When to Consider Custom Software over COTS?

When your business requires a software solution, you have two directions in which you can go — Custom or COTS (Commercial Off-The-Shelf). Which path you choose depends upon considering a number of factors. It is our goal to arm you with information that will enable you to make the best business decision.

For this article, we will define “custom” software as computer software that the business owner has contracted to have written for their company. Traditionally, custom software is written by a third party entity; usually an outside software development company or a team of in-house personnel. COTS software is usually purchased from a retailer or from a vendor who has developed the software and mass-markets their product to many businesses (usually within a vertical market).

It’s not always easy to decide between custom or COTS software since it often requires long hours of deliberation and an understanding of the pros and cons of each choice. In the spirit of full disclosure, the authors’ main source of income is derived from creating custom business software; however, since we realize that there are times when custom software is not the best solution, we will attempt to present a balanced description of the pros and cons. Reviewing the following pros and cons will make that daunting task easier.

Custom Software – PROs:
Gives you exactly what you need – Each business has its own set of unique business rules. Often, the only way they can be computerized is via custom software. Why pay for features that will never be used?

You own the source code – Owning the source code affords you more control over future enhancements. When clients see the value of custom software, they become more sophisticated and quickly find specific ways to improve their particular business work flow. When ideas pop into your entrepreneurial brain, you can have the existing software modified to incorporate those ideas. Additionally, owning the custom source code is a valuable asset; an asset that should be included in the price of the business if it is ever sold.

More useful reports – There is no reason to have software unless it can produce the desired output; this is often in the form of reports. Custom software allows for the creation of meaningful reports that are used to make astute business decisions. You, the business owner, can ensure that reports give you the information the way you want it; not how the vendor thinks you want it.

More efficient in-house help desk – Help desk personnel will be more familiar with the business rules involved and can assist users. They will know about common issues, traps, and work-arounds. This is much better than having to explain a specific issue to COTS help desk personnel who usually deal with generic problems.

Decision makers are readily available – During the design phase, decision makers are available to make judgment calls. They have an intimate knowledge regarding how the software should work. Users are very good at describing the work flow and as a result, the software can be more effectively designed to increase their efficiency.

Vested users readily accept the software – If the users have had input into the design of the new software, they more readily accept the changes. Plus, they are ahead of the learning curve because they’ve been exposed to the software during the development stage.

Money is not wasted on unnecessary features – A side benefit of getting the exact functionality you want in the software is wisely spending your development dollars. Every dollar that is spent goes toward making the best possible product.

No major license fees – You own the code. You own the software. You control its use. This is not to say that annual fees, hardware enhancements, and other “cost of doing business” expenses don’t exist. Most likely, they will exist, but you will need to find out what they cover, how much they are, and compare them to the same fees for the COTS software.

Custom Software – CONs:
May cost more – It is custom software and one would expect to pay more because custom “anything” is labor-intensive. Depending on the scope of the software’s capabilities, it could be considerably more expensive than “canned” software; only you can decide if the derived benefits are worth the expenditure.

Not immediately available - Depending on the number of developers, the scope of the project and other factors, it may take months for the application to be created. This may be greatly reduced by using developers who employ proven software development practices such as a framework, agile processes, test-driven development, etc.

You may be re-inventing the wheel – Most applications have many of the same features as requirements; printing reports, displaying data, and adding or modifying data are such examples. Time, money, and effort will have to be spent with respect to these basic tasks.
 
COTS Software – PROs:
Immediately available – Upon purchase, the software is yours. Deploying the software and establishing the user environment is up to you; as is getting it to do exactly what you want.

May cost less – The initial cost will almost certainly be less than any custom software. You may have a licensing obligation, though, where you must pay a fee on a per-user basis.

Don’t have to re-invent the wheel – For performing basic data functions, COTS software should be able to do the job. Basic customer, sales, basic reporting, and invoicing tasks could be handled as long as you are willing to do it the way the vendor wants you to do it.

Technical support – Technical support is sometimes free; sometimes, it’s pay-by-incident. Hopefully, the COTS personnel know their package and can relate to your specific issues.

COTS Software – CONs:
Little extensibility – The software may or may not be able to implement the features you desire. However, some COTS packages allow for some extensibility via a user scripting tool or via a report writer that enables the user to develop their own custom reports.

Usually “work-arounds” are required – There may also be additional expenses to implement required “work-arounds” to handle specific needs for your particular business; even then, you might not get the result you desire.

At the mercy of the manufacturer – You have no control as to when updates, bug fixes and new features will be available or even if they will ever be available. Vendors typically respond to the concerns of “squeaky wheels”. If you are the only one experiencing a specific issue, it could be a long time before it is addressed, if ever.

Non-Vested users can become frustrated – Users have no vested interest in “canned” software and there is a psychological component when installing new software. Users are placed on the “learning curve” and it usually isn’t fun for them; people are reluctant to change.

Potentially major license fees – Some vendors charge annual license and/or subscription renewal fees.

In summary, if you find a COTS package that meets your requirements and is reasonably priced, then go with it. However, if you need a solution that more closely meets your business requirements, implements rules for your specific business (not just for the vertical market in which your business resides), and is flexible enough to change as your business changes, then you would be doing your business a disservice by not considering a custom software solution.

- Art Bergquist and Dave Aring