28 January

Software: Build or Buy?

When software development companies evaluate software for their business, one question creeps to mind  – should we build or buy?

When your business builds software for a living, you have resources at your disposal – talented team of software engineers who are wizards at code, money for research and development, and unlimited office coffee to keep the team running.

But economically does it make sense to build software? Instead of just looking at how much it will cost to build the software vs. buy, you should also consider the effect building in-house will have on your resources: their time and ability to work on the very projects you hired them for. In most cases, companies realize diverting their resources to build software and maintain it in-house can quickly become more costly than just buying it. Not to mention the fact that it diverts your focus from your core business.

Looking past the cost and the resources needed to build software, what else should be considered when you are questioning to build or buy?

1. Functionality: Can you build the same functionality the paid product offers? The paid product’s team of engineers are experts in the platform they’ve built, continually making changes, adding features and new functionality as they get feedback from the end users. When you build software in-house you lose this expertise. Not to mention, the time to build features takes longer. Building in-house requires time and effort that ideally would be spent on your product to release new features that your customers will love relative to the competition. Do you have time to divert this attention somewhere else? In reality, time and expertise must be considered just as much as cost when evaluating whether you should build or buy.  My take –  leave it to the experts.

2. Speed to market: Time is of the essence for any business. If you are considering purchasing software, getting it live as quickly and effectively as possible is important so your business can begin reaping the benefits that you were sold on. Integration with paid software can take a couple of weeks.  On the other hand, building software can take a months or even years. For example, I work for VersaPay and our accounts receivable (AR) automation software, ARC, that we built in-house took many months just to build basic features. If one of our prospective customers wanted to build a similar software to ARC, the advanced features would take years.  Think about the opportunity cost. For our customers, the ability to have our AR automation software up and live in weeks makes all the difference. It means a new customer can start receiving their money faster, as their customers pay online in the portal. Take Metroland Media for example: one of their customers paid an outstanding invoice of over $20,000 in less than 5 minutes of the platform going live. Is the tradeoff of building vs buying worth it? Or do you need to see benefits now? My take – if it’s software that can make your business run more efficiently and save your team time, that’s significant money saved in itself; tradeoff  isn’t worth it. 

3. Updates and Features: Can your team support updates and features? What if something goes wrong with your software, will your team have time to debug? How will your team keep up-to-date with the best features in the market for your platform? When purchasing software, you receive the benefits of continual feature and software updates driven by customer feedback, competition and market research. For example, VersaPay is investing seven figures per year to continually add advanced features to our AR automation platform every quarter. This is a spend that is leveraged by thousands of our users. This investment is just not possible for in-house developed systems.  My take – for feature enhancements and functionality alone, buying software can prove to be more advantageous than building in-house. 

Other things to consider:

  •  PCI Compliance: Software that stores financially sensitive information needs to be PCI compliant. Meeting the objectives to be PCI compliant is an additional investment in time, people and processes. For example, VersaPay ensures our platform is PCI compliant as our portal accepts payments and processes funds. This is advantageous to our customers, because they do not have to take on the investment of meeting the requirements to be PCI compliant. We make our customers PCI Level 1 compliant right when the portal goes live – the payment portal is fully audited, maintained and updated by us. No investment of resources required by our customers.
  • Support: When you purchase software, you have access to your vendor’s support team. This allows you to leverage their expertise to optimize the use of the software and its adoption internally and externally.
  • Cloud-based software: If you are investing in cloud-based software, purchasing a software license may be the best bet. The cloud is shared by the vendor’s customers which makes it cost effective for them and in turn trickles down to price savings for you.

So to build or to buy?  That is the question. Whether you make this investment internally or externally, I hope the considerations above help you choose what is right for your business, resources and most importantly time.

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