Before Investing in Custom Software, Answer These 4 Questions

Custom software can make a company, but it can also break a business if leaders and entrepreneurs fail to look before they leap.

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By Alex Tapper

Opinions expressed by Entrepreneur contributors are their own.

Digital innovation was important before the pandemic, but Covid-19 served as a tipping point.

IFS found that 70 percent of companies plan to increase spending on digital transformation, and Meticulous Research estimates that the market will be worth nearly $3.3 billion by 2025. With 74 percent of companies planning to permanently shift to remote work and more customers doing business digitally than ever before, these predictions could very well come to pass. Organizations will need to make digital innovation a priority if they want to flourish.

The risks of moving too slowly are well-documented. Competitors get to market first, customers shift to better-equipped providers and employees leave in search of more interesting and innovative work. In a recent New York Times article, for example, 15 current and former executives bemoaned indecision and delay at Google, demonstrating that even the most tech-forward organizations aren't immune to corporate lethargy.

What people forget is that hasty decisions regarding digital innovation investments come at their own cost. Shortened development timelines lead to missed product requirements, which ultimately translate into costly reworks or scrapped projects.

Related: 3 Ways to Be Technologically Innovative on a Budget

At Frogslayer, we typically encounter two types of groups looking to make digital investments: There are mid-market firms that want to shift from paper to digital, and then there are companies hoping to launch new business concepts as fully digital. Both groups can rush to conclusions, assuming they need custom software solutions for their entire business. In reality, off-the-shelf software products can be purchased at a lower price point and then integrated with custom components.

What's the difference between standard software and customized software? Custom business software promises a perfect fit at a much greater expense. If solving a unique business problem with custom software will catapult an organization ahead of the competition, it's worth the investment — but failure can be costly.

This is why young company leaders and entrepreneurs should ask themselves these four questions before investing in custom business software:

1. Do I gain a competitive advantage from custom software?

If custom business software doesn't produce a clear competitive advantage, it's a good idea to look at off-the-shelf alternatives. Accounting software is an excellent example because it's unlikely to be a differentiator. Most young businesses and startups are better off buying existing solutions instead of starting from scratch.

On the other hand, custom software that produces a competitive advantage can be worth the investment. For instance, a workflow platform designed for a specific business could improve efficiency and make it more valuable to customers. According to a recent survey by McKinsey Global Institute, companies in the top 10 percent of annual growth invested 2.6 times more in "intangible assets" like research and development, employee training and digital transformation.

2. Are my goals and requirements specific and well-documented?

Too often, people make the mistake of assuming their final products will turn out well — even if they lack a plan. For example, after a Boeing spacecraft performed poorly in a recent test flight, NASA realized it had failed to ask for a management plan detailing how complex parts would be put together and tested.

The best way to avoid future problems is by starting with a clear product vision. Outline objectives and source requirements before a single line of code is written. Then, designate a seasoned product manager or third-party consultant to translate disparate goals into a development roadmap.

Related: Overcoming Challenges On The Road To Digital Transformation

3. Am I ready to work on the business instead of in it?

Custom software isn't just about writing a check. It takes engagement from business sponsors and stakeholders to make software come to life. Whether development teams are internal employees or third-party vendors, they need to engage end users if they want to make functional software.

Engagement sounds easy enough, but keep in mind that stakeholders probably have a host of other responsibilities. According to MuleSoft, only 37 percent of information technology teams were able to complete all of their projects in 2020. Before investing in custom software solutions, weigh competing priorities against each other to see what should take precedence.

Related: Why Digital Transformation is More About People Than Technology

4. Where will this project live when it's done?

Building software can be fun, infectious and beneficial to a company's bottom line. Although kicking off a new project is exciting, enthusiasm tends to wane over time, which can cause critical long-term details to be overlooked.

Consider the $44 million vaccine administration management system that the Centers for Disease Control and Prevention built in partnership with Deloitte. A month after the project went live, only nine states were using it — and complaints of crashes and slow speeds were common. The moral of the story? Software development is never truly finished, which is why it's critical to ensure that a project has a long-term home. Delegate software owners for needs such as documentation, versioning, new user training and more.

Once young company leaders and entrepreneurs answer these four questions, they'll be better equipped to figure out whether they need off-the-shelf or custom software solutions. Just make sure to take a step back before making any decisions. Digital innovation is the key to the future, but it should always serve a purpose.

Alex Tapper

Entrepreneur Leadership Network Contributor

Head of client strategy and services at Frogslayer

Alex Tapper is the head of client strategy and services at Frogslayer, a custom software-development and digital-innovation firm. Clients partner with Frogslayer to rapidly build, launch and scale software products and digitals platforms that create new revenue streams and competitive advantages.

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