Custom Software Can Be a Risky Proposition (Opinion)

Most small and mid-sized businesses have computers and software that are used in running the business. The most typical software is some sort of bookkeeping, or “general ledger,” type of software. It is not uncommon to also find software for inventory, purchasing, order processing, work scheduling and other types of transactions and recordkeeping needed in the business.

Most of the time this software is purchased, or “packaged,” software. Sometimes the business has invested in writing its own “custom” software.

Whether the “packaged” or “custom” software approach is used, it is common to find that businesses are both unhappy with their software and have spent, or are spending, a lot of unnecessary money related to that software.

How does this happen?

Believe it or not, the reason that businesses end up unhappy with their software or related spending is that the whole endeavor was approached with the notion of saving money foremost in mind.

Most large businesses make use of some type of packaged software. For small businesses, QuickBooks is the most popular. By far the most popular software for large corporations is from the German company SAP.

The territory between QuickBooks and SAP contains thousands of software packages.

Many programmers will review these packages and announce, “I can write that and save a lot of money.”

Key message – Do not believe them!

As a basic rule, a business should never attempt to write custom software when packaged software is available that performs the needed functions.

There is a very simple rule that I provide my clients. Imagine a triangle. At each of the points of the triangle is written one word. The words at the three points are “fast,” “good” and “cheap.”

When thinking about custom software, it is important to realize that you only can optimize two of the three points of the triangle.

If you want software that is “good” and you want to get it “fast,” it will not be “cheap” in the short run.

If you want software “fast” that is “cheap,” it will not be good.

If you want software that is “good” and “cheap,” you will not be getting it “fast.” In fact, plan on it taking way more time to get it finished than you ever imagined. Actually, you can probably plan on never really finishing it.

The focus on “good” and “cheap” ends up not being very “cheap.”

Custom software tends to bring along an investment in a full-time programming staff. Good programmers can easily cost $80,000 to $100,000 per year. Put two to work and it becomes very easy for a business to spend $180,000-plus a year for multiple years – to write functionality that probably could have been purchased for much less and been available to implement immediately.

When writing custom software, both programmers and other staff invest time in learning-curve issues and design work. In contrast, packaged software tends to have thousands, if not millions, of hours of design and user experience built into it that a purchaser gets immediate access to. There is a huge difference in quality and detail.

While working with the programmers on the development of custom software, businesses tend to use extra staff in order to get work accomplished. Many times the business lets work go undone or gets to it very slowly. It is common to find significant cash flow improvement opportunities available in a business simply because of a failure to get invoices out promptly or effectively manage accounts receivables.

Writing custom software tends to lead to an unhealthy reliance on specific individuals that wrote, or are continually writing, it. Documentation is poor or non-existent. As more work gets done, more dependence on specific individuals results. The business knows this, and, more importantly, the individuals know this. If they leave on their own or get run over by the proverbial truck, well, you get the picture.

Custom software is more than likely to be a bad, expensive and risky investment for small and mid-sized businesses. Unfortunately, it is easy to turn a purchase of packaged software into a bad investment as well. Check back next month for that discussion.  w

Steve Hankins is CEO and co-founder of Accio.US of Springdale, a technology company providing advisory and management services for small to medium-sized businesses. He may be reached at [email protected] and followed on Twitter as @stevehankins or @accious.