In this article you will learn about the real difference between custom made- and off-the-shelf software looked upon from a modern (2023) standing point. It is particularly helpful when you have to decide between the two options and need to refresh or renew your knowledge of the two options. This article will also give you input on what you can use to explain these two methods to laymen.
Custom software and off-the-shelf software are two options available to businesses and organizations when acquiring software solutions. Each option has its advantages and disadvantages, and the choice between the two ultimately depends on the specific needs and circumstances of the organization.
Author of the blog:
Harmjan Oonk
What is custom software?
Custom software refers to software built specifically for an organization’s needs. This means that it is designed and developed from scratch, tailored to meet the organization’s specific requirements. There are multiple ways of building software. In an earlier published article, we already explained the different ways of building software, i.e. no-code, low-code and high-code and discussed its pros & cons.
Custom software is often used when off-the-shelf software does not meet an organization’s specific needs or when unique business processes require a custom solution. The main advantage of custom software is that it can be precisely tailored to meet the organization’s needs, resulting in greater efficiency and productivity.
What is off-the-shelf software?
On the other hand, off-the-shelf software refers to readily available software that can be purchased without any customization. This type of software is designed for use by a wide range of businesses and organizations and often has a broad range of features and functionalities. The main advantage of off-the-shelf software is that it often is more affordable and can be implemented faster than custom software. It’s cheaper since multiple clients use these solutions because the cost of the building of the software is carried by multiple users.
The needs of an organization
Every organization is, of course, unique and constantly changing. If it is your job to ensure that your IT software solutions fit current needs and are scalable or flexible enough to be ready for the future, you need to be aware of the consequences of your choices. But, naturally, it is hard for every company to ensure they are prepared for the future. The only thing you can do is make sure that your IT landscape is flexible enough to adjust.
The differences between the two types of software
| Custom | Off the shelf | |
| Fulfill your organizational need | 100% | 50-75% |
| Initial price | $$$ | $$ |
| Total Cost of Ownership | Dependent upon use case | Dependent upon use case |
| Being in control of the software | You’re in control of the roadmap of the software. | You’re a customer of the software, therefore you have limited influence on the roadmap of the software |
| Own the software | Yes | No |
| Gain competitive advantage | Yes | No |
| Price versus amount of features | Bad | Good |
| Speed of implementation | Long | Short |
| Gets constantly updated | No | Yes |
| Adds value based on market focus | No | Yes |
The main reasons to choose custom software over off-the-shelf include:
- When you want to be in control of your roadmap. Once you purchase off-the-shelf software, you’re one of the many clients. Therefore, you have limited influence on the product roadmap.
- When you don’t want to be dependent on your software supplier.
- When you want to create a unique software solution that does not yet exist.
- When you want to gain a competitive advantage, since competitors cannot ‘purchase’ your solutions.
The main reasons to choose off-the-shelf software over custom are:
- You want a reasonable balance of price versus features .
- You don’t care about the fact that multiple suppliers use these solutions.
- You want to be sure your solution is always updated with essential regulation information (for example: legal, finance or human resource management).
- You don’t use this software solution to gain a competitive advantage.
What is the best option?
Again, a question we get regularly is: “What is the best option?”. But once again, we cannot answer this question. There is no best; custom and off-the-shelf have significant advantages and disadvantages. There is no solution for everything. However, by combining these two solutions, you can achieve great things. Let us discuss some examples of how companies use combinations:
Financial company
Example: a company is constantly acquiring new companies. They use SAP to make sure their core system is continually updated. However, these systems use low code to ensure the acquired companies’ data gets updated into SAP. After the core system of the newly acquired company is ‘end-of-life’, the new company starts to use SAP.
Postal company
Example: a postal company offers many unique services through their website that can be purchased. They have multiple unique digital products.Therefore, they created a website with a custom back end using high code, as they wanted a competitive advantage with this website, as well as a good customer experience. They use SalesForce to ensure all main processes are managed in a core system.
Transport company
A logistics company uses a supplier’s off-the-shelf solution for their transport and management system. They do not use custom software to enhance this. Since they want to be the cheapest carrier in the market, they only offer services that are part of this TMS solution. If they can purchase modules available in the TMS solution, they will use these modules.
In the three examples mentioned above, you can see that every company chooses a different strategic approach. There is no good or bad choice. The solutions are just used differently. As explained earlier, understanding the pros and cons of multiple custom software languages can be great to make a decision on what is the most ideal choice for your company.
Summary
The choice between custom software and off-the-shelf software depends on various factors, including the specific needs and requirements of the organization, the initial budget, and the time constraints. Custom software is ideal when there are unique business processes or when off-the-shelf software does not meet the specific needs of the organization. However, one has to understand what different types of custom software solutions are available. At the same time, off-the-shelf software is a good option when cost and speed of implementation are a priority.
Harmjan Oonk
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