Businesses are faced with a choice when selecting the software that will help run their business for the next five to ten years: elect for low cost and short-term flexibility – at the expense of long-term strategic options – or choose a high-end product with a large price tag that the company may never outgrow, but at the expense of day-to-day flexibility. More and more companies are opting for the middle-road: a custom solution that will provide the right mix of flexibility, price, and power.
The trade-off between scalability and flexibility
Off the shelf (OTS) or consumer grade applications, such as Microsoft Excel and Access, are very flexible in how they manage data. They are agnostic as to the specific types of data stored and arranged, and make a large set of generic tools available for mining and manipulating data. However, users may end up spending many hours manipulating data so it is presented in the right format, and keeping data clean can be an issue since there is no central database. In addition, Excel and Access often are not suitable for manipulating large volumes of data.
High-end, typically industry vertical-specific applications, on the other hand, are less flexible about the type of data, where and how the data is stored, and what operations are available to manipulate and explore data. The upside is increased overall functionality, improved business intelligence, and better ability to keep the database clean and accurate. By trading flexibility for scalability, these high-end solutions are able to efficiently perform highly complex manipulation and reporting on very large quantities of data.
The trade-off between power and price
With a higher degree of scalability and processing power comes a hefty price tag: The initial license cost for industry specific applications can be tens of thousands of dollars per license; annual maintenance and upgrade fees can easily reach 40% of the original purchase price; and the lost productivity and costs of integrating the new software into a company’s unique business situation can easily double or triple the explicit purchase and installation price.
Ongoing costs include keeping staff up-to-date on the latest release’s new functionality, and paying high-priced “vendor consultants” to enable your expensive piece of software to do what you need to run your business. Consumer grade or retail software tends to be priced in the hundreds of dollars per user and there is often no explicit maintenance fee, but major feature upgrades are usually 50 percent to 75 percent of the cost of a new license. In return for reduced up-front licensing and implementation cost, however, retail consumer software suffers from performance issues when either the sheer amount of data overwhelms the entry-level installation, or when the custom needs of the user exceed the design of the off -the-shelf product.
The Custom Software solution
Businesses seeking a rich feature set without a large price tag must consider custom software as an option. Pricing for custom software is typically negotiated based on your needs and wants, and on the complexity of the finished application. Custom software builds on the functionality of both off-the-shelf and high-end packages, tailoring the feature set to the business needs of the customer. The customer defines documentation requirements, functional requirements, and technical support procedures tailored to his or her business processes and existing IT infrastructure. Custom software can be a pay-as-you-go pricing model, where you only pay for what you need, and since you are buying tailored functionality, you get a very powerful “vertical” application at a comparatively low price.