Buy vs Build Software – Which is Better for Your Enterprise?

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Olga Demidenko , Author at Geomotiv
Published: Apr 25, 2023

When planning software implementation in your Enterprise, you must strategize to maximize its potential. Technical decisions will go hand-in-hand with business determinations and impact the consecutive development flow.

Companies generally have two options and need to decide between build vs buy software for their Enterprise. What factors come into play when choosing between software build vs buy? Why do some companies find buying software more suitable than custom software development from scratch and vice versa? Let’s find out.

To simplify the matter, first, let’s examine the essence of each approach to Enterprise software implementation.

What is Enterprise software?

Get to know the details regarding Enterprise software, its types, benefits, and practical solutions in the market.

Read now

Enterprise-level software can power most or most of an organization’s operations. Unlike consumer apps, Enterprise software tailors the needs of individuals in a specific business or niche. Besides, it helps complete core business functions like customer support, resource planning, data management, and more. 

Remember when you used an app like Uber to plan a ride to your favorite cafe? Such an app connects you to a ride-sharing business from wherever you are and no matter which organization you belong to. 

However, if Uber was an Enterprise app, it would be a part of an ecosystem of tools for specific business functions. It could easily integrate and process data from other endpoints, including CRMs, BI apps, or ERP systems.

This peculiarity of Enterprise software outlines the effort required to develop and implement it. Since it caters to the internal needs of large businesses, its functionality must cover a relatively large scope of requirements. Besides, it should process vast amounts of critical data.

Enterprises can choose between build vs buy software options. When they decide to build Enterprise software, they will deal with a custom-built application that developers will create from scratch and tailor its functionality to current business needs. On the flip side, if Enterprises opt for the “buy” approach, they will acquire a commercial-off-the-shelf (COTS) solution and start using it immediately or customize it to a limited extent.

Custom Enterprise software
is tailor-made
COTS Enterprise software is an
out-of-the-box solution
Custom software is the result of development efforts. A company develops software from scratch and tailors its functionality to specific requirements. The development team starts with basic functionality and then adds other crucial features on top of it. The company can narrow down the necessary functionalities based on specific parameters.Companies can opt for commercial software available in the market and sell to other business users. Unlike custom Enterprise apps, COTS solutions feature generic functionality that caters to mass target end-user needs. Hence, off-the-shelf software can address business needs without having to build the solution from scratch.

Why is there a build vs buy software debate?

Suppose you are preparing to introduce a new Enterprise-grade ERP system. Having researched many ready-made options, you opt for a packaged solution. It saved your IT budget and enabled you to jump-start new processes and improve productivity.

But what happens when you need to add unique methods or adjust a generic module to meet critical needs? At this point, some decision-makers consider going for Enterprise software development. However, this option goes with its own set of challenges and afterthoughts.

Only some businesses have what it takes to build an Enterprise solution and implement tailor-made features from scratch.

In a nutshell, this is what the buy vs build software debate is about. This is a continuous dilemma for many business owners in the age of digital transformation. To get on the right track, businesses need to consider several crucial factors before deciding between buy vs build software applications. Let’s overview them below.

Top 10 factors to consider before deciding whether to build vs. buy software

The total cost of ownership

TCO, or total cost of ownership, encompasses all direct and indirect costs associated with implementing a new piece of software. The cost drivers will be different depending on the choice between the build vs. buy approach.

When a company buys packaged Enterprise software, it can address immediate needs with a relatively small budget. COTS solutions have limited customization options, meaning monthly or annual fees are typically the only cost drivers. The vendor is responsible for legal support and maintenance tasks such as software updates and security patches.

Factors driving the TCO of packaged software

However, the costs of buying software can pile up in the long run. For example, some vendors can charge customers for features they don’t use. Or suppose you must move customer data from legacy systems to ready-made SaaS solutions. Another aspect is the need to invest in employee training to improve productivity.

Other hidden costs include customization efforts when business requirements need to change. The problem with packaged software is that it can lack some functionality in at least one area or more. A purchased solution will need fixes or upgrades from the onset to comply with new regulations, a growing customer base, or any other changed parameter.

When a company decides to build Enterprise software in-house, it should cover upfront expenses associated with the full-cycle development of a unique product. It is necessary to factor in many parameters to calculate the TCO regarding time and money investments.

Factors driving the TCO of custom software

The cost to develop custom software will differ from case to case. It will generally depend on the following factors:

  • the complexity of requirements;
  • the scope of features;
  • the complexity of UI;
  • the number of user interfaces and roles, etc.

Besides, it requires a team of in-house or outsourced developers to start MVP development and fulfill consecutive iterations. Other expenses include testing, bug fixing, software upgrades, and introducing security measures.

Building custom Enterprise software seems a colossal business investment. But eventually, it can pay for itself since it will bring business value in the long term.

Read Geomotiv’s shortlist of the best engineering practices.

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First, if you need to integrate a newly created solution with your IT infrastructure, developers will be at hand to complete the task. Second, adapting and expanding its functionality to adjacent use cases will be much easier. These and other factors are the results of a tailor-made solution that exists because it can serve the proper purpose and meet exact business goals.

Scalability requirements

When it comes to the build vs buy software development dilemma, assessing scalability demands should go hand in hand with the decision-making process. Enterprise software should adapt to increasing loads or traffic spikes whenever needed. If so, then it shouldn’t compromise the performance and service availability for end-users.

If Enterprises choose to buy software, they might encounter an issue when a ready-made solution is not ready to meet urgent scalability demands. Since COTS products cater to mass business audiences, the chances for capacity adjustments for your case are close to zero. However, vendors may introduce changes to their solutions if many customers wish.

If the company builds commercial Enterprise solutions in-house, it can ask the developers to design scalable software architecture. Likewise, an internal or third-party development team maintaining your software can help scale or upgrade your solution to meet changing requirements.

Time-to-market

A short time-to-market is an intuitive path for any company planning to launch a solution. So, it is no secret that the timeline and the urgency are important, especially amidst an increasing pace of business change and digital transformation.

How does each option score in our build vs. buy software comparison? Let’s have a look.

  • The “buy” approach is a go-to solution for Enterprises when time is of the essence. It saves product development and testing time since all the features are available straightaway. But mind that fast setup times and quick onboarding come with the risk of the result not solving your challenges entirely.
  • The “build” approach is a less viable solution for time-sensitive companies. Developers need to cover all stages of the software development process, not to mention project estimations and requirements elicitation. Moreover, testing concepts, building an MVP, and fixing bugs are necessary. If the company can wait for the solution to be developed in-house, it needs to ensure that these timelines won’t adversely affect the business.

Customizability

Your business can have stringent workflows that require more work to adapt to new systems. On the other hand, you might need specific customizations to implement unique requirements. These issues must be part of the decision-making process regarding the build vs. buy software dilemma.

It is best to buy ready-made solutions if you are okay with adapting internal workflows to off-the-table design and functionality. As the software vendor dictates how you use the software, this option is preferable when requirement customization requirements are infrequent or non-critical.

On the other hand, custom Enterprise apps include the desired level of customizability at the design stage of software development. You can modify the solution at any given instance per evolving business needs.

Adoption of Agile methodologies

The added value of the Agile approach is the early delivery of small chunks of the required functionality. The development team works in iterations, dividing the project into sprints instead of following linear processes. Unlike the traditional approach, Agile methodology is more flexible and responds quickly to changes.

Agile adopters are more ready to build custom products than those following a conventional approach to software development. Developers work in iterations and deliver new features after every sprint. They can conduct tests, receive user feedback, and change the code without exceeding the budget and project timelines.

Buying a COTS product is a more viable option for companies without the Agile transformation journey. A traditional software development approach like Waterfall can cause significant delays when adjusting the development flow or introducing changes in the feature set is necessary.

Coherence with other Enterprise software systems

Modern businesses rely on different tools for separate processes. However, enterprises must let them communicate or exchange information without disruptions to thrive. Otherwise, coherency and compatibility issues may arise and cause problems with availability.

Choosing software build vs buy, companies need to assess possible coherency issues in their tech ecosystem.

When opting for the “build” option, avoiding coherency issues at the planning and design stages is doable. Think of a custom-made suit you can create from scratch instead of shopping at a popular store. You can specify the type of fabric, choose an exclusive color, and the most appropriate size. And additionally, you can select the style which will be compatible with other items in your wardrobe. 

Conversely, buying software can make you reconsider current workflows or adjust other tools to speak the same language as a COTS product. A newly purchased solution may conflict with existing tools as it caters to mass business users rather than the specific case.

Learning curve

Unlike consumer apps, Enterprise software is more complex by nature. If employees aren’t well versed in its specifics, it can become difficult to reap the benefits of new software. What do build vs buy approaches offer in this regard?

Learning curve

The “build” approach lets you familiarize the team with the designated functionality, usability parameters, and process workarounds. Companies that build software from scratch tend to involve other team members in testing.

Many Enterprises conduct a large share of user acceptance testing internally as well. Such practices help to design a system that will be user-friendly and easy to navigate for team members. However, remember that you must commit your organization’s time and effort to reach that target.

When you buy a COTS product, the learning curve can become steep. Although the feature pool varies from vendor to vendor, such software has excessive functionality for different users. Extra training efforts may apply based on the number of unwanted features.

Unique business or functional requirements

Does your company have exclusive or standard requirements? This question should arise before deciding to buy or build a solution. Here’s why.

Suppose you must manage complex workflows in a tightly regulated industry; no packaged software can satisfy your needs. Things can get worse if you need a solution urgently, e.g., you can face legal challenges or a damaged reputation. In this case, building a custom solution from scratch is better.

On the other hand, if you need to manage standard tasks like lead management or time tracking, you don’t need to invest in custom software development. Instead, you can rely on packaged software and even the one used by your competitors.

The need to differentiate from competitors

Some organizations seek to differentiate from the competition when solving business problems. But others don’t have this requirement and want to be on the same page with everyone in the industry. Depending on your desire to stand out, you can choose from two options:

  1. Buy ready-made software if you want to offer the same functionality as the rest of the pack;
  2. Build custom software if you need to get ahead of the competition.

Data security concerns

Enterprise applications are prone to cyber security threats and vulnerabilities. It is necessary to think about credible data protection mechanisms or access control systems to protect sensitive information and reduce the chances of misuse. 

Do COTS solutions provide the necessary security layers? Or is it better to build Enterprise software from scratch to ensure ultimate protection? Let’s find out.

When you buy a ready-made Enterprise solution, you need to send sensitive information to third-party servers. Even though you can sign a confidentiality agreement with the vendor, you still share the data about customers or finances. While you remain the data owner, it is necessary to restrict access to it to minimize potential threats.

However, when you build custom software, you can reduce the number of security concerns. You can store the data on-premises or set up private cloud servers. Besides, only authorized developers will have access to the source code. The beauty of a custom solution is that it isn’t a widely used piece of software. Instead, it is unique and tailor-made, so you can add custom security features to ensure maximum protection.

Build vs Buy software - pros and cons of each option

Decision-makers must consider what aspects come into play before choosing buy over build or vice versa.

We picked the top ten influencing factors above to assist your decisions. However, to get the complete picture of what each approach to Enterprise software offers, it is essential to understand the positives and negatives of building and buying software.

Here’s what build vs buy software pros and cons look like in detail:

“Buy” approach: pros and cons
Buy ProsBuy Cons
Low upfront costs -
fixed monthly or annual fees
Indirect costs of data transfer,
future changes, and user training
Fast time-to-market and the ability
to bring immediate value
Redundant features and excessive functionality that may be complicating workflows
No need to support and maintain the solution
as the vendor is responsible for the underlying code stability and reliability
Lack of customization options and coherence with other Enterprise systems
Ease of deployment and management since the solution is pre-packaged to fulfill the needsDependence on the service provider
Lack of opportunity to gain
a competitive edge
Potential security risks
“Build” approach: pros and cons
Build ProsBuild Cons
Full control over
software functionality
High upfront costs
(that pay off in the long term)
Extensive customization optionsOngoing investments in support,
maintenance, and security
Fast response times to
changing conditions
Implementation takes longer than
with off-the-shelf solutions
The ability to meet
scalability demands
Competitive advantage with
unique tailor-made solutions
No dependence on the vendor’s
decisions regarding the software

Summing Up

As a business owner or a decision-maker, you can have difficulty choosing between buy vs. build approaches. Many factors come into play, and the pendulum can swing from one extreme to another. 

However, now that you know the points to consider when deciding between buy vs. build, you can carefully approach the issue. Besides, you can use the information about the pros and cons of each option to make informed decisions.

Let’s summarize our findings and outline a few scenarios where opting for build vs. buy software makes sense. When to buy software vs. build from scratch?

When does it make sense to buy and build software?
When to buy?When to build?
To address immediate needsTo solve unique challenges
To solve commonly occurring challengesTo stand out from the competition
To save time on full-cycle developmentTo eliminate workflow changes
To avoid operational issues with
software support and maintenance
To meet future scalability requirements
To avoid vendor lock-in
To meet stringent data security demands
To be able to customize the solution
To ensure a seamless connection with
other Enterprise systems

If you plan to implement Enterprise software but want to learn more about the differences between buy vs. build approaches, don’t hesitate to contact us. We have experts in custom software developers who know how to turn business requirements into fully functional software.

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