Your current software no longer meets your needs. It is unable to provide valuable information; does not support your current business process; is difficult to maintain or is frequently unavailable due to system failures. Or, perhaps your company needs a completely new software application to support a specific business process. Whatever the case, you are probably trying to decide how you should proceed. Should you purchase an off-the-shelf product or build custom software? If you decide to build, should you build the software in-house or outsource the project to a third party vendor? If you decide to outsource, should you use an onshore or offshore development organization?

The decision to buy, build or outsource is both important and complex. After all, you are making a decision about the software upon which the future success of your business lies. The choice you make will set the direction of the project and ultimately determine its success.

There are many options available to you. However, you should proceed with caution. The option that appears to be most affordable at first glance could result in a failed project or negative return on investment. The goal of this paper is to highlight the advantages and disadvantages of each scenario to make it easier for you to choose the best strategy for your company.

When you are considering off-the-shelf software, the evaluation process is all-important. Carefully analyzing the features, functions, benefits and costs of all viable options will allow you to select the best product for your business. An efficient way to gather the same information regarding each product is to issue a formal Request for Information (RFI). The responses you receive from the RFI will help you do a side-by-side comparison of each product's strengths and weaknesses.

In most cases, off-the-shelf software will not fit your organization perfectly. In the event that you find an off-the-shelf application that meets a majority of your requirements, you should proceed cautiously and make sure your organization will not be adversely affected by having to drastically change its processes to fit the software.

As you are conducting your analysis, you will also want proof of each product's reliability and ease of integration with your technology infrastructure. Many companies believe off-the-shelf products never fail and easily integrate with any environment, but this is not always the case. Choosing the right vendor and product for your situation is the best way to ensure project success.

As for requesting new product features, keep in mind you will have to jockey with the rest of the vendor's clients for the vendor's attention. When you do get the vendor's attention, you may have to explain your problems to people who do not necessarily understand your business or how you are using their software. Odds are your request for a new feature will not be granted until enough of the vendor's other clients have requested the same feature and the development makes economic sense. As a result, you will want to choose your software vendor wisely.

You will also want to identify all costs associated with each product before you proceed. For example, if the off-the-shelf product requires extensive customization to fit your organization's needs, you should factor in the time and price associated with doing the work. Many companies purchase off-the-shelf applications, only to find they have to pay a consulting firm three times as much for customization. This becomes very costly and significantly lengthens the project timeline.

Another cost factor that should be considered is ongoing per-user licensing and maintenance costs throughout the product's lifecycle. Over the long term, this can make off-the-shelf software a very expensive option. This is especially true when a company only uses a fraction of the available features, but has to pay license fees on the entire product set. Suddenly, what looked like an attractive option because of the lower initial costs turns into a very expensive option with low or negative return on investment (ROI) in the long term.

When To Consider Off-the-Shelf Software

• Many viable products available
• Business processes are flexible
• Customized branding is not required
• Integration with other applications is limited
• Implementation timeline is short
• Per-seat or per-license fees are acceptable
• Adding new product features is not critical

Perceived Benefits

• Lower initial costs
• Reduced time to deployment
• Higher success rate
• Availability of training and support
• Access to user manuals and documentation

Since not all IT departments and software developers have the same expertise, it will be important to analyze the capabilities of your company's development team. Simply asking your developers if they can handle the project is not enough. A comprehensive technical skill assessment is strongly advised. If you determine upon completion of the skills assessment that you do not have the bandwidth or the skills needed to complete the project but still would like to complete the project in-house, you can hire additional developers or augment your staff with contract engineers. However, a careful interview process is recommended so you select the right technical resources for your project.

Another factor to consider is how long it will take to develop the application in-house. There is often a communication gap between management and developers; management looks at the world from 50,000 feet and developers focus on granular details. As a result, what may appear as a small additional request from management may require months of programming to incorporate it into the application. To ensure the project stays on track, it will be critical to define requirements, deliverables and timelines at the beginning of the project and keep future changes to a minimum.

A financial analysis of an internal project is recommended. Whether you are using internal employees or on-site contractors, there can be significant development and opportunity costs. For example, internal employees have other responsibilities that will be interrupted due to the new development project. Therefore, the opportunity costs associated with not performing regular tasks and responsibilities will be a cost to the company. In the case of contractors who are hired to augment your internal staff, you will want to add the cost of training and additional technology resources that are consumed to the hourly rate you will be charged.

Many companies successfully complete in-house software development projects, but following are some common challenges that can impede a project's progress:

• Unrealistic deadlines from management
• Vague definition of project deliverables
• Inadequate time allotted for software design
• Little or no beta testing
• Internal politics
• Poor estimating techniques (time and cost)
• Lack of a quality assurance process
• Lack of proper project management
• Insufficient resources for ongoing maintenance and support
• Documentation that is overlooked or avoided

When To Consider In-House Software

• Software requirements are unique
• Internal development staff has expertise
• In-house staff has bandwidth
• Extensive integration is required
• Implementation timeline is flexible
• Customized features are needed
• Ability to make changes is critical

Perceived Benefits

• Software built around specific requirements
• Complete control over future development
• Clear understanding of how the software works
• Unique features that will create a competitive advantage
• Lower cost to develop and support

BHMI is one of a variety of options you can pursue if you decide to outsource your software development project. Since outsourcing means you will be depending on an external company to successfully complete your software development project, a strong business relationship will be critical. As with any relationship, effective communication between the two organizations will be a critical success factor. During your evaluation process, you may want to confirm the software service company has a process in place to proactively communicate with your project team and management. BHMI, for example, assigns a senior project manager who has the technical and business knowledge to communicate with all levels of your organization. This project manager will be dedicated to your project until the software is successfully deployed.

Another area of importance is the company's project methodology and development approach. If software development is the company's core competency, it should have a detailed and highly efficient approach for developing software. It should also be able to provide you with a list of references you can contact to confirm the company's reputation. Over the last 20 years, BHMI has created a comprehensive methodology that insures project success.

Understanding the company's pricing structure is also a key decision factor. You should be wary of companies that want to charge you by the hour. Paying by the hour means you will assume the pricing risk for the project. Reputable software service companies, including BHMI, will eliminate the pricing risk for your company by providing a fixed project cost. Once BHMI provides you a budget, it will take responsibility for any overage – not you.

You will also want to choose a software service company that has strong financial stability and longevity. This not only speaks to its ability to run a business profitably and satisfy client needs, it also means it will be around in the future to provide on-going enhancements, support, maintenance and training. BHMI is financially stable and has been providing on-going support to its clients for decades. Corporate stability is important because companies depend on BHMI to support applications that are critical to the successful operation of their businesses.

Using a third-party software developer can sometimes appear to be more costly, but typically this option is not as costly as hiring contractors to augment your staff. Plus, the costs are visible, up-front and quantifiable. In general, outsourcing has become very popular due to its flexibility and cost savings. It also allows your organization to concentrate its efforts on your core business while leveraging best-of-breed knowledge for your non-core software development tasks. In the end, this option will provide tremendous value to your organization in the form of a highly customized application that fits all of your functional requirements and differentiates your business from competing businesses. The key, however, is selecting the right partner for your company.

When To Consider Outsourcing

• No in-house development staff
• In-house staff lacks bandwidth
• Specific features and functions are required
• Must be deployed as quickly as possible
• Prefer a single capital expenditure
• Quality control and testing are critical
• Require the flexibility of custom software with the ease of a product

Perceived Benefits

• Reduced project and financial risk
• Clearly defined requirements and deliverables
• Most up-to-date design capabilities
• Reduced project timeline and budget
• Easy to maintain and enhance
• Unique features will create a competitive advantage

Deciding to buy, build or outsource is not an easy decision. The first step is to determine if there are any viable products on the market that will meet your business needs. If so, a careful analysis of available off-the-shelf product options is a great way to start.

However, if you find your software needs are unique, you will probably consider developing the software in-house or outsourcing the development to a third party software solution provider like BHMI. This can be a difficult decision because many of the benefits for outsourcing a development project are similar to the benefits of creating an in-house application. For instance, in both cases, a custom solution will be created to meet the specific business needs of your organization.

When considering in-house development, you should keep in mind that research has shown an inverse correlation between the size of a project and the probability that it will be completed successfully. It's not uncommon to hear about a large organization that has lost millions after pulling the plug on a multi-million dollar development project.

The likelihood of success is greater for outsourced projects when compared to in-house development, most likely because software development is the outsourcing vendor's core competency. Additionally, the experience of a vendor in building software applications for other companies in the same industry is a valuable proposition. Outsourcing organizations do not have to re-invent the wheel and can leverage the experience and technology expertise offered by a software development company. This means, unless your in-house development team has a proven track record for developing applications on the same scale that you require, you can increase your chances for success by outsourcing your large, complex development projects to a third party software solution provider like BHMI. By partnering with BHMI, a company with a 20-year history of successful software implementations, you will significantly improve your chances of outsourcing success.

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