Custom software vs off-the-shelf

This is the first article in a 3-part series designed to highlight some common differences between custom software (also known as bespoke software), and off-the-shelf business software (either SaaS or on-prem).

The three articles will focus on the following areas:

• Part 1 - Flexibility and Cost (this article)
• Part 2 - Speed of Implementation and Support
• Part 3 - Security and Expertise

When we refer to off-the-shelf software we're referring to products such as:

Type	Examples
CRMs	Salesforce, HubSpot
ERPs	SAP, Microsoft Dynamics 365
Productivity suites	Google Workspace, Microsoft Office
Low/no-code platforms	ServiceNow, Salesforce Lightning, FileMaker Pro
Disparate systems	Combinations of SaaS and/or on-prem products

Flexibility

Greater usability, functionality, scalability and differentiation, simpler integration

Why do I need flexibility from my software, after all I already know what it needs to do?

Flexibility is probably the most important feature of custom software, and for some very good reasons:

Custom software fits your operational processes exactly

This is probably the most obvious benefit of custom software over off-the-shelf or SaaS.

With custom software you’re in charge of the features, functionality and workflows, meaning it can be moulded around your operational processes.

Slick sales demos that hook you into a SaaS product sometimes don't live up to their promise

Slick sales demos that hook you into a SaaS product sometimes don't live up to their promise. You only later on find that UI, processes or workflows dictated by the software that mean you can't take full advantage of the software you're paying for.

These subtle differences often relate to operational processes that for good reason are embedded in your company.

Differentiation and branding

Whether your custom applications will be outward facing (customers, partners or suppliers), or inward facing (staff), it’s equally important for them to reflect your brand.

The most successful software providers in the world build software that is easy to recognise not just because it's branded, but because the user experience is differentiated from their competitors. Look at Microsoft, Apple, Google or Salesforce.

With custom software you’re not forced into using patterns supplied by the vendor (enhancing their brand), you have the flexibility to implement a user experience tailored to your brand and your audience, one that enhances your brand rather than dilutes it.

Usability

Providing only the functionality your users really need means your applications will be more intuitive, and crucially, simpler to use. Many business applications suffer from low take-up because they create friction with their users by not being simple enough to use, or not following familiar UX rules.

Tailoring off-the-shelf software inevitably leads to compromises in user experience. Custom software relates more effectively to your audience, providing them only the functionality they need, when they need it. This in turn significantly increases the chances of the success of your project.

Improved operational integration

Custom software is, by its nature simpler to fully integrate with existing systems and processes than off-the-shelf. Closer integrations between software systems should mean not only streamlined processes but also a reduction in shadow IT.

...spreadsheets have their place as a stop-gap... but aren't designed to be used to paper over the cracks between working operational systems

Because of their simplicity, familiarity and flexibility, spreadsheets have their place as a stop-gap or while you're defining operational processes, but aren't designed to be used to paper over the cracks between operational systems.

Partial or incomplete integrations can mean the difference between a system that saves time and effort and one that creates more process holes than it covers.

It’s worth mentioning that it’s not uncommon to find that no off-the-shelf integration matching your requirements exists and custom software is your only option.

Control over product direction

As with quite a few of the benefits of custom software this one often only becomes an issue quite a way through the lifecycle of an application or system.

Custom software will always be fully aligned with your business goals and always move in the direction you want.

Control of development speed

Developed at the speed your business and its processes develop. As your business experiences natural (or unnatural as we've all recently experienced) ebbs and flows you may want to speed up or slow down development (and cost).

With custom software you're able to control the speed of development and you don't end up paying for functionality you don't yet have the resources to fully utilise.

Changing licence agreements & costs

Off-the-shelf software vendors can often change their licencing arrangements leading to unexpected costs. Licencing can also become very complex to track. Evaluating whether you’re remaining in compliance with licensing agreements and forecasting future costs can be extremely difficult.

Cost

This is the greatest misconception around custom software

Isn’t custom software more expensive?

This is the greatest misconception around custom software.

SaaS software is designed to be financially attractive at first glance. However, as we’re all aware, it quickly becomes more expensive and there can be a great deal of associated costs which often aren’t fully factored into the initial buying decision.

Conversely, custom software becomes less expensive over time. As software infrastructure and management costs reduce, the costs associated with developing custom software are falling in line.

Paying for unused functionality

The nature of custom software means you only pay the costs of functions and integrations you’ll use.

It’s rare that you’ll use the full functionality of many SaaS offerings, but you’ll often still be paying for those features.

An integrated solution

With custom software, there’s no need to cobble together multiple products to create the functionality you need.

A single source of data/truth

It’s rare that you’ll find a SaaS offering where you remain in full control of your data.

Off-the-shelf or SaaS software often requires you to store your data on their platform, rather than pulling it in via API. Whilst this doesn’t present an obvious cost implication, it’s worth considering what happens if you create duplicate data, i.e. the same data is required in multiple SaaS products or a single SaaS product and an on-premise system.

The cost implication here is that if your data becomes out-of-sync, or worse, conflicting data is created in separate systems not only can it cause unexpected operational consequences but it can also be very costly to get it back into a usable state.

Wherever possible, your internal operational systems should always hold the master copy of your data but it’s nearly impossible to enforce that with SaaS.

Increased demand means increased costs

Speaking of SaaS costs, as your company grows and more SaaS user licences are consumed, costs will increase. The relative costs of creating custom software should decrease as a proportion of staff growth over time, making it a better investment for growth.

SaaS costs are difficult to track

SaaS costs are notoriously hard to track

The costs of multiple SaaS products can quickly add up – SaaS costs are notoriously hard to track and companies often find they’re paying for licences or add-ons they don’t need or don’t use. Moreover, you’ll often find the costs increase significantly once you start adding further modules as your requirements change, and at that point you’re already locked-in.

Additional resourcing requirements

CRMS, ERPs and often productivity suites (such as Google Workspace, or Microsoft Office) usually require specialist administrative resource. If you’re intending to make the most of them, they’ll also need customisation. This will require an entirely new skillset from that of your IT team.

These additional resources can be costly to recruit & train and crucially. Also, if it’s not part of your core business, these staff can be very difficult to retain, compounding costs.

Reducing development costs

Modern dev processes mean custom software is always getting cheaper:

• The growth of Cloud infrastructure and specifically Serverless technologies means reduced infrastructure management costs. This allows development teams to do what they’re good at and focus on writing code
• Cloud-native development means reduced on-premise infrastructure & hosting costs
• Modern Dev Ops practices contribute to significant reductions in infrastructure management costs

Increasing licence costs

Off-the-shelf software is designed to be cheap, or often even free when you’re starting out, but the SaaS licensing model means it becomes more expensive as your business grows.

It’s no coincidence that licence costs increase as you gradually become more dependent on it.

Changing business needs

If you outgrow off-the-shelf software, it takes a different direction to your business or you simply require some new functionality, your options with off-the-shelf are limited. Replacing it can be extremely expensive and integrating it into another off-the-shelf solution can be costly and difficult to manage.

No vendor lock-in

A decent software partner will provide you access to the source code of your software in case, for whatever reason, you need to change suppliers.

R&D tax credits

claim up to a 230% corporation tax deduction on salaries, wages, NIC contributions and pension fund contributions, consumables and software

Last, but by no means least, a factor that is often overlooked because of the complex nature of the system are research and development tax credits. R&D tax credits can siginificantly reduce the costs of custom software development.

JDLT are experienced in assisting with customer claims against the government’s SME R&D and RDEC schemes. These schemes allow claiming Corporation Tax relief on research and development costs.

Specifically, companies can claim Corporation Tax relief on up to 65% of sub-contracted costs. You can also claim up to a 230% deduction on salaries, wages, NIC contributions and pension fund contributions, consumables and software.

No such tax relief is available on SaaS payments.

Conclusion

In summary, the hidden, associated and increasing costs of SaaS can become a greater issue over time.

Custom software by comparison, is an investment and you should find that the relative costs decrease over time.

Part 2

In Part 2 - Speed of Implementation and Support, we'll be focussing on the Speed of Implementation of custom software vs off-the-shelf and the various Support options available to the users of each type of software.