Custom software vs off-the-shelf: when to build, from €2,500

For a price for your own situation, request a quote.

What is custom software?

Custom software is software made for one business. A small tool for one task can be built from €2,500, excluding VAT. A tool like that takes over one job that is now done in a spreadsheet or by hand. The opposite is off-the-shelf software: a product you buy or rent that is the same for many businesses, such as accounting software, a shop platform or a CRM.

Custom software stores your data, runs the calculations and checks that belong to your business and links the systems you already have. The choice is seldom all or nothing. Many businesses use off-the-shelf software for what everyone does and have only the part that sets their own work apart built for them.

Take, for example, an installation company with twenty employees that keeps work orders, hours and materials in three spreadsheets and, besides that, in its accounting software. That is the situation in which the question “build or buy?” is real.

Custom or off-the-shelf software: what is the difference?

Off-the-shelf and custom software differ on seven points:

When is off-the-shelf software better?

Buying is the better choice in four situations:

• A product already exists that does what you need. Then you do not need custom software.
• Your process is ordinary. Writing invoices, sharing a calendar or running a web shop are done the same way by many businesses.
• You can take on the product’s way of working without your business being worse off.
• Speed matters: you want to start tomorrow, not in a few weeks.

When is custom software better?

Have it built if you recognise yourself in one or more of these five situations:

• You have to adapt your way of working to the software, and that costs you more than it earns.
• Your staff enter the same data by hand in several systems. A link or a new system removes that double work.
• A spreadsheet has become too big and complicated to trust: nobody dares to touch the formulas.
• You have calculations, checks or rules that belong to your business and that off-the-shelf software does not know.
• Your own way of working is how you earn money, and you do not want to trade it for a supplier’s.

The installation company recognises itself in the second and the third: the same data sits in three spreadsheets and the accounting system, and nobody dares touch the formulas of the timesheets.

What does custom software cost?

A tool for one task costs from €2,500. Extra screens, connections to other software, permissions for different kinds of users and data that has to be moved across make it more. The price follows from the hours of work; count on about €100 an hour. This is roughly how many hours each part takes:

Moving data and connections vary the most. A tidy spreadsheet is moved in a few hours; a spreadsheet with years of exceptions has to be cleaned first. A connection to modern accounting software usually stays at the low end, and a connection to an old system ends up at the top. How the same parts add up for an app is in how much does it cost to build an app?.

Know which parts your own tool needs? Request a quote and say in a few lines which job the software should take over.

A timesheet tool for an installation company

The installation company wants to replace its three spreadsheets with one tool. Engineers enter their hours and the materials used for each work order, and the office sees per job what has to be invoiced. The first version does only that:

25 hours at €100 is €2,500. For that, the hours and materials are in one place, and the formulas nobody dared to touch are gone.

Once the tool works, the company can extend it step by step. Each amount below includes testing and meetings:

Start with the first version and add to it only once the engineers are using it. You then pay only for what turns out to be needed in practice.

Does your situation look like the installation company’s? Request a quote and you get the same sum worked out for your own tool.

When does custom software cost more?

Custom software gets more expensive as more people and departments do their work in it. A system for several departments starts at around 100 hours, about €10,000. That amount buys three things a tool for one task does not have: several kinds of users with their own permissions, connections to the software the business already uses, and data moved across in stages while the old system keeps running until the new one works well.

A large system does not have to be built in one go. The timesheet tool can be the start: once it works, planning, stock or quotes are added one at a time. Each step is then an amount you can oversee, and you stop when it is enough.

When does custom software pay for itself?

Off-the-shelf software costs every month; custom software costs an amount first and little afterwards. You work out the break-even point like this:

break-even in years = build cost ÷ (yearly cost of off-the-shelf − yearly maintenance of custom)

Suppose the installation company has the tool built with the connection to its accounting software, for €2,500 + €1,600 = €4,100. The alternative is a work-order package at €30 per user a month: €3,600 a year for ten users. Maintenance of custom software is 15 to 20% of the build cost a year, here €615 to €820.

If the package costs €10 per user a month, that is €1,200 a year, and the break-even lies between 7.0 and 10.8 years. Almost no business uses the same software that long without changing anything, so buying is then better. Hosting comes on top for custom software, and a package may do more than the one task you need. If the break-even is shorter than the time you expect to use the software, custom software pays; if it is longer, it does not.

What are the risks of custom software?

Custom software has four risks, and each has a remedy. The first is ownership: who has the rights to the software? Agree that they pass to you once everything is paid and that accounts with third parties are in your company’s name. The second is dependence on one builder: ask for the complete source code, a written description of the system and common technologies, so that another developer can take it over. The third is maintenance: software that is not maintained stops working properly after a few years, so count on 15 to 20% of the build cost a year. The fourth is starting too big: projects often get stuck on a plan that was too large, not on the technology, so start with a small first version that is already usable.

How do you choose? Five questions

Go through these five questions in order:

1. Is there a product that does what you need? If so, buy it.
2. Does it make you adapt your way of working, and does that cost you more than it earns? If not, buy. If so, go on.
3. Do your people enter the same data more than once? If so: try linking first, otherwise build.
4. What is the break-even in years, with the formula above? Shorter than the expected time of use: build. Longer: buy.
5. Can you afford the maintenance? If not, do not build.

What is a mix of both?

A mix is often best: buy off-the-shelf software for what everyone does, link the systems and build only the missing piece. That keeps the building small, and you keep the benefits of a product someone else maintains. A connection between two systems you already have starts at about €800 and is often the cheapest form of custom software.

Frequently asked questions

Having custom software built by us

If a product you can buy does what you need, you do not need us, and we say which product. If your way of working does not fit what exists, or your people enter the same data in several systems, we build the tool that solves it, from €2,500. Request a quote with a few lines about the work that now takes too much time, and you receive the hours, the price and the monthly costs in writing.