The Risks, Benefits & ROI of Custom Business Software

Transcription

1 #203, St NW Edmonton AB T5N 1P9 tel. (780) fax. (780) The Risks, Benefits & ROI of Custom Business Software Prepared by Emergence by Design Inc. Rev

2 Table of Contents 1 Introduction Custom Software As Compared With Commercial-Off-The-Shelf Solutions Fixed Cost & Time Lines Vs Time & Materials Approach Complete Advance Specification Vs Iterative Development / Specification Open Source Vs Proprietary Tools Integrations & Automations Custom Software: Analysis of Benefits and Detractors Benefits Detractors In Conclusion: In the Fullness of Time Business Needs Change... 8 The Risks, Benefits & ROI of Custom Business Software Page 2

3 1 Introduction First, it s important to understand the choices you can make, and the pros and cons of each. There are custom solutions and there are ready-made off-the-shelf solutions. Additionally, there are different kinds of problems you can try to solve with software, which are not mutually exclusive: Increase revenue by increasing overall efficiency, and subsequently capacity Increase revenue by reducing lost revenue opportunities Increase the reliability of your processes Increase the value of your data / the efficiency with which you mine and handle data Increase customer satisfaction Reduce employee frustration In any event, you might consider going through a thorough review of your goals and challenges with a qualified software vendor before determining your budget. If you re not certain whether custom software or off-the-shelf software is right for you, consider reading the rest of this document, and doing further reading afterwards. Budget is often a big issue for customers, who are naturally prone to determine their budget in advance of learning about the various solutions available to them. Reasons to do some investigation of the solutions available before settling on a budget include: Depending on the appropriateness of the solution, a complete Return-on-Investment should be practical in under two years from project launch, possibly even under one year The sweet spot for the point of spending-versus-return will not be apparent until you have engaged in a thorough consultation with a professional vendor Depending on the vendor, you may end up paying for initial consultation, but you will come away with invaluable perspective and information about your project requirements, and no obligation to proceed further. Think of it like spending roughly 1% or less of your total budget to be certain of the best plan for your entire budget. 2 Custom Software Compared With Commercial-Off-The-Shelf Solutions There are many different ways to solve business problems with software, but two basic categories of solutions: Make software from scratch (custom software) that solves the problem(s) precisely and fits like a glove: o The customer commissions the software directly, and subsequently owns the code outright As a result the customer can make any changes they wish to the software, now or at any time in the future The Risks, Benefits & ROI of Custom Business Software Page 3

4 o No unnecessary features or behaviours within the software means no obstacles or entanglements to complicate future development o Outright code ownership means no ongoing licensing fees and no licensing issues when you want to add new features or change the behaviour of existing ones o None of your critical path features are missing Commercial-Off-The-Shelf ( COTS ) solutions are ready-made o These can potentially be configured to your specific requirements o These are unlikely to be a complete match with your requirements, as they are more of a one-size-fits-all solution o While the initial cost can be lower with COTS solutions, you generally pay for initial savings over time, as you compensate for the software s growing inability to bridge the gap between the functionality it delivers on Day 1, and your continually evolving business requirements If the highest priority you have is getting something up and running now, with as little time and money as possible, a COTS solution may be worth considering. If, however, you: Need to solve your problems with precision, Plan to do business for a long time, and Wish to utilize a solution with a sustainable legacy, solving problems with custom developed software may be right for you. *NOTE: In a variety of industries, custom software is simply not necessary under any circumstances. For example, in the world of accounting, there is often no need to create custom software for any but the most highly specialized of purposes, as this is an area where COTS solutions have mastered many contingencies with skill and maturity. An initial consultation with Emergence by Design, or most professional software development vendors, will cost you no money and require no obligation. A credible professional will tell you plainly if there is anything legitimately useful they can do for you, alternately recommending a COTS solution or making a qualified referral as appropriate. 3 Fixed Cost & Timelines vs. Time & Materials Approach Nobody likes to jump into a custom software project, regardless of the benefits or ROI, without some idea of the costs and timeline; yet at the same time it s a good idea to remember that the development of custom software will yield the right outcome(s) when the cost(s) and deadline(s) are approximations, and not written in stone. There are projects that have real world reasons to have time deadlines: Some businesses are seasonal, and the software must be operational by a certain date before the busy season begins in order to be certain everyone has time to train sufficiently If you only have so much money, that is a reason to have a hard cost limit The Risks, Benefits & ROI of Custom Business Software Page 4

5 In general, however, it s important to remember that you can continue to develop features of lower priority once the main software component(s) are in production, to allow deadlines and cost limitations to be addressed incrementally. A standard Time & Materials approach to the development of custom software is generally advisable for software of any significant complexity, because such projects can be compared to the creation of a car whose production run size is one. Generally, you find out afterwards how much it cost to make one of them. You don t generally know (to the penny, and the exact date) what it was going to take to make the first one in advance. Remember, it s not really done until everyone who needs to use the system is smiling, and that takes an unspecified volume of effort on the part of the development team, who will need to address unpredictable issues that went unforeseen until someone tries using the software for the first time in a production environment. An experienced software development company can put you in the ballpark, and account for the unknown to a standard extent, but no two projects are identical, and no two customers require the same degree of robustness. 3.1 Complete Advance Specification vs. Iterative Development / Specification This is another variable that is custom to each project: the degree to which you will want to specify your project in advance of seeing any code written. Depending on the nature and complexity of the project, it makes sense to detail the project in advance. In some cases, you reduce project risk factors significantly by exploring and detailing every last aspect of the project specification in advance of any other aspect of project commencement. In other cases, you need to get the project under way to reveal essential details that only become known as you undertake the project execution phase. 4 Open Source vs. Proprietary Tools Many proprietary (or closed-source ) tools are popular owing to the functionality they deliver with little or no configuration. The focus of these preconfigured tools is primarily on their up front functionality, and rapidly configurable modules, as opposed to long-term flexibility and extensibility. Conversely, open source systems (which are subsequently more commonly used as the basis for custom software) offer less functionality out of the box, but act as rapid-application-development-platforms. They are known for being highly flexible, customizable and extensible, standing the test of time in applications where the ability to evolve to meet continually-changing business needs is paramount. 5 Integrations & Automations In many cases, businesses do not simply require that new software be written to deliver new interfaces with new functions rather, existing systems which already perform tasks without any problem simply The Risks, Benefits & ROI of Custom Business Software Page 5

6 need to be integrated together, potentially with the addition of some automations, in order to bridge some gap(s) in functionality that make all the difference. While the solution here still requires writing custom software, the software required to integrate and automate does not always come with an interface, or any extensive interfaces, and is subsequently often regarded as minor, when it may have been very simple to create, or it may have been somewhat difficult. In any event, a consultation with a professional software development vendor can help to determine what sort of solutions and options exist, suggest price points, and help you figure out the various amenities of each approach. 6 Custom Software: Analysis of Benefits and Detractors The decision to pursue custom software isn t always as simple as it sounds. On the surface, a custom solution sounds right for almost every business; after all, who wants a one-size-fits-all business system which was not crafted for their business, and will not exactly match existing business processes and systems? Despite this apparently obvious and simple analysis, there are issues to consider; depending on your approach, the process can be risky, and depending on your requirements, there may be Commercial- Off-The-Shelf ( COTS ) solutions that are a better value for the effort. A reputable custom software vendor will tell you plainly if there is a COTS solution that would suit your requirements better than a custom solution for numerous reasons: An industry-wide COTS system will undoubtedly be better than the solution a vendor develops for just one customer, as the COTS solution is generally developed and paid for by thousands or even tens of thousands of customers, so the vendor will know they are doing you a disservice not just in terms of cost, but also in terms of the quality of the solution and believe it or not, most business owners (including software development company owners) take pride in offering you quality advice, even if it involves a referral elsewhere You will inevitably discover the COTS solution, and when you do, you will want to know why the vendor chose to re-invent the wheel instead of pointing you at the pre-existing offering When the vendor doesn t have a good answer, you will become an unhappy customer, at which time you will refuse to continue to do business with them, or refer business to them, and You will slander them to anyone who will listen, forever, as well you should; something no software development vendor, or business owner in any field, is interested in better to make a quality referral initially 6.1 Benefits The graphic below (Figure 1) shows many of the common problems addressed, and benefits produced by, a custom-developed business solution in the most general terms. As a general rule, business systems and processes develop in response to a need, and are not necessarily the best solution to the problem, rather, these solutions are often stop-gap measures that are put in place quickly out of necessity, and then simply not revisited, because everyone is too busy. The Risks, Benefits & ROI of Custom Business Software Page 6

7 All too often, businesses could be operating at higher capacity, and with greater efficiency and profitability, yet inefficient flow of data, bottlenecks, and unreliable / inefficient systems prevent the business from reaching its peak. The development and adoption of custom software is not just a magic wand that replaces otherwise inefficient business processes; often it is a rallying point for change of many kinds, at many levels, viewed as an opportunity to examine and reshape habits throughout the business. One of the great benefits of a custom software investment is that you can generally plot the ROI for any custom software project as within 1-2 years of project completion / implementation, and those are conservative numbers. As a general rule, you will increase capacity and reduce inefficiencies and unreliable process so much so quickly that the system will seem worthwhile before it reaches implementation, by virtue of the stress it alleviates. Figure Detractors The development of custom software is not for every business / business owner / stakeholder. The process is intensive, and sometimes you will get more from a solution that solves your problems partially (such as a COTS solution), and which requires less investment of your time and energy, than you will from the somewhat rigorous process of developing a system which requires insider-involvement throughout the process in order to achieve maximum potential. The Risks, Benefits & ROI of Custom Business Software Page 7

8 No custom software development vendor will understand your business, and will know the details and minutiae, in the same way as the owner(s) and those who operate it at the top levels. For this reason, the custom software development process needs fairly regular and unfettered access (or at least orderly and predictable access) to business owners and stakeholders for the purposes of consultation and regular testing. Additionally, as mentioned above, custom software will [often] require additional investments of time and money, as compared with COTS solutions as is often the case, this is a you get what you pay for scenario, and if you are paying for custom software you should expect it to fit much better but you should only expect that outcome if you are investing your own time, energy and observations into the process throughout, without simply waiting for the miracle to manifest at the end of the process. The process requires that all parties participate extensively in order to succeed. 7 In Conclusion: In the Fullness of Time Business Needs Change Over time, the nature of an organization changes, along with its requirements. If business processes and systems do not change in a corresponding way, or cannot keep pace, the business will suffer: Inefficiencies and bottlenecks will come to the forefront Overall capacity will suffer Profitability will suffer Mistakes will increase Stress in the workplace will increase The cost of doing business will increase Well-designed and properly-fitted custom software will be able to change and grow to meet your evolving and changing business requirements: As existing business logic must change or expand in focus As completely new requirements emerge As the scale of the business grows Software that habitually pays for itself rapidly is by definition a worthwhile endeavour, and systems which are flexible enough to continuously adapt to your changing needs do not become obsolete. The Risks, Benefits & ROI of Custom Business Software Page 8