Custom Software vs. Off-the-Shelf: When to Build Your Own

"Should we buy or build?" - this question comes up with almost every software project. The answer is rarely simple, but with the right framework, it can be answered systematically.

Table of Contents

1. The Basics: Build vs. Buy
2. When Standard Software Is the Right Choice
3. When Custom Software Makes Sense
4. The True Costs Compared
5. Decision Framework
6. Hybrid Approaches
7. Checklist for Your Decision

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The Basics: Build vs. Buy

What Is Standard Software?

Ready-made products used by many companies:

Examples:

• CRM: Salesforce, HubSpot, Pipedrive
• ERP: SAP, Odoo, Microsoft Dynamics
• Accounting: QuickBooks, Xero, Sage
• Project Management: Asana, Monday, Jira

Advantages:

• Ready to use immediately
• Proven and tested
• Regular updates
• Community and support

Disadvantages:

• Limited customizability
• Vendor dependency
• Often features you don't need
• Ongoing license costs

What Is Custom Software?

Tailor-made solutions developed specifically for your company:

Examples:

• Industry-specific inventory management
• Individual customer portals
• Special workflow systems
• Custom apps and platforms

Advantages:

• Exactly tailored to your processes
• Competitive advantage through differentiation
• Full control and ownership rights
• No license costs

Disadvantages:

• High initial investment
• Longer time-to-market
• You're responsible for maintenance
• Risk of misdevelopment

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When Standard Software Is the Right Choice

Rule 1: The Process Is Industry Standard

Question: Do other companies in your industry do the same thing?

If yes → Standard software is probably better.

Examples of industry-standard processes:

• Accounting (QuickBooks, Xero)
• Email marketing (Mailchimp, HubSpot)
• HR administration (BambooHR, Workday)
• Project management (Asana, Jira)

Why? Millions have been invested to solve these problems. You benefit from that investment.

Rule 2: No Differentiation Through Software

Question: Is the software crucial for your competitive advantage?

If no → Standard software is probably better.

Examples:

• Your accounting isn't a USP
• Your email tool doesn't make you better than the competition
• Standard CRM suffices for your sales processes

Rule 3: Budget and Time Are Limited

Question: Do you need the solution quickly and cheaply?

If yes → Standard software is probably better.

Aspect	Standard Software	Custom Software
Time-to-Market	1-4 weeks	3-12 months
Initial Costs	€100-€10,000	€30,000-€500,000
Risk	Low	Higher

Rule 4: Requirements Are Unclear

Question: Do you know exactly what you need?

If no → Start with standard software.

Standard software helps understand requirements. Only when you know what's missing does custom development make sense.

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When Custom Software Makes Sense

Rule 1: Unique Business Processes

Question: Are your processes so special that no standard solution fits?

Indicators:

• You have to extremely customize standard software
• Workarounds are complicated and error-prone
• Employees work parallel in Excel
• You need integration that doesn't exist

Example: A logistics company with special route optimizations that no standard TMS can handle.

Rule 2: Software Is Core to Your Product

Question: Is software central to your business model?

If yes → Custom software is probably better.

Examples:

• SaaS companies (your product IS software)
• Tech-enabled services (software makes the difference)
• Digital platforms (marketplaces, networks)

Rule 3: Competitive Advantage Through Technology

Question: Does custom software give you a real edge?

Indicators:

• Competition doesn't have access to the same technology
• Automation creates cost advantages
• Customers choose you because of your digital solution
• Processes are 10x faster/better than competition

Rule 4: Long-Term Strategic Importance

Question: Will you still need this software in 10 years?

If yes → The higher initial investment pays off.

Calculation:

Standard software: €2,000/month × 120 months = €240,000
Custom software: €150,000 + (€500/month × 120) = €210,000

→ Custom is often cheaper after 5-7 years

Rule 5: Data and Control Are Critical

Question: Must the data stay with you?

Reasons for custom:

• Highly sensitive data (health, finance)
• Regulatory requirements (GDPR, etc.)
• No dependency on third parties desired
• Full control over source code

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The True Costs Compared

Cost Structure Standard Software

Cost Type	Year 1	Years 2-5	5-Year TCO
License/Subscription	€12,000	€12,000/year	€60,000
Implementation	€10,000	-	€10,000
Training	€3,000	€1,000/year	€7,000
Customizations	€5,000	€2,000/year	€13,000
Integration	€8,000	€1,000/year	€12,000
Total	€38,000	€16,000/year	€102,000

Cost Structure Custom Software

Cost Type	Year 1	Years 2-5	5-Year TCO
Development	€100,000	-	€100,000
Hosting	€3,000	€3,000/year	€15,000
Maintenance	-	€10,000/year	€40,000
Further development	-	€15,000/year	€60,000
Training	€2,000	€500/year	€4,000
Total	€105,000	€28,500/year	€219,000

The Crux: Hidden Costs

Standard software - hidden costs:

• Premium features you'll need later
• Price increases at contract renewal
• Costs for workarounds
• Opportunity costs from limitations
• Dependency (vendor lock-in)

Custom software - hidden costs:

• Scope creep during development
• Technical debt
• Developer team turnover
• Documentation and knowledge transfer
• Security updates and patches

Break-Even Analysis

When does custom become cheaper?

Standard software: €16,000/year ongoing
Custom software: €28,500/year ongoing
Difference Year 1: €67,000 (Custom more expensive)

Break-even reached when:
- Standard license increases >15%/year
- Custom maintenance drops to €15,000/year
- Value from custom > €12,500/year savings

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Decision Framework

Step 1: Evaluate Strategic Relevance

Question	Yes	No
Is the software core to your business model?	+2 Custom	+2 Standard
Does it differentiate you from competition?	+2 Custom	+2 Standard
Will you still need it in 10 years?	+1 Custom	+1 Standard

Step 2: Evaluate Requirements

Question	Yes	No
Are your processes unique?	+2 Custom	+2 Standard
Do you need deep integration?	+1 Custom	+1 Standard
Are requirements clearly defined?	+1 Custom	+2 Standard

Step 3: Evaluate Resources

Question	Yes	No
Do you have €100k+ budget?	+1 Custom	+2 Standard
Do you have 6+ months time?	+1 Custom	+2 Standard
Do you have internal IT competence?	+1 Custom	+1 Standard

Step 4: Evaluate

Sum	Recommendation
Standard > Custom +4	Clear recommendation: Standard software
Standard > Custom +1-3	Tendency: Standard software
Equal (±0)	Consider hybrid approach
Custom > Standard +1-3	Tendency: Custom software
Custom > Standard +4	Clear recommendation: Custom software

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Hybrid Approaches

Option 1: Standard + Custom Extensions

Concept: Standard software as base, custom for special functions.

Example:

• Base: Salesforce CRM
• Custom: Special reporting modules via API
• Advantage: Best of both worlds

When useful:

• 80% of requirements covered by standard
• Critical 20% need custom solution
• API access available

Option 2: Low-Code/No-Code as Bridge

Concept: Platforms like Bubble, Retool, or Airtable.

Example:

• Quick prototype in no-code
• Validation of concept
• On success: Custom development for scaling

When useful:

• Uncertainty about requirements
• Limited budget
• Fast iteration important

Option 3: Custom on Open-Source Base

Concept: Open source as foundation, custom for specifics.

Example:

• Base: Odoo (Open Source ERP)
• Custom: Own modules for special processes
• Advantage: Lower development costs

When useful:

• Complex system needed
• But not building everything from scratch
• Open source competence available

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Checklist for Your Decision

Before the Decision

Requirements:

• All stakeholders surveyed
• Must-have vs. nice-to-have separated
• Current processes documented
• Future requirements considered

Market Analysis:

• At least 5 standard solutions reviewed
• Demos conducted
• References obtained
• Prices calculated over 5 years

Internal Resources:

• Budget realistically planned
• Timeline with buffer
• IT competence evaluated
• Change management considered

During the Decision

For Standard Software:

• Exit strategy defined
• Contract term optimized
• Extensibility verified
• Data migration planned

For Custom Software:

• Detailed requirements specification
• Development partner evaluated
• Ownership rights clarified
• Maintenance contract planned

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Conclusion: Asking the Right Question

The question isn't "Build or Buy?", but:

"Which approach creates the most value for my company?"

Choose standard software when:

• The process is industry standard
• You want to start quickly
• Software isn't a differentiator
• Budget and risk should be limited

Choose custom software when:

• Your processes are unique
• Software IS your business model
• You need a real competitive advantage
• You want long-term independence

Choose a hybrid approach when:

• You're uncertain
• Standard fits 80%
• You want to stay flexible

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Next Steps

Facing the build-vs-buy decision?

At Balane Tech, we help you make the right decision - and implement it. Whether standard software integration or custom development. Schedule a free consultation