News & Insights
Insights25th November 2019
Understanding the Hidden Risks and Costs of Off-the-Shelf Software
Off-the-shelf vs custom software development, which is right for your business?
In a previous article, we discussed the merits and pitfalls of choosing an off-the-shelf software solution. In it, we defined what the options are and how to spot the telltale signs that off-the-shelf just won’t fit your business. (For a refresher on this article, click here.)
We also provided a framework for selecting off-the-shelf software and helping to decide if it is right for your business. Below is a quick recap of the 6-step framework we designed:
- Use Google
- Get Insights from Your People
- Compare Features
- Understand the Costs
- Understand the Risks of Off-the-Shelf
- Decision Time
In this article, we want to zone in on two aspects of this framework that are often overlooked. These are understanding the true, and often hidden, costs and risks associated with off-the-shelf software solutions.
Understanding the True Costs of Off-the-Shelf Software Solutions
By following our 6-step framework for choosing off-the-shelf software solutions, you should arrive at step four with at least two products that you are happy with. At this point it is time to get to grips with the costs. Looking at the stated price alone would be a big mistake but it’s something that happens all too much. Oftentimes organisations only start understanding the additional requirements after the solution has been implemented and at that point, it’s a bit late.
So, what to look for?
You might find that both of your options, on the surface, seem to have similar costs and conditions. For example, both products could be labelled as relatively inexpensive for up to twenty-five users, and you might only have twenty. That, of course, sits well. But, and there usually is a “but”, if you want certain features there is a paywall or an additional cost. At this point, there are a few vital questions you need to ask:
- What key features fall behind a paywall?
One of the main advantages of off-the-shelf solutions is that you get a baseline of standard features at an affordable cost. However, what if many of the features you need aren’t part of the standard set. This now becomes a major consideration. You must evaluate the actual cost of the product based on your established must-have key features.
- Are integration features behind a paywall?
Often integration features are hidden behind a paywall. This must be considered as part of the initial cost.
- Consider the maturity of the product in the market. Could key features move behind a paywall in the future?
This is an even trickier proposition. One of the biggest disadvantages of off-the-shelf solutions is that you are putting yourself at the mercy of the vendor. You may find that all your must-have features are part of the standard offering. However, what if the vendor decides to change that offering and their business model? Who’s to say whether or not your must-have features could be placed behind a paywall? This is an unforeseen cost that is rarely considered.
- What is the status of the vendor you are buying from?
Is the product well settled or is it changing rapidly? Is the software provider well established and still producing regular releases? Be aware that the software you choose may work differently in the near future. This may cause problems.
Understanding the Risks Associated with Off-the-Shelf Software Solutions
Once you’ve assessed the true cost of your off-the-shelf solution, it’s time to examine the risks. Like some of the cost considerations, the risks are often hiding out of plain sight. Below are a number of risks associated with off-the-shelf software that you need to be aware of.
- Your business may change.
Your current list of must-have features may be totally different in 12 months’ time. This is a major risk. If your business needs to stay agile you may want to consider custom software development.
The scale of your business may change, and the off-the-shelf solution may quickly become cost prohibitive. This is true of many excellent products in the market. Be aware of the projected costs if your team grows or if the amount you use the product increases.
- Pricing may change at any time.
The solution you choose has a business behind it and you are at the mercy of their decision-making process. At any time, pricing structures could change, or features could go behind paywalls.
- The risk of relinquishing control and individuality.
With off-the-shelf solutions, the main advantage is that the development costs are effectively split across numerous buyers or the volume of licences sold. However, this is also a disadvantage. Providers of off-the-shelf software solutions have many customers; you are just one of them. You can’t easily influence the direction the product goes in.
By being ‘just another customer’ you also lose control and differentiation. You are locked into an upgrade cycle. (You can sometimes opt out of upgrade cycles. However, this is often even more problematic. Updates often address issues and bugs within features.)
By being one of many customers, you are also not unique. Any other company can use the same product and align their business processes with it. This means that competitors can easily imitate how you deliver your value to customers.
- The risk of being locked-in.
When you invest in off-the-shelf software there is often a training cycle, there are costs associated with migrations from other systems and other up-front charges. These costs make changing products at a later date, very challenging. This even applies when you are experiencing major difficulties with the product. The decision to integrate software into your internal processes is a big one. Choosing to reverse your decision down the line can be a serious blow to your organisation.
How can we help?
There are many considerations in choosing between off-the-shelf solutions and custom software development. However, understanding the hidden costs and risks, is one of the biggest. If you are worried that you haven’t considered all eventualities, why not talk to one of our team. ActionPoint’s team of software experts have vast experience in walking through the software decision-making process. We would be more than happy to answer any and all questions, and help you decide what options is best for your business.
Visit us at https://actionpoint.ie/contact/