When to Consider Developing Your Own Software: A Guide for Midsize Companies

In today’s business landscape, software plays a pivotal role in driving success and efficiency. However, as small companies expand into midsize organizations, they often encounter performance gaps within their existing software solutions. These issues can hinder growth and impede innovation, forcing midsize company CEOs to make a crucial decision: upgrade through a vendor or develop their own custom software. In this article, we’ll explore the factors to consider when deciding whether to roll your own code and the critical competencies required to undertake this endeavor.

The Software Dilemma for Midsize Companies

It’s a common understanding that software upgrades are both expensive and potentially disruptive. They don’t always deliver on their promises, sometimes leading to minimal or no return on investment. For small companies, it’s often more manageable to employ manual workarounds when their software falls short. However, these workarounds can lead to inefficiencies and hinder growth for midsize companies, making custom coding a viable option. Let’s delve into the factors that midsize businesses should weigh when deciding whether to develop their own software.

When to Roll Your Own Code

Developing custom software for core business functions like accounting, payroll, sales tax, inventory management, and customer relationship management (CRM) can be inefficient. Numerous off-the-shelf solutions are readily available for these functions. However, there are situations where no existing software adequately addresses a company’s unique needs. In such cases, creating custom code becomes a worthwhile option, but it should only be pursued if it promises a substantial return on investment (ROI).

For instance, consider BF&S Manufacturing, a contract manufacturer serving various industries. The company faced challenges in providing real-time data to its customers, who needed oversight of their production. Unable to find an off-the-shelf solution, BF&S embarked on a software program to offer 24/7 real-time data on its product builds. This custom coding enabled transparency and control over production, a competitive advantage that off-the-shelf software couldn’t provide.

The Journey and Costs of Custom Code Development

While rolling your own code can be beneficial, it’s neither simple nor cheap. Software engineers command high salaries, and the costs of finding and hiring them, along with associated expenses, can be substantial. Effective management of code development is crucial to ensure productivity. A DevOps executive may be necessary to supervise the development department effectively. A clear software roadmap should be established before coding begins to avoid costly delays.

Maintenance is another critical aspect of custom code development. Software requires ongoing support, as it can break down, face security threats, and demand updates. In some cases, a complete rewrite may be necessary every five to ten years. These continuous costs must be factored into the decision-making process.

Three Competencies for Rolling Your Own Code

Developing custom software demands specific competencies, which vary depending on the complexity of the requirements. These competencies include:

1. Translating Business Needs into Software Projects: Identifying business needs and solutions is an iterative process. It requires a deep understanding of your current software systems, available data, and available resources. This competency is essential to create a clear roadmap for the code development process.
2. Code Development: Depending on the complexity of the project, a midsize business may have one programmer or a complete engineering department. Efficient code development is crucial for the success of the custom software project.
3. Software Operations: Managing custom applications is costly and involves user support, security risk management, bug fixing, and more. The operations side ensures that the custom code remains healthy and performs optimally.

Case Study: Corefact

Corefact, a marketing services provider for the real estate and mortgage industries, is an example of a company that developed custom code to meet unique needs. Their innovative idea of sending postcards with unique URLs that led to personalized websites couldn’t be realized with off-the-shelf software. Through their technological competency, Corefact developed custom code to achieve this, leading to significant growth and opportunities.

However, Corefact doesn’t develop every piece of software they use. For their ERP and CRM needs, they opted for standard products, highlighting the importance of assessing when custom code development is necessary.

Conclusion

In the quest to decide whether to develop custom software, midsize businesses must carefully consider the potential benefits, costs, and required competencies. Custom code development can be a powerful tool for innovation and efficiency, but it’s a path filled with challenges. Before embarking on the journey of custom code development, businesses should thoroughly assess their capabilities and the magnitude of the potential payoff. The decision to build or buy software is a critical one, and it should be made with a clear understanding of the long-term costs and a commitment to success.