When NOT to Invest in Custom Software

Custom-developed software is not always the best option. Seriously. And there are plenty of instances that we have turned down work that we didn’t believe would be a good fit for the customer.

Here are five situations we’ve run into in which custom software isn’t the best idea.

 

1. When Off-the-Shelf Software (OTS) Works Just Fine

 

We do sometimes run into clients that are simply gung-ho about customizing a good portion of their tech-stack even when it’s not a good idea. We get the sentiment. When you have a big budget and you’re used to working with things that are tailored to your specific needs, it can be difficult to settle for a generic solution.

But sometimes generic really is the best option. What we mean by “when OTS works just fine” is when it meets all your core requirements and it suits your budget.

Clients will also approach Unstoppable because they’re tired of paying thousands of dollars a year in licensing fees and believe it would be better just to build their own system they can own outright. But they don’t realize that the system they want to recreate would cost six to seven figures to build, and they’d never see a reasonable return on their investment.

This is especially true for software that’s not industry-specific. For instance, there’s probably no reason for you to create your own email system. Why would you when G Suite or Outlook or Front will meet your core needs and would cost millions of dollars to recreate?

 

2. It Doesn’t Fit the Nature of Your Business (Risk is Too High)

 

Unstoppable Software was once approached by restaurant owners who wanted to create a custom app that allowed diners to order and flag down the waitstaff, pay, and tip, etc. using a tablet on the table. There were a few problems with this request. 

The first was that their margin was too low to make the investment pay off. It doesn’t make sense to build software when the nature of the business you’re in doesn’t have room to fuel that innovation.

And going back to our first point, this kind of solution already exists for a modest subscription fee. There was no reason to reinvent the wheel — especially because this particular product was not going to bring the business new revenue and was outside their primary business model. 

When an investment is outside of your primary business model, it’s much less likely to boost your profit margins by either helping your business run more efficiently (save money) or bring in more revenue.

In very broad terms, custom software investments usually occur when off-the-shelf solutions are not industry-specific enough to meet a company’s needs or when a company wants an edge over your direct competitors who are already using OTS industry-specific solutions. 

In either scenario, we’re looking at what’s best for your specific industry and business.

 

3. The Use Case/Value Hasn’t Been Proven 

 

Since a lot of our focus is on internally-focused software, clients come to us not always knowing how to prove the return on the software they’re interested in investing in. 

There are ways to prove this investment and we believe it’s always a good practice to spend a little time or money proving the value of an investment before approving a massive project.

So when a client is interested in a project, but the value hasn’t been proven, we don’t outright turn these projects down. Instead, we assist the customer in proving the ROI. Learn how.

 

4. Copying What Another Company Has 

 

We were once approached by a taxicab company that was looking to create an app that, to be frank, would’ve copied Uber.

First of all, they didn’t have any idea how much Uber had spent creating their product. (If you’re curious, it’s near a trillion). Sure, at the beginning, somehow offering rideshare programs could’ve been a way for taxi companies like the one that reached out to Unstoppable to stay relevant. But by the time this company had reached out, they were too far behind to catch up. 

And perhaps more importantly, there would’ve been major issues with patents and trademarks. We or they would’ve been sued if we tried.

A tech development firm called Iron Speed was forced out of business by a patent troll even though the founder of Iron Speed believed the litigation was baseless. “While we feel this is baseless, patent litigation is generally a multi-million dollar exercise. This has put a drain on our resources we can no longer afford,” one of the co-founders explained to customers. 

If you’re looking to create software through which your company will generate revenue, then it better be unique from other programs out there. 

 

5. You Can’t Afford It

 

Like the taxi company, we sometimes see folks trying to use software as a lifeline to make their business profitable. Paying for custom software is never going to be as good of an investment as whatever it takes to fix your core business model. 

Software can bring new sources of revenue, but it needs to already be in line with your existing business model, or you’re in a good place to test out a new market/business model.  

In other words, we don’t recommend using a custom software development as a lifeline to save your business. Save the business first, then make an investment.

 

So When Do You Invest In Custom Software?

 

Basically, it’s the inverse of what we’ve outlined in this article. Do invest in custom software when:

  • Off-the-shelf software is missing features & functionality tied to your business goals
  • The software is integral to your operations and/or strongly tied to your industry
  • You have a documented ROI
  • You can afford it and it offers a proven competitive edge that can increase your companies value by:
    • Making your operations more efficient
    • (OR) Offering new revenue ideas that are unique to anything else on the market

We recommend you check off as many of these as possible before considering a custom software investment. Unsure? We can talk you through your ideas.

https://unstoppablesoftware.com/boost-profit-margins-practical-custom-software/

 

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