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Deciding what software to build in house and what to buy

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Article by: Mark Rawlins | Founder & CEO, InfoTrax
Steven Hooper
August 14, 2017

When deciding on a software solution to address a pressing problem, you face a difficult decision: Should you buy your software or should you build it?

You may be tempted to build your own custom software to save money. But that instinct is wrong—building software is expensive. If you’re going to build any software for yourself, that software needs to create a competitive advantage for you.

You’ll also find that some software suites may not provide what you need, and it may be too painful to try to adapt your processes to fit the software. You’ll need to determine the best solution for your company. Today, that best solution is often to choose several solutions—one for each individual problem—and integrate them into one system by using application programming interfaces (APIs). APIs let software programs speak to each other, passing data (such as transactions and commissions information) back and forth so that each piece of software can efficiently perform the task for which it was designed.

The ability to pick and choose software “parts” and then integrate them into a functioning system is one of the biggest, best changes we’ve seen in software. It lets you think about each issue your business faces individually and get the best solution for each need.

Breaking the decisions down

Esteemed IT research company Gartner recommends that companies think of their software needs in terms of rate of change, or the timeline on which you’re forced to update to keep pace with technology. Some software systems need to change frequently while others can stay more or less the same for a long time. For example, today’s mobile apps must continually update to stay compatible with the rapid updates of device hardware and operating system. Mobile apps have a fast rate of change. At the other end of the spectrum, almost half of all current Windows users still use Windows 7, an eight-year-old operating system. The Windows operating system has a slow rate of change.

Based on the rate of change, here’s how to determine whether to buy an off-the-shelf software package or create a custom application for your business:

Purchasing standard business software?

This software is the type that is used in common business operations: payroll, accounting, manufacturing, enterprise resource planning (ERP), and others. Gartner refers to this type of software as systems of records. Systems of records have a slow rate of change and a long life cycle. There are many options to choose from, and the functionality of the software does not differ greatly. Because of this, you should always buy this type of software. Even if you’re in a highly custom environment, 90% of what you need from this software will be in the standard package.

Pros of systems of records

  • It’s the most readily available and cost-effective software that you can buy.
  • Because of its large user base and large design team, quality control is very high for this type of software.
  • It usually includes either free support or the option to purchase support through a maintenance contract. There are often online user communities you can turn to for suggestions or help.
  • Most software of this type comes with upgrades at either no cost or a reduced cost.

Cons of systems of records

  • Inability to handle direct sales needs. Because it’s designed for general business needs, it can’t effectively handle the unique requirements of the direct selling industry such as commission calculation, rank advancements, or tree management.
  • Non-customizable. This type of software usually cannot be easily modified to accommodate your specific needs.
  • Lack of response to enhancement requests. Any feature requests you make to a horizontal-market software manufacturer are likely to be ignored unless they benefit a large portion of the customer base.
  • One size fits all. You may need to change your business processes to fit the software’s capabilities or the work flow that it dictates.

Purchasing specialized direct sales software?

This software is the type that fills those custom needs not met by your systems of record. Gartner refers to these types of software as systems of differentiation. Systems of differentiation have a shorter life cycle and a faster rate of change.

Because we are in direct sales, we need systems of differentiation to address the singular needs of our industry. For example, promotions are handled differently in our industry than in other ecommerce areas. MLM promotions can pay back into the commissions or your commissions could be the trigger through which someone is offered a promotion. You need specialized direct sales software to address your promotions.

Should you buy or build this type of software? That depends. Software is available to address most of the needs of our industry. You can build specialized MLM software, but you should understand that it’s at least 2–3 times more expensive—and potentially as much as 10 times as expensive to build. And of course, the initial cost isn’t the end of it. You must then pay to keep your developers on staff indefinitely to keep the system that they built up and running.

Pros of systems of differentiation

  • Price, compared to custom-developed software. Systems of differentiation software is a lot less expensive than custom-developed software—so it makes sense to use it whenever you can instead of developing your own solutions.
  • The right fit. Because it’s created specifically for the direct selling industry, the right software can increase your efficiency, profitability, and the ease with which your run your business.
  • No hardware or installation hassles. If you purchase software-as-a-service (SaaS), you won’t have to deal with hardware or installation.

Cons of systems of differentiation

  • Price, compared to systems of record software. This type of software is significantly more expensive than general business software. A best business practice is to use it only where systems of record don’t meet your specific needs.
  • Customer base size. Because it has a smaller customer base, some software systems may not look as polished as systems of record. Some may not be tested as thoroughly. Some systems may look slick but lack the functionality promised. You should do research into companies and their product offerings before making a purchasing decision.

Purchasing innovative software?

This software addresses a need that no one else has addressed before. This type of software is known as systems of innovation. Systems of innovation have the fastest rate of change and the shortest life cycle.

The first direct sales mobile apps were systems of innovation. Real-time commission information, rather than batch information delivered daily—that was innovation. Jamberry’s Nail Art Studio that lets customers design their own nail wraps—innovation. You should build your systems of innovations if you have the capability.

Pros of systems of innovation

  • Increased brand identity. Custom-developed software can help build a unique brand identity—particularly when used for customer-facing components, such as internet shopping.
  • A perfect fit. Because it’s developed to meet your company’s specific needs and existing work processes, well-designed, well-built custom software can increase organizational efficiency.
  • Hardware compatibility. By nature, this type of software is designed to work with your preferred hardware environment.
  • Complete control. You have direct control of enhancements, bug fixes, and updates.

Cons of systems of innovation

  • It’s expensive. Let me repeat that: it is very expensive. Custom software development requires designers, user-experience experts, programmers, and more.
  • Initial development time. It takes months or years to design, develop, and test a custom application. Because of this, there is a high failure rate of custom development projects—many companies pull the plug on in-house development before a working software product has been completed.
  • Custom software is also expensive to maintain and upgrade. Whether built by an in-house development team or a third-party development company, software development and maintenance and is an ongoing expense as long as you use it.
  • Usability and support. Home-grown software can be painful to use if not designed and developed by a capable team—and there is no user community you can turn to for suggestions or help.

 

Whether you’re choosing your very first software system or rethinking the one you already have, keep these three categories in mind. If you think about your needs one by one, you’ll be able to choose the mix of software that will serve all your organization’s needs without tearing through your profits. Today’s top-of-the-line software can be affordable if you take advantage of the APIs that are revolutionizing the industry.

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Mark Rawlins | Founder & CEO, InfoTrax

With a career managing MLM/network marketing companies that spans more than 30 years, Mark Rawlins is recognized as one of the pioneers and...

Read more Articles by Mark Rawlins

Steven Hooper

Steven Hooper is a recognized network marketing industry name in technology and operational strategy and has the unique opportunity to head up the...

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