are more common. SaaS applications are external, which means a business has little control over its data security policies, but also has the benefit of not incurring those costs or concerns. There also is the issue of data ownership. In most SaaS agreements, the customer owns the data while the SaaS provider manages it, which may create liability concerns for certain organizations. With custom software, security must be built into the infrastructure. Security metrics and analytics are also important for risk management and to show regulatory compliance.
Cost – SaaS applications are generally less expensive to deploy because they don’t require developers or additional enterprise hardware. Custom software needs a more sizable investment in time and resources. Both options have ongoing costs, either in subscription fees or maintenance and new feature development. For some organizations, the larger investment into custom software results in substantial productivity gains and the creation of an asset that continues to yield value. But in truth, the ROI varies depending on an organization’s unique challenges and potential benefits. A cost analysis of short-term and long-term goals can help determine the most cost-effective approach.
Business Alignment – Depending on business objectives, custom software and SaaS solutions each offer pros and cons. SaaS deployments are often beneficial for addressing immediate problems since they can be deployed quickly at a relatively low cost. SaaS systems offer a low-cost way to start a digital transformation without the investment and commitment of a bespoke system. However, SaaS solutions may not offer the functionality needed to grow. SaaS applications also may be difficult to integrate with other business software. The architecture of bespoke software can be structured to grow with the company, although development and deployment time will be longer.
The software marketplace constantly changes, and making the right technology decisions to streamline operations can be challenging. The best approach is to stay informed about changes to the digital ecosystem. When assessing possible software solutions, remember to consider scalability, customization, security, and business objectives, as well as cost. Don’t just consider immediate needs, but be forward-thinking when making technology decisions.
