Custom vs. packaged software – Three myths people still believe in

Markus Manninen | 24.02.2015
Reading time 2 min

Tailored software

Whether to build custom software or buy packaged software is an old question but far from outdated. The old common wisdom used to be as simple as to always buy when you can and to only build when you have to. That is a reasonable advice for small companies but for mid-sized and large companies that is not the case anymore if it ever has been. Technology has evolved and the decision makers have to work harder and evaluate both options thoroughly in order to make smart decisions.

In addition to the old commonly accepted wisdom there are also several interesting myths when it comes to building vs. buying software dilemma. Here are three of them that still in 2015 seem to be confusing people.

1. Large companies do not build custom software anymore.

The fact of the matter is that they do. According to Forrester report enterprises spend about the same amount on custom-developed business software as on packaged business software. TechNavio´s forecast says that the Global Custom Application Development Services market will grow at a CAGR of 5,18% over the period of 2013-2018.

2. If there is a suitable packaged software companies do not have reasons to build software of their own.

In reality companies will always be developing and deploying custom software to gain competitive edge. Also it is impossible to find an off-the-shelf software for every business need.

Balancing the building and buying smartly is not an easy task to handle for decision makers. Often custom applications are customer-facing, partner-facing or employee-facing solutions that improve core business processes.

3. Building custom software is always slower and more expensive than buying.

This is the most interesting myth in my opinion because it really seems to make sense but in real life it is dead wrong.

Firstly, custom cloud-based applications are built about 30% faster with about 50% lower TCO than traditionally hosted applications. So the world has already changed since custom software meant slow and expensive.

Secondly, it is not unusual that buying and customizing packaged software is slower and more expensive than building custom software from scratch. In fact it happens surprisingly often when the hidden costs of packaged software are honestly and accurately taken into account. Hidden costs typically occur when the enterprises end up:

  • using only a small part of the features and paying for a lot more than they need
  • using a lot of time and resources on testing, training and maintaining excessively complicated functionality
  • trying to limit the amount of licensed users which leads to limited business benefits