Software: Should You Make your Own or Buy It?


Every company has to make internal decisions about whether or not 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 that they need in-house against the cost of outsourcing. Whether it is building a car or building software, the cost-benefit analysis companies m­­ust do to make their decisions about keeping it in-house or outsourcing is the same.

One of the benefits of building software internally is the ability to customize said software to meet any needs that arise. Many SaaS (Software as a Service) providers have to purchase new software every few years or when the software available no longer suits their needs. The cost to update software can be expensive. Building software in-house means that a company can customize said software to fit any of their needs 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 needs for the company that a general SaaS might not be able to provide.

However, building and maintaining one’s own software can be expensive and time-consuming. It may take a company upwards of a year to complete the software and they would also have to dedicate funds 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 software of their own.

 

Making software in-house

One of the benefits of building software internally is the ability to customize said software to meet any needs that arise. Many SaaS (Software as a Service) providers have to purchase new software every few years or when the software available no longer suits their needs. The cost to update software can be expensive. Building software in-house means that a company can customize said software to fit any of their needs 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 needs for the company that a general SaaS might not be able to provide.

However, building and maintaining one’s own software can be expensive and time-consuming. It may take a company upwards of a year to complete the software and they would also have to dedicate funds 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 software of their own.

 

Outsourcing software

Many companies provide SaaS for companies looking to outsource the software building process. Many SaaS providers provide cheaper upfront costs to the user as well as shorter implementation times for software. Many SaaS providers offer subscription plans on a monthly or yearly basis that include not only software implementation but maintenance as well. Buying a subscription is far cheaper than building one’s own software, as one does not also have to hire an internal software team to develop and maintain the software.

However, buying from a SaaS provider also has drawbacks. Outsourcing requires a company to become fully dependent on the SaaS provider to develop the software, which can cause issues if they cannot deliver. There are also some drawbacks to outsourcing the software-making process. A SaaS provider might not be able to create software that is adaptable enough to fit the changing needs of the company. Subscription fees can also add up over time and can even cost companies more on the backend than just developing their own software. Buying from a SaaS may also reduce a company’s competitive advantage, as they would be using software that many other companies are already using.

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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