Custom Software Vs Off-The-Shelf Software - What to Choose?

With growing digitalization, using software has become necessary for running a business.

But, with so many options available out there, it can be challenging to decide whether to buy an off-the-shelf software or choose to go with a custom-made one.

Both custom and off-the-shelf software have pros and cons and cater to different needs. Hence, analyzing how they compare in terms of use cases, costs, and benefits is vital if you want to pick the right one for your business.

This is what we’re here to help you with.

In this article, we will discuss everything you need to know about custom-built and packaged software to help you make an informed decision, including the pros and cons, costs, and optimal uses.

What Is Custom Software Development?

Custom software development means building software from scratch. This approach is useful when there is a need to develop software that caters to a company's specific needs.

Imagine this; you are a marketing company that constantly schedules meetings and events with clients. Now, Google Suite is a software package that includes Google Calendar to help you with this.

But what if you want software that not only helps schedule meetings but also sends an automated reminder for the same and takes notes of the meeting? In such a case, you will need custom software built for your specific needs.

In contrast to packaged software, custom-built software aims at solving a narrowly defined set of problems and requirements. Hence, such software is usually intended for internal use.

Custom Software Development Process

There are two ways you can go about building custom software. You can either have an in-house team or hire a software development company. The latter is also referred to as bespoke software development.

Regardless of your choice, there must be a strong use case for developing custom-built software. Once you have the use case, you should follow these six steps in the custom software development life cycle to build your software:

• Requirement analysis: Gathering and analyzing requirements from stakeholders to understand what problem the software must solve.
• Planning: Creating a plan to address the issue, which includes estimating the required resources, timelines, and risks.
• Designing: Creating a detailed software system design that meets the requirements and fits within the plan.
• Development and coding: Implementing the design by writing the actual code.
• Deployment and testing: Deploying the software in a production environment and testing it thoroughly to ensure it works as expected.‍
• Maintenance: Monitoring and maintaining the software after deployment. This includes fixing bugs, updating, and ensuring the software remains secure and reliable over time.

Pros & Cons of Custom Software

Like everything else, custom software has its advantages and disadvantages.

Here are the main pros and cons you must know before making a decision:

Advantages of Custom Software

• Helps solve unique problems facing your company
• Makes it easier to modify the software for scalability
• Allows adding enhanced security measures
• Does not require additional licenses cost
• Gives you a competitive edge
• Offers higher return on investment, in the long run
• Lets you license it to others
• Offers interoperability

Disadvantages of Custom Software

• Requires a larger upfront investment
• Doesn’t quickly fix your problems, as software development can take several months
• Requires some research to choose the right vendor
• Takes time and money to maintain

While there are certain disadvantages, the pros of custom software easily outweigh the cons.

This is probably why the demand for custom software is skyrocketing. According to market analysis from Grand View Research, the global custom software development market can grow at a Compound Annual Growth Rate of 22.3% from 2022 to 2030.

Cost & Uses of Custom Software

The cost of building custom software can vary vastly based on several factors, including:

• Software size
• Complexity
• Integrations
• Design
• Security
• Data migration

Generally speaking, though, the average cost varies from £18,000 to £75,000. The cost is usually higher because, unlike packaged software that acts as a one-size-fits-all solution, custom-built software is tailored to your needs.

Custom-built software is specifically useful for businesses looking to keep up with the latest technology through quick upgrades, which are crucial to add functionality to the software. For instance, according to the 2023 State of Accounting & Finance Software Adoption Report, 44% of SMBs in the finance industry plan to upgrade software in 2023 to add more functionality.

Custom software is also useful for companies that have gathered a lot of data and want to personalize customer interactions or automate business processes. This also makes custom applications valuable for solutions with the potential to generate a lot of data.

Here are some practical examples:

• Content management systems
• Invoice and reporting automation
• Inventory control
• Point-of-sale software
• Customer relationship management systems

Businesses with complex processes or startups with growth potential can use custom software. Such companies usually belong to industries like healthcare, FinTech, eCommerce, real estate, etc. However, businesses across many other industries can find use cases for custom software.

Examples of Custom Software

Here are some popular examples of custom software in 2023:

• eCommerce solutions like Amazon and eBay
• Transportation solutions like Uber and HyreCar
• Entertainment software like YouTube and Netflix
• Banking software offered by banks like JPMorgan Chase and Bank of America
• Healthcare solutions like McKesson

What Is Off-the-Shelf Software?

Off-the-shelf software (or packaged software) is commercial, ready-made software. 

You can quickly buy and use off-the-shelf software without any delay. Unlike custom-built software, packaged software is developed to meet general needs and you can integrate it into your existing technology infrastructure.

It’s called packaged software because developers build most commercial off-the-shelf software into different package modules. Anyone can use any of these modules according to their needs.

Pros & Cons of Off-the-Shelf Software

Just like custom software, packaged software comes with its fair share of advantages and disadvantages too. 

Here are some packaged software pros and cons you should take into account.

Advantages of Off-the-Shelf Software

• Doesn’t require a high upfront investment.
• Allows faster implementation.
• Offers better compatibility.
• Comes with 24/7 customer support.
• Provides a wide range of features.

Disadvantages of Off-the-Shelf Software

• Doesn’t allow customization.
• Leads to security concerns if you don’t update it regularly.
• Increases dependency on a vendor for upgrades and updates.
• Requires purchasing a license.
• Results in compatibility issues.
• Comes with extra functionalities that might not be needed.

Cost & Uses of Off-the-Shelf Software

Off-the-shelf software is usually cost-effective, with prices ranging from as low as £50 to as high as £5,000, depending on the developers. 

This is mainly because the cost gets divided among a large user base. Since many people use off-the-shelf software, developers can manage to offer it at a low price.

Some developers also offer a subscription model, especially for cloud-based software. Companies can rent the software’s license for months or even years, based on their needs. For instance, Zoom is an off-the-shelf software. Companies can subscribe to Zoom premium packages at a minimal cost.

Packaged software is mainly useful for small startups. Since custom software requires huge upfront costs, businesses that don’t have funding options are more likely to stick to off-the-shelf software, which usually has all the features that can help companies get started.

Hence, packaged software can help new companies optimize their business operations while saving money. 

Additionally, packaged software is useful for institutions with limited requirements and minimal needs to scale based on customer demands. Educational institutions, for example, can usually do with simple, packaged software to collect students’ information and manage it.

Here are some businesses that should invest in off-the-shelf software:

• Small businesses with limited budgets.
• Non-profit organizations.
• Educational institutions.
• Government agencies.

Off-the-Shelf Software Examples

Off-the-shelf software is a good alternative to costly custom software if you don’t need to meet some specific business requirements. Here are some real-life examples of packaged software:

• HubSpot Custom Relationship Management (CRM)
• Salesforce CRM
• Slack
• Zoom
• Microsoft Office
• Google Workspace
• WordPress

Which One Should I Choose?

Choosing custom or off-the-shelf software largely depends on your business needs, requirements, and budget. Suppose you are a small business owner with a limited budget who needs a tool to manage your accounting and finances. In this case, purchasing a commercially available accounting software package such as QuickBooks or Xero would be enough to meet your business needs.

So, unless your business is big enough and you are ready to scale quickly, packaged software is an ideal choice. 

However, it is best to use custom-built software if you have the budget.

As competition across all industries has got fierce, making your business successful is all about getting a competitive advantage. And custom software can help you with just that. 

For example, if you are a large corporation that needs to manage a complex supply chain that spans multiple locations, departments, and vendors, a custom software solution would be the best choice.

If you are still confused about whether to go for custom software or not, ask yourself these questions:

• Are your current packaged software solutions not meeting all of your business needs?
• Are you using multiple software solutions that do not integrate well with each other?
• Do you have unique business processes or requirements that off-the-shelf software solutions cannot address?
• Are you willing to invest in developing, deploying, and maintaining a custom software solution?
• Do you need to have more control over your software?
• Do you find more benefits for custom software after comparing custom vs packaged software?

If your response to these questions was yes, collaborating with a software solution provider to build customized software is your best bet.

Conclusion

Now that you know the difference between packaged software and custom-built software, you can escape the “buy or build dilemma.”

It's important to remember that there are trade-offs with either choice. Custom software may require a high upfront cost and take a long to develop. But it will give you more returns on your investment in the long run.