Buying Software Vs Building In-House

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Table of Contents

“Digital transformation is critical for organizations to not only compete but survive.”

-McKinsey1

All businesses understand the importance of implementing a digital transformation program across their organization, so their activities can be coordinated through the one central hub, and everyone is working together instead of in siloes.

Finding the Right Software Solution

Central to that process is finding a software solution that is the best fit for your particular organizational needs.

Which often leads senior executives to wonder, would we not be better off custom-building our own software, in-house? That way, we’d end up with a solution that did exactly what we wanted it to. And we’d save on what seem to be some fairly high costs.

This, however, is wishful thinking. In reality, there are a wide variety of practical considerations that make buying a software solution far more beneficial than trying to design and build one yourself. Furthermore, buying an existing package is significantly more cost effective.

Benefits of Buying a Software Solution

There are a wide range of benefits when you buy a software solution from an established vendor, which include:

  • Quicker Rewards – You’ll benefit from your digital transformation program immediately instead of having to wait for something that’s being built from scratch.
  • Industry Experience – However unique your product or service is it’s almost certain that other businesses have experienced the same issues, and that your software provider has already invested years building products and features designed to solve them.
  • Ongoing Support – You’ll have access to industry experts on permanent call, and your vendor will have different teams working on constant improvements to produce new features and provide you with regular upgrades and updates.
  • More Effective Use of Resources – You’ll save a huge amount of time and work force hours that would have been diverted, which you can now use to focus on your core business.
  • Lower Costs – In both the short and long-term (see below).

On top of which, the software that you buy will be every bit as effective at solving your specific pain points as any software that you build in-house. That’s because whatever team you put together (or bring in) to custom-build your software will face exactly the same technical challenges and constraints as your vendor’s team.

The only difference being that the latter will have spent years and often decades working together, as part of a coherent unit, to find the most efficient and effective ways to best address whatever those issues are.

The Costs of Building In-House

Then you’ll have the added costs of hiring or contracting a team of highly qualified technicians to design, build, update and maintain your technical components, and on an ongoing basis.

As well as research and development costs, legal and compliance fees and data storage issues, together with the constant expenses needed for systems maintenance, bug fixing and regular hardware and software updates.

So not only will it take much longer before your software is finished and ready to be used, it will almost certainly be less successful at doing what you want it to than the software that you buy.

After all, your vendor has been working solely on designing and building industry software for decades, and their team have been focused exclusively on those issues and challenges for years.

5 Year Cost Analysis

Buying software isn’t merely more effective than building it in-house, it’s significantly more cost effective, as the following cost analysis demonstrates:

5 Year Cost Analysis

In-house*

Year 1:             $300,000 Development

Years 2-4:        $372,000 Enhancements/Maintenance

Year 5:             $24,000 Maintenance

Total:               $696,000

Installing Cora

Year 1:             $60,000 Implementation

Year 1-5:          $375,000 Subscription @ $75,000/yr x 5

Total:               $435,000

*Calculated conservatively as follows:

Year 1: Development – 5,000 hrs (BA x 1 + developers x 2) @ $60/hr = $300,000.

Years 2-5: Maintenance – 400 hrs/yr x $60/hr = $24,000/yr

Years 2-4: Enhancements, BA, 333 hrs x 3, 1000, Dev, 1,333 hrs x 3, 4000 = 5000 x $60/hr = $300,000

Cora PPM Software Solution

If designing and building software is what you do, then it makes sense to consider building it yourself.

But for almost everyone else, it’s much more cost effective to entrust the task of building your software to a team of established experts and to benefit from a body of knowledge that’s been built up over decades.

This will enable you to reap the benefits from your digital transformation program immediately, and will free you up to invest your time, work force and resources more profitably.

Find out more about the Cora PPM software solution here

  1. https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-digital-transformation

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