The SMB software challenge: to build or to buy?

– Nov 4, 2022
Three question marks in speech bubbles on a blue background
Love what you’ve read? Share it with your network.

Many SMBs find themselves spoiled with options and flush with enough money to do more business than ever before – meaning new business-to-business associations and new opportunities for unprecedented post-pandemic growth. Over half of SMBs intend to spend part of that money on software that will help them grow and market their brands.

The key question is whether those businesses should buy or build onto their current system with an off-the-shelf solution or to revamp entirely and buy a new one. The decision to buy or to build is as unique as each SMB, brand, and vision to drive productivity and sales.

Start with what’s working and what isn’t

Life would be easy if the decision to buy or build was 100 percent either way. But as you know, growing an SMB rests on decisions that are built on other decisions. There’s rarely a time when decisions aren’t made in shades of grey, re-evaluated, and reconfigured over time.

So start with what’s working for you and what isn’t. If you’ve already deemed the decision to build or to buy new software is necessary for your business to remain competitive, consider both the tangibles and intangibles driving your business. What’s driving your sales or service? Will your business model transition from remote work back to the office? How is your data mined and used? Are you digitally fluent? Have you optimised and bedded down your processes?

The Economist once called data the most valuable resource in the world, likening it to oil as a renewable resource. Out of all the tangibles and intangibles, one umbrella you should take into consideration in the decision to buy or to build is your company’s digital fluency.

Consider these tangibles
  • Think about cart to conversion whether you are a retail, wholesale, or service SMB.
  • Are you operating a legacy system?
  • Are you already in the cloud?
  • Integration capability
  • Cybersecurity
Consider these intangibles
  • Possible downtime during deployment
  • Integration and acceptability among the culture of management and workers
  • Ability of your SMB to keep pace with a changing environment
  • Does your company operate in a waterfall or agile method?
  • Your SWOT software analysis (tangible and intangible)

Obviously your company will have its unique objectives and goals driving where you want it to be, say a year, three years, five or 10 years down the road. Digital fluency notwithstanding, necessity is always the prime consideration whether to build or to buy software that will change both the short-term and the long-term trajectory of how you do business.

Now consider your options

Your options, once you figure out what is necessary for your business, what is working and what isn’t working for your SMB, are three-fold and may prove to be the most challenging facet of your build or buy decision of all.

Option 1: The buy and build approach. 

Find a product that meets the majority of your needs, and build a product to meet the rest of your company’s needs. There’s no need to build an entirely new system when this combination approach will integrate and build a product into what your SMB already has working for it.

Option 2. The buy multiple products approach. 

Find two or more products that when combined will cover all of your needs. Your budget will focus on developing and integrating these products into your already functional system.

Option 3. The last resort.

If you can’t find the right product to meet your needs, focus on building a solution from scratch.

What issues are you trying to find solutions for in your existing system? Do you have a process in place, and is it repeatable? Do you have budget or time constraints that you have to work with? Do you want your build or buy solution to generate new revenue streams, invigorate growth, be scalable to meet future demand?

Build or buy decision tree.

The pros and cons of deciding to buy

Integrating out-of-the-box software into your existing software system meets the needs of most companies. Don’t expect it to deliver on every need, however. You may have to compromise with a partial system build for the sake of efficiency, effectiveness, and how it all fits together to deliver on your company’s objectives and goals.

Pros:
  • You know what the upfront investment and ongoing costs will be. Out-of-the-box software costs are spread out among customers, which keeps costs lower.
  • Set up out of the box allows for speedy deployment. It can take a few hours to a few days depending on company approvals, user training and configuring the system.
  • Multiple features that meet the requirements of your existing system.
  • Support and maintenance won’t be a worry, but taken care of by the company you buy from.
  • Training provided by the software vendor.
  • Lower product risk. Vendors provide upgrades, bug patches, and fill any functional gaps.
  • Large number of active users mean that there’s usually a large knowledge base.

Established software will have a lot of public documentation that your company can readily pull as needed without having an internal IT team spend time and money developing something that already exists.

Cons:

There are always a few cons to consider to balance out the pros:

  • An out-of-the-box solution may not meet all of your (exact) functional needs.
  • Less flexibility, as out of the box solutions meet current needs but not necessarily future growth and its changing needs.
  • Scalability is limited.
  • Monthly or annual cloud fees to plan for.

You may or may not be able to modify an out-of-the-box solution to meet the changing needs of your company since each software package will have functional limitations to consider before you buy.

You can buy (or rent) software instead of building from scratch. But if you do decide that your SMB has the digital fluency, the budget, and the timeframe to hire a development team to build a new software system, consider the entire lifecycle – the software logistics, if you will – in your feasibility analysis.

The pros and cons of deciding to build

Your SMB’s unique processes have kept your company working for a while now. You’ve weathered the pandemic. Now you’re deciding if your system needs a reset – a rebuild. You’ve evaluated your system and feel that off-the-shelf products don’t represent what you need or your processes in order to remain not only competitive, but to grow your business in the direction that meets future objectives and goals.

Building a proprietary system allows you to customise software throughout its lifecycle, to add or delete features as your company grows.

Pros:

Tailored solutions give you more control over your desired outcomes.

  • Custom builds allows for intellectual property and competitor advantage retention and agility since you won’t be fitting your business around a technology product.
  • Flexibility means that your build can be modified as you need it to be.
  • Customer experience can be fully customised and controlled.
  • Exclusive ownership and total control of your build.

Custom builds are personalised builds that meet your industry’s regulatory needs.

Cons:

Custom software solutions take significant time to implement. SMBs don’t always have that luxury as implementation can mean serious downtime, training, and costs to get your build up and running.

  • Expensive to build and maintain. The initial outlay isn’t the end all in cost. There is a “cost uncertainty” in building proprietary software that an SMB may not be able to readily absorb in its infrastructure.
  • Expensive to develop and maintain your build. Even when the build is up and running, your investment in the system will continue since maintenance is ongoing at your company’s expense.
  • Developer dependency is also expensive. You really do get what you pay for in a build. You need to find a software developer you can trust, who has a proven track record in delivering the tech you need and select.

The keyword here is expensive. Build, maintenance, training, and ongoing support are dependent on your developer to deliver. If you go over budget, which according to McKinsey, IT projects can easily go over budget by 45 percent and over timeframes by 7 percent, many companies, including SMBs, reach the brink of company failure when IT projects go badly.

Wait! Going hybrid may capitalise on what you have already

Leveraging the parts of your system that are truly unique to your business with a tailored build solution may be more cost-effective than exclusively buy or build scenarios. Likewise, changing some of your processes to fit off-the-shelf products can keep core functions like sales and marketing from unnecessary downtime.

Such a hybrid solution may also better protect your company’s intellectual property – patents, trademarks, copyrights, and the like.

Hybrid solutions allow you to keep what’s working and build on what’s not.

Don’t reinvent the wheel unless necessary

Listen, you don’t want – or need – to reinvent the wheel. Every customer, every company, is unique. What kind of software you need shouldn’t be exclusively dependent on your company’s size or its sales volume but rather on its individual needs and processes. Don’t try to fit your company around software. You want your solution to fit your company’s needs and processes to maximise your return on investment.

Buy off-the-shelf or build new? You’re in charge of your company’s future. But you don’t have to make the build or buy decision alone. So talk to us. Let’s get you started. We can help you find out what solution is right for you.

Woman skiing downhill

Enhance your competitive edge.
See how we can supercharge your growth.