You've all agreed —your organization desperately needs resource management software. But the pivotal question remains: should you build your own software or buy it?
There are a lot of advantages and disadvantages to both building and buying to consider. On the one hand, buying software off-the-shelf can be quick, easy, and inexpensive. On the other hand, designing custom-built software can give you complete control over the features, integration, and code quality.
It's essential to do your research before making a final decision. Taking the time to consider different options and collect feedback from key stakeholders is essential before making a final commitment. Only by examining at all possible solutions can you make an informed decision that aligns with your unique needs and situation.
Weigh the time, cost, and resources associated with each option, as well as any functional integrations that one or the other may lack. If you're serious about building your own software, be sure to speak with people who have gone through the process and built proprietary software.
So which option is right for you? Let's take a look at the pros and cons of building and buying resource management [#section-one]software.[#section-one]
Benefits of building your own resource management software
Building internal resource management software can help your business in many ways. Tailoring software to the specific needs of your organization can give you control over the process and influence over the timeline and costs associated with its development, making it easier to adjust resources as needed.
Creating simple, in-house internal software may save you money because you won't have to build features you don't need. Over a long period of time, building software can often be less costly than purchasing an off-the-shelf product, similar to purchasing a car (versus leasing it) pays off the longer you drive it (though you are left with an outdated vehicle—or, in our case, outdated software).
Ultimately, it's important to carefully consider your organization's needs against time and cost constraints when [#section-two]deciding.[#section-two]
Challenges of building your own resource management software
When getting started, finding the right people to design and build your software can be difficult. If your organization doesn’t currently build its own software, hiring the right people with the appropriate expertise may prove challenging, and hiring the best software designers and developers will be expensive.
Because of a lack of access to top designers, internal software teams often struggle to understand resource management problems to design appropriate solutions. This can raise costs and cause delays. Additionally, having multiple stakeholders inputting their own specifications can result in a “Frankenstein” product.
With a small development team, the transfer of information on the codebase can be a concern, particularly when it comes to software involving different programming languages. You should be sure to have a plan in place should the small team of people who built the software leave your [#section-three]organization.[#section-three]
Plan out all expenses
Cost is probably the single most important factor to consider when building your own resource management software, as the process can be very expensive. Depending on its complexity, tailored internal software can cost hundreds of thousands to millions of dollars.
When drawing up an initial budget, calculate the cost of all labour involved, from design to development. In addition to software developers’ time, don’t forget to factor in the time that all stakeholders will spend on software design during all phases of the project, including the executives who will play a role in the design and testing. This is a significant and often overlooked expense that will be a large distraction from their core job function and comes at the expense of time and resources that could otherwise be put toward other projects.
There are also third-party software component licensing costs to consider. Integrating your current software into the custom software you are building can be a project costing tens to hundreds of thousands of dollars in itself once you factor in time cost. Along with these considerations, ongoing maintenance and support are other important cost of building resource management software.
On a limited budget, you won't be able to achieve the code quality for reliable software, but either way, whatever you build will most likely break and need to be fixed. A quality assurance team is often required to ensure the reliability of your software, especially since it's mission-critical. There will also be required updates and upgrades to open-source systems used in most software, not to mention training, as well as the help and support provided to people using the software.
Further, the software can be prohibitively expensive for small and medium-sized businesses that are unable to achieve an economy of scale for servers and other recurring expenses. For any organization, building your own resource management software will most likely be a costly proposition. All of these factors contribute to the high rate of failure of internal software projects.
Don't forget you will need to implement your own security features. In an era of advanced cyber attacks, it's more important than ever to make sure that your security measures are up to date and effective. If your organization does work for clients that requires higher security now or may in the future, you would want the software to have SOC II Type 2 compliance at a minimum to ensure the right process and testing is in place. These levels of security are complex, time-consuming and very expensive for a single organization.
Perhaps the most overlooked aspect of building your own resource management software is that once you have built the software, you have to train and educate people on it. This is very challenging with complex software like resource management software. Readme docs, help videos, and training must be done to educate other users. Typically the people who build the software are not the people who will do this work and ultimately, the customer support and training can be half of the annual maintenance cost.
If you are a multi-national organization, localization of the software for date, language, and currency can be expensive and time-consuming. There are many details like these that are hard to anticipate at onset of a project and must not be overlooked.
While these aren't even an exhaustive list of the core expenses, it's also important to think beyond base expenses and anticipate additional costs related to delays, unknowns, the unexpected, scope creep, and troubleshooting. If you don't perform this specific type of software development work regularly, you could be drastically underestimating the time and cost it requires.
Even if you're just building a supercharged spreadsheet, comparing the time cost of the employees that will need to be involved in the development can prove to be expensive. This expense can be quickly evaluated by comparing the annual cost of the software to your average cost rate (including overhead) for the total time estimated for the people involved in the project.
According to Glassdoor, the average salary for a software engineer in 2023 is $106,227 with top engineers well over $300,000. Depending on the size of your organization, the annual expense for purchasing software will often be lower than the annual salary of the engineers required. The involvement of executives in the organization in the project is where things can get expensive, especially when considering the opportunity cost of their [#section-four]time.[#section-four]
Scope Creeps
Keep in mind, the process of building anything usually starts out simple and then grows in complexity. As any experienced project manager will tell you, from construction to software projects, time and costs can quickly escalate, often leading to budgets significantly exceeding original estimates. This is particularly true for human capital management, which may seem straightforward but is actually one of the most challenging aspects of operations.
Given how quickly costs can add up, it’s essential for businesses to have a clear sense of their budget at the outset to ensure that their custom-built resource management software does not break the bank. Only by appropriately budgeting the entire life cycle of the project can an organization manage the cost of building its own software.
In many cases, the investment will be well worth the effort. However, what started as an investment to save money can quickly deteriorate into a significant business loss if you continue to pour money into a project without seeing returns. Beware of anyone who tells you that building is easy. The consulting software developers you are looking to hire benefit from the ongoing expenses described above. They know that, because of how far in you are, it will be too late for you to turn back. The sunk cost fallacy is largely to blame for [#section-five]this.[#section-five]
85% of software projects fail
Studies have shown that up to 85% of internal software development projects fail. As I like to say, it’s the unknown unknowns that get people in trouble. If your business doesn't build software as a service and you don’t have anyone in leadership who can answer the question: “What are the best programming languages?” this could be a sign you are headed down the wrong path.
Failure can often be the result of losing stakeholders, having too many decision-makers reluctant to take critical action, and running out of money due to delays and unforeseen expenses. When projects run long and cost becomes a major factor, project stakeholders often begin to lose interest in seeing the project through to [#section-six]completion.[#section-six]
The Pros of Buying Software
Buying off the shelf may be a more appealing option to you due to its associated cost savings and promise of immediate implementation. The time cost of not having the product immediately available is often overlooked when attempting to build your own software, especially given the delays that arise as scope creeps up and the software continues to evolve due to unforeseen changes.
With an off-the-shelf product, you’ll be buying professionally designed software that has experienced professionals on a solution that works for everyone. Successful software companies typically receive and implement feedback from thousands of businesses like yours to design and build a drastically better product. If you understand how deep it goes, resource management is inherently as complex as software can get.
Remember, no software will ever be everything to everyone, and looking for the perfect solution will lead to you never buying software or being disappointed. It’s important to remember that if there was an all-in-one that did everything, it wouldn’t do anything very well.
Given software companies’ large-scale servicing of hundreds, or even thousands of businesses, integrations with your existing software may be available at a steep discount relative to building them yourself. Depending on the software, you may also be able to access the latest, often very expensive, machine learning and AI technology without a large number of users on the software.
Not to be understated, by purchasing software, you also won't have to worry about the headaches and expenses of training, help desk support, documentation, videos, and ongoing maintenance costs, which are typically included in your software subscription [#section-seven]costs.[#section-seven]
Making a decision
Pros of building software
- You’ll have the flexibility to customize the software to your business’s unique requirements.
Cons of building software
- You may not have the relevant experience to know the project’s requirements or the technical expertise to build it in the right way.
- Building custom resource management software costs hundreds of thousands to millions of dollars over the life cycle of the software.
The ability to customize technology based on the specific needs of your business may be worth the additional work and time involved in building instead of buying, but you’ll need to evaluate the total cost of ownership for each scenario beforehand. If you do decide to build your own software, be sure to prepare a thorough budget that accounts for design, development, integrations, servers, licensing, training, maintenance, and ongoing support.
When considering the costs of building your own resource planning and management software, it is essential to take into account up-front investments in development, as well as ongoing maintenance costs. Budgets need to be established with contingencies for scope creep and unknowns that can lead to delays along the way, and it’s important to include support, licensing, and maintenance expenses so that budgets stay within established expectations.
Pros of buying software
- A much faster time-to-implementation.
- Significantly less money to invest up-front.
Cons of buying software
- You may not get all the features you feel you need.
If you decide to buy software, be sure to pick a partner that specializes in resource management and understands your problems. Check that they have good customer support and will listen to your needs. Look for flexible, customizable software that allows you to grow with [#section-eight]it.[#section-eight]
But what's more effective?
As Forbes highlights - “In most situations, working with a reputable provider to deploy a proven solution will allow companies to get the technology into the hands of users more quickly and generally ensures that the solution will have more comprehensive support throughout its life cycle…Why spend countless hours having your best people — or hiring new people — architect a solution that already exists and is proven in the market? Generally, a vendor has already solved the same problem hundreds of times, therefore bringing clients the benefits of best practices based on others’ experiences.”
Further, payroll is the highest expense in most organizations, yet people are managed inefficiently. This results in a tremendous amount of wasted time and money. Resource planning and management is the core driver of efficiency in managing people and can dramatically impact the profitability of any organization. Given the importance of resource management in the organization, this discussion should be about selecting the most effective tool for the job, not the cheapest.
Looking at it that way, building your own resource management software could never compete with a specialty-purpose product. You wouldn't think to build your own project management software, but for some reason people are fooled into thinking it's easy to build resource management software —arguably one of the most complex business functions.
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