11/01/1998

Are You a Candidate for Custom Solutions?

By Todd Zeldin and Michael Pascale

ACG Professionals, Inc.

The choice between implementing off-the-shelf software products or developing custom applications may be daunting. So much is at stake and a wrong decision could paralyze your company and be very costly. We often are exposed to clients who are dissatisfied with software decisions others made years ago, when they are the ones who left to clean up the mess. Sometimes clients need not replace software, rather they need to better implement the program they adopted years ago. However, what if you determine that you must adopt a new application? Perhaps you need a client-server solution to replace your legacy system or you think an Internet application is critical to the future success of your company. Do you adopt a proven off-the-shelf solution or embark on developing your own product? How do you determine what is best for your company?

As a grocery list is helpful to you when you shop, a requirements document is invaluable when you are considering a new software product. Last year, our company worked with Atlanta-based United Parcel Services (UPS) to develop and implement their lease tracking system. For the first several weeks, we reviewed UPS's current system and its shortfalls. The strategic planning and implementation document served both as a guideline during the selection process and a justification for the funding of the project. By evaluating the present conditions, stating the problem at hand, and analyzing the various alternatives, UPS was able to confidently evaluate the relative strengths and weaknesses of off-the-shelf solutions versus custom development, taking into consideration both short-term and long-term requirements.

Market research is an integral part of any requirements document. UPS spent several weeks exploring all of its alternatives and devising an action plan. The best place to begin is to talk with software vendors and their clients. Find out which products currently are available in the marketplace, what your competitors are using, and the language in which the program is written. Often industry journals cover the latest software applications and are an excellent guide. You will probably ascertain that there are a select group of off-the-shelf products that, on the surface, meet most of your requirements. Contact these vendors and request demonstration diskettes or on-site presentations of their products. Always make sure that the product is within your price range before you request an on-site demonstration. If you love a product but cannot afford to purchase and implement it, you will further frustrate your user base.

Off-the-shelf products offer many benefits. One of the greatest benefits is pricing. Most canned solutions will be more affordable and will offer greater stability because the product has been field tested. Often implementation costs are underestimated for canned products – don't be fooled. You should apply an additional 40 percent to 50 percent of the licensing fees toward training, implementation and report writing.

Other benefits of canned applications are quick implementation and the ability of trading data with other companies. If your application is transaction-oriented, swapping electronic information with others is a significant competitive advantage. Additionally, the greater the market share of the product, the more people know how to use the program and the easier it becomes to recruit employees. Legacy programs become increasingly expensive because the skill set required to maintain them is more scarce.

If you determine that no off-the-shelf products fully meet your needs, you should extend your search to include custom solutions. Not all custom solutions require building a product from scratch. Often vendors can provide a "shell" and layer your custom application on top of the shell. In fact, today's software development firms are more software assemblers than developers, leveraging off of components or "objects" that others have developed and seamlessly integrating these into their own architecture. Remember that the premium for custom solutions can be as low as 10 percent and as high as several hundred percent, and your on-going maintenance costs will be higher as well. Despite these premiums, custom solutions offer many benefits.

For one, you have the ability to reflect your business practices into the application instead of changing your business to accommodate the software's limitations. For most middle to large sized companies, canned programs simply are not flexible enough. The software must be "faked" into performing various functions. Furthermore, vendors are reluctant to change their product for a single client, opting for a generic approach that can appeal to the masses. The custom application is developed to reflect exactly how you do business and is extremely flexible, and the incremental price is often justified.

Another advantage of custom applications is that they can offer greater integration with other applications. Off-the-shelf solutions are often too constrained and difficult to "talk" to other programs. Database systems are often custom developed because they afford so much flexibility in importing from and exporting to other products.

There is a third solution that we call the "hybrid" model. For years, software development was proprietary in nature, resulting in custom solutions and legacy systems. There were no economies of scale in custom software development because vendors always started from scratch. With the advent of industry standards, the creation of custom programs can depend heavily on others' tools. For example, if you want a graphing engine in your program, you need not develop your own, rather you can choose from dozens of third party applications. This presents a new and complex variable to the equation of software development: did you select the best tool to embed into your program? If you are a formidable assembler of tools, you can deliver a hybrid solution to clients that includes the relatives strengths of both custom and off-the-shelf applications.

Before you embark on making a software decision, make a grocery list and inventory what you would like the software product to do for your company. Once this list is compiled, thoroughly research the market to see what is out there and whether it will satisfy that list. If you are lucky enough to find an off-the-shelf alternative that meets your needs, act accordingly. However, if canned products do not meet your full expectations and you feel as if you would be compromising important functionality, do not hesitate pursuing custom or hybrid solutions. If developed and implemented correctly, a custom or hybrid solution may result in your company enjoying a significant competitive advantage.

If you would like to address any interests, you may contact Todd Zeldin at tzeldin@acgpro.com.