Custom software or off-the-shelf: how to decide

When does off-the-shelf software fit?

Off-the-shelf software fits when the work is done the same way in most businesses, such as accounting, payroll or email, and a product covers your process with its settings alone. The vendor handles hosting, updates and new features, and your team can start in weeks. If a product fits without spreadsheets alongside it, buy it.

• The work is done the same way in most businesses: accounting, payroll, email, file storage, rostering basics.
• The product covers your process with settings and configuration, without spreadsheets alongside it.
• You want the vendor to handle hosting, security updates and new features.
• Your team needs it running in weeks, and a few compromises are acceptable.

If a product fits, buy it. Our custom software development work usually starts where the products a business already uses stop: the step that still runs on a spreadsheet, or the data that has to be typed in twice.

When does custom software fit?

Custom software fits when your process is part of what customers choose you for, when your team keeps spreadsheets and manual checks alive to cover a product's gaps, or when your systems cannot share data. It also fits when per-seat licences keep rising with headcount, or when you need to own the code and the data.

• The way your business works is part of what customers choose you for, and a standard product would change it.
• Your team runs spreadsheets, double entry or manual checks to cover what a product cannot do.
• The systems you rely on cannot share data, so the same information is typed in more than once.
• Per-seat licences cost more each year as the team grows, for features most staff do not use.
• You need to own the code and the data, and decide when the software changes.

If the software is a product you will sell to other businesses, it is a SaaS platform, and the comparison is with the products your customers would otherwise buy.

What are the hidden costs of off-the-shelf software?

The subscription is rarely the whole cost. Per-seat licences grow with your team, needed features can sit on higher plans, and staff time goes into workarounds for what the product cannot do. Integrations can need connector subscriptions or development, and the vendor can change prices, plans or features. Leaving means exporting your data in a usable form.

• Licences per seat or per user, which grow with headcount, and higher plans for features you need.
• Workarounds: the staff time spent on spreadsheets and manual steps around the product's gaps.
• Integrations: connector subscriptions or development to make the product talk to your other systems.
• Changes you do not control: price rises, features removed or plans restructured by the vendor.
• Leaving: exporting your data and history in a form another system can use.

What are the hidden costs of custom software?

The build is paid before most of the value arrives, and the software keeps costing money after launch: hosting, third-party services, security updates, fixes, and changes when a connected system changes. Your own team also spends time explaining the process, reviewing designs and testing each phase. Support after handover should be priced in writing before the build starts.

• The build itself, paid before most of the value arrives.
• Hosting, monitoring and third-party services the software depends on.
• Maintenance: security updates, fixes, and changes when a connected system changes its API.
• Your team's time to explain the process, review designs and test each phase.
• Support after handover, which should be priced in writing before the build starts.

Our guide to what custom software and apps cost explains each cost driver, with sourced market rates. Scoping the first release as a minimum viable product (MVP) keeps the upfront build small while you test the idea.

How do you decide between custom and off-the-shelf?

Write the process down, trial the closest products with your own data, and note every step they cannot handle. Then compare two totals over the same number of years: licences and workaround time for the products, against build, hosting and maintenance for the custom option. Decide which risks you would rather carry, and buy where a product fits.

1. Write down the process, step by step, including the spreadsheets and manual checks around it.
2. Trial the two or three products closest to it with your own data, and note every step they cannot handle.
3. Count the licence cost over the years you expect to use the product, at the headcount you expect.
4. Estimate the staff time the remaining workarounds cost each week.
5. Ask a developer to scope only the part no product covers, and price its build and running costs.
6. Compare the totals over the same period, and decide which risks you would rather carry.

What should a written scope for custom software cover?

A written scope should cover the users and roles, each workflow step by step, the data and where it comes from, every integration, the delivery phases, how each phase is checked before sign-off, and what you own at handover. It should also say how support and changes after the scope is agreed are priced.

• Users and roles: who uses the software and what each role can see and change.
• Workflows: each process the software supports, step by step, including approvals and exceptions.
• Data: what is stored, where it comes from, and what moves across from any old system.
• Integrations: each system it connects to, and what passes between them.
• Phases: which part ships first, and what each later phase adds.
• Acceptance: how each phase is checked before it is signed off.
• Ownership and support: what you own at handover, and how support and changes are priced.

Can you combine custom software with off-the-shelf products?

Yes, and it is often the result of the comparison. Keep the products that fit, such as accounting and email, and build custom software only for the process no product covers. The custom tool reads from and writes to the products around it, so data is entered once and each system keeps doing what it does well.

A common result of the checklist is a mix: the accounting system and email stay as they are, and a custom tool handles the process that makes the business different, reading from and writing to the products around it.

What should you ask a software vendor before you buy?

Ask how pricing changes as your team grows, which features sit on higher plans, and how the product connects to the systems you already use. Ask what happens to your data if you leave, in what format you can export it, and how much notice you get before prices or plans change. Get the answers in writing before you commit your team's processes to the product.

• How does the price change as we add users, locations or records?
• Which of the features we need are on a higher plan?
• Which of our current systems does it connect to, and through what?
• Can we export all our data and history, and in what format?
• How much notice do customers get before a price or plan change?
• Who do we contact for support, and in which hours?

Ask a custom software developer the same kind of questions about the build: who owns the code and data at handover, what support costs after launch, and how changes are priced. Our guide to choosing a software development company lists them in full.