Software: Should You Make your Own or Buy It?

Every company must make internal decisions about whether they can create the tools they need in-house or if they need to purchase the tools from an outside company. This is called a make-or-buy decision. When making a make-or-buy decision, companies must weigh the cost of creating the tools they require in-house against outsourcing. Whether it is building a car or software, the cost-benefit analysis companies m¬¬ust do to make their decisions is the same.

Making Software In-House

One of the benefits of building software internally is the ability to customize said software to meet any challenges. Many SaaS (Software as a Service) providers often purchase new software every few years or when the software available no longer suits their needs. Frequently updating and installing new software from an external provider is expensive. Building software in-house means that a company can customize the software to fit their requirements and update it whenever they please. They can also build software that is not yet available on the market that can be adjusted to meet specific demands for the company.

However, building and maintaining one’s software can be costly and time-consuming. It may take a company upwards of a year to complete the software, and funds must be dedicated towards maintenance costs and supporting an internal software team. There is also the possibility that the software that a company needs already exists, eliminating the need to create their own software.

Outsourcing Software

Many software developers create SaaS for organizations looking to outsource the software building process. SaaS provides cheaper upfront costs to the user as well as shorter implementation times for software. In addition, many SaaS providers offer subscription plans monthly or yearly, including both software implementation and subsequent maintenance services. Buying a subscription is far cheaper than building one’s software, as one does not have to hire an internal software team to develop and maintain the software.

However, buying from a SaaS provider also has its drawbacks. Outsourcing requires a company to become entirely dependent on external software developers to create and maintain the software. If the software developer cannot meet a company’s requirements, it can cause delays in implementation and create excess work for the company to remedy the issue. In addition, a SaaS provider might not develop software that is adaptable enough to fit the company’s changing needs. Subscription fees can also add up over time and can even cost companies more on the backend than just developing their software. Buying from a SaaS may also reduce a company’s competitive advantage, as they would be utilizing software that many other companies are already using.

There are advantages and disadvantages to building software in-house versus outsourcing software development. Every company’s requirements for the software they utilize are different depending on what those. Some may find that building software internally might be the best option, while others choose to outsource. It is essential that when planning one’s software implementation strategy, a company is clear on its goals technologically and financially.

Maria is a writer at Enki Tech, a Downtown Santa Monica technology company that specializes in the development of high-quality, user friendly software, web platforms and mobile apps.

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