Pros and Cons of Custom Applications vs. Off-the-Shelf Software

Nowadays, it is not uncommon that even the smallest of businesses depend on the software to manage operations, track data, and engage with customers. As software itself comes to life as a service through cloud computing and software as service (SaaS) models, companies have truer reasons than ever for selecting tech solutions. Two of the main choices are:

• Custom business applications built from the ground up for that company's specific needs
• Off-the-shelf software packages configured to the business

There are advantages and disadvantages to both options. When deciding between custom applications or pre-built software, companies must consider a number of factors such as cost, flexibility, integration, features, and others.

In this article, we will look at the major pros and cons of each of them so that businesses can decide which software approach is the most suitable for their requirements. We’ll analyze how custom and off-the-shelf solutions compare across critical categories like: 

• Cost Flexibility & Customization
• Features & Functionality
• Integration & Implementation
• Vendor Support & Updates

This will help technology decision-makers understand the tradeoffs and choose the strategy that is closest to their business goals and constraints.

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Cost Comparison

The most important difference between custom applications and those that are off the shelf is the upfront and ongoing costs. 

Custom Applications Cost 

The benefit of commercial packages is that bulk develops across vendors so that they reach the customer base. Since the software already exists, you avoid large upfront investments in planning a programm, testing, and deployments.

You can visit the website of an experienced development company and learn more about all the tangible benefits of custom applications and off-the-shelf solutions.

With custom software, your business bears the brunt of these costs to create an application from scratch. Key project expenses include:

• Business analysis & requirements gathering
• UX design & prototyping
• Software architecture & system design
• Programming & development
• Quality assurance & testing
• Deployment, maintenance & support

According to Business of Apps, the average cost to build a basic business application is around $120,000 in the US. Systems that are running (more) complex systems with many features or integrations can run past $500,000+. Also, there are maintenance and periodic upgrade costs over time.

The exact timeline and budget for a custom business application depend on the project scope, choice of developer, reliance on third-party APIs, usage of code libraries and more. However, in most cases, the costs of building custom software for the average enterprise are substantial.

Off-the-Shelf Software Costs

The other pre-built software option comes from vendors like Salesforce, Oracle, SAP, or HubSpot. This is not cheap, but it does come with somewhat more predictable upfront costs. Common pricing models include:

• Per user/per month subscriptions
• Consumption/usage-based fees
• Tiered packages by product capabilities
• One-time license fees + annual maintenance

Octobits says that the average cost per user for well-known SaaS platforms is $10/month. High-end solutions like ERP or CRM often $+ systems run 300 per user monthly. The total spending for larger organizations is high, but you pay for capabilities used only, not speculative development, which benefits you.

The subscription-based nature of SaaS/cloud software also turns capital expenditures into smoother operating expenditures. This prevents sticker shock from large one-time development bills during tight budget cycles. It offers more flexibility to scale software usage up and down as business needs evolve.

Custom software projects often experience budget overruns due to changing requirements. However, with commercial software, vendor pricing models typically stay consistent year over year. This greater cost certainty aids financial planning cycles.

Flexibility & Customization

All companies have a unique mix of processes, workflows, data and interfaces. The ability to mold software directly to those needs is key for maximizing value.

Custom Software Flexibility

A major perk of custom applications is the flexibility to build exactly the features, functions and workflows your business requires. Instead of being constrained to what a vendor offers out-of-the-box, you can work closely with developers to translate specific needs into code.

Refinements can happen iteratively throughout the agile development process before launch. By owning the source code outright, it’s simple to implement changes post-deployment to add capabilities or modify functions.

You avoid the limitations of commercial software packages enforced by rigid data models, standardized custom objects and predefined user interfaces. If a process doesn't conform to how the off-the-shelf application is designed, you face configuration hassles to bend it to your will.

The drawback of extensive customization is the risk of over-engineering features that don’t deliver commensurate business value. But overall, the latitude to build software tailored from the ground up to your operations can’t be matched by pre-built solutions.

Off-the-Shelf Software Configurability

No two companies are exactly alike. So SaaS vendors make off-the-shelf systems configurable through:

• Custom fields & objects
• API integrations
• Interface templates & branding
• Rule definition tools
• Click-based configuration platforms
• Low-code personalization

These techniques allow you to modify key elements to match your organization’s nomenclature, data structure, workflows and styles. However, you still have to work within the software's limitations.

The major tradeoff is less flexibility for easier deployment. Vendors have already constructed the underlying infrastructure, data architecture, logical processes, interfaces and integrations at scale. Instead of needing developers to program extensive custom logic, you can simply toggle settings and drag-and-drop components.

The best SaaS solutions strike a balance between robust configurability through easy interfaces while still ensuring system integrity, seamless upgrades and interoperability. Salesforce Lightning Platform is an example of offering low-code personalization without heavy custom code. SAP Cloud Platform provides configuration tools and templates for rapid adaptation. Workday Studio builds flexibility to model unique organizational structures, processes, and analytics needs.

But ultimately, commercial applications can’t match the breadth of customization in a purpose-built system. The variability lies more in how well vendors facilitate modification without touching code.

Features & Functionality

Beyond just configuring software, the depth of capabilities natively available is critical for managing comprehensive business activities.

Custom Software Features

The key advantage of custom software is the ability to dictate exact specifications for features included from the start. You avoid paying for unused add-ons common in commercial solution suites, resulting in applications laser-focused on your most vital functional areas.

Custom systems also prevent feature bloat, which can result from trying to be everything to everyone. SaaS vendors often overload platforms, trying to satisfy the broadest customer base. However, a custom application only requires investing in capabilities that advance your specific business goals.

The tradeoff is essentially re-creating the wheel by coding common software functionality from scratch. While the basics, like user interface workflows and reporting, may be simple table stakes, re-inventing advanced capabilities can carry substantial costs.

Examples include predictive analytics algorithms, artificial intelligence services, mobile compatibility layers, internationalization and accessibility standards. Commercial applications embed these to accelerate time to value. However, custom software means either paying to develop it independently or sacrificing the features entirely.

Off-the-Shelf Software Features

Mature SaaS vendors have already spent years developing vast feature sets that tackle virtually all business needs. Companies can take advantage of these embedded capabilities without additional development effort or the need to stitch together disjointed point solutions.

Common out-of-the-box features in commercial platforms include:

• Mobile apps
• Artificial intelligence
• Business intelligence & reporting
• Predictive analytics
• Marketing automation
• Sales acceleration
• Customer service case management
• Inventory optimization
• Financial consolidation
• HR talent management
• Supply chain planning

Pre-built integrations between functional modules allow easily activating and interoperating features to match business priorities. The breadth of natively available capabilities minimizes the need for custom development to achieve core system requirements.

Vendors continuously invest in enhancing platforms by responding to collective customer feedback. You benefit from regular technology and feature upgrades that are not possible with fixed-scope custom builds. SaaS providers' extensive domain expertise also translates into very specialized functions fine-tuned for specific industries.

Integration & Implementation

The effectiveness of any software relies heavily on how well it interfaces with existing infrastructure and applications.

Custom Software Integration

A huge advantage of custom systems is the ability to inherently build tight integration points across internal data sources, legacy systems, databases and external SaaS platforms. Creating a single unified dataset and seamless workflows prevents employees from constantly switching contexts between disparate systems.

With custom development, your technology team can work closely with business leaders on priority integration needs and then directly code the exact APIs, connectors and data synchronization required. You won't need to rely on the availability, completeness or performance of pre-built integration tools.

The costs of extensive integration ultimately fall upon initial custom software budgets. However, the long-term productivity and analytics gains from consolidated data and processes outweigh the upfront expenditures of most enterprises.

During implementation, custom software projects require careful coordination between developers and business teams regarding testing, user acceptance,e and change management. But you dictate the entire deployment plan instead of conforming to rigid vendor timelines. For smaller-scale rollouts, this provides more control over pacing and resource allocation behind getting users transitioned.

Off-the-Shelf Software Integration

SaaS application integration is facilitated through:

• Open APIs
• Embedded connectors
• Cloud data services
• Pre-built adapters
• Integration platform-as-a-service (iPaaS)

Today, most commercial solutions include rich libraries of APIs and data integration toolkits. iPaaS offerings like Microsoft Azure, MuleSoft, Workato and Dell Boomi also facilitate interlinking platforms. However, some legacy or niche systems with proprietary data models can still encounter connectivity hurdles.

And if an out-of-the-box integration for your most critical business systems hasn’t already been developed, the options narrow to:

• Pay the SaaS vendor additional professional services fees for custom development work
• Take on custom integration yourself after the software purchase
• Both scenarios increase costs and project timelines

However, they have an obvious advantage that commercial solutions present: rapid deployment because they use existing integrations. The synchronization of your data between enterprise entities is simplified when you go with vendors who have the deepest connectivity in your technology stack.

Structured processes that vendors enforce are designed to speed up rollout planning, user training, and change management communication to prompt faster adoption. On the other hand, companies that don’t have enough internal resources or need something specific for integration take longer to deploy.

Vendor Support & Updates

The experience working with software vendors and mechanisms for staying current are also pivotal considerations.

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Custom Software Support

A strategic benefit of custom software is establishing a concentrated focus on your business as essentially the sole client for the applications and vendor. This aligns developer incentives directly with your goals for responsive support, timely upgrades and ensuring reliability.

You dictate exact terms of ongoing maintenance and support contracts upfront to guarantee appropriate attention to the custom system. SLAs can enforce strict response times, uptime requirements, dedicated technical resources and account management.

The risk lies in relying on a single vendor’s capabilities long-term to continue enhancing the application. If the development shop lacks financial staying power or technical skills to scale, you may face disruption, needing to switch providers later and re-architect the system.

Off-the-Shelf Software Support

Backcommercialsl is vendoring software for entire organizations with resources solely dedicated to customer success across sales, support, education and community engagement. SaaS economics allow companies to invest heavily in these areas by spreading costs over a diverse subscriber base.

Today, most enterprise software vendors have technical support teams that are available 24/7 to triage issues based on severity. The multiple escalation tiers guarantee that urgent problems are immediately routed to product experts with SLAs of only 1 hour for top-priority cases. Minor configuration changes, minor user permission adjustments, etc., usually come under the support team’s responsibility, and they handle them without having to submit a formal change request.

Relying on a broader installed base also provides comfort that major vendors will remain financially viable. Market leaders like SAP, Oracle, and Microsoft dedicate billions annually to R&D and new feature development.

The tradeoff is customers becoming small fish in very large enterprise software ponds. Without a seven-figure annual budget, you may struggle to get adequate executive attention or influence on product roadmaps from the largest vendors. However, opting for SaaS products from smaller best-of-breed players helps align more strategic relationships.

Finally, SaaS economics require core software packages to be constantly updated with bug fixes, security patches and new capabilities. Continuous delivery of innovation is better for customers than having to budget for periodic major upgrade projects such as on-premise perpetual licenses. For instance, Salesforce releases 3 major platform updates per year, while Workday churns out two new HCM versions a year.

Conclusion & Key Recommendations

It makes sense to start with a determination as to whether an organization should invest in custom software development or configure an off-the-shelf SaaS platform such that an answer would depend on an organization’s specific needs, resources and growth. While custom systems allow unmatched flexibility, they require large upfront costs and ongoing maintenance, which is not feasible for many companies. Pre-built solutions sacrifice some configurability for faster time-to-value and lower TCO.

The companies deriving the most value from custom applications typically exhibit a few common traits:

• Complex operational scale or regulatory constraints demanding highly specialized capabilities
• Large budgets with in-house developer talent to iterate quickly
• Unique business processes are difficult to model in standardized software
• Mission-critical data necessitating full control and custom integrations
• Industry innovation agenda requiring cutting-edge capabilities

For most SMBs and enterprises without these traits, configurable SaaS software presents fewer risks and faster ROI. Also, it can shrink down the work that needs to be done as part of the ecosystem around third-party apps, cloud services, and even platform extensions.

However, there is not one answer for all the companies on the spectrum. SaaS takes another form as well: hybrid, where common functions are bought via SaaS and the rest is built to meet specialized needs or competitive differentiation. Clearly, determining the optimal mix of tech types is possible only after organizations map their software to strategic goals.

Whether the approach is traditional or agile, user adoption and maximum return on investment from software investments are achieved when cross-functional leadership and agile principles are used in requirements planning. By having careful diligence around total cost, flexibility needs and feature priorities early on, companies can confidently go down the strategy that advances their business vision.