When a company needs an enterprise solution, be it CRM, ERP, or marketing automation software, its decision-makers need to choose between custom and off-the-shelf software. In this article, we will shed a light on the economics of custom enteprise software development by exploring the main cost factors and potential ROI and analyzing the benefits of with investing in software development services.

Custom software development cost factors

It goes without saying that custom software development requires high initial investment that varies between dozens of thousands to millions of dollars. The factors affecting the cost of custom enterprise solution development are the following:

• Software complexity. If your enterprise software features multiple modules, complex business logic, sophisticated algorithms, advanced features, or complex analytical engines, it will require more effort develop and test.
• Your business size. The number of employees expected to actively use your enterprise solution will directly influence its performance and scalability requirements and therefore, the amount of effort and investment needed for its development.
• External integrations. Integrating your solution with your existing systems or other third-party applications can also incur additional costs. Whereas some integrations are easy to perform, like connecting payment services through APIs that they provide, integrating your new enterprise software with legacy systems will require more time and effort due to the need for careful planning, extensive testing, and ensuring data compatibility and business continuity. In addition, legacy systems are typically built on outdated technologies, and connecting your new software to them requires custom integration scripts.
• Data migration. Transferring business data from your existing systems to the new one will also increase the custom development project’s cost. Although data migration itself is not a very complex process, it still requires additional time and effort to write migration scripts, prepare data, cleanse it, map it to the new system, and perform a test migration, as well as run the data migration itself.
• Developers’ salary. Developing your custom solution in-house, you will have to pay fixed salaries to your IT team. However, if outsource your project to a third-party provider, the hourly cost of the development team may vary considerably depending on the team’s qualifications and location.

Taking into consideration all the mentioned factors, the cost of custom enterprise software development can reach, as we already mentioned, millions of dollars. So, if it’s so expensive, why bother?

Benefits of custom software development

One of the first and foremost benefits of custom development is its cost-eficiency in the long run. A carefully designed and properly developed custom enterprise solution has all the chances to be less costly compared to its off-the-shelf alternatives. Owning a custom-built system, you are not paying for the use, support, and maintenance of the functionality you don’t need.

Moreover, license fees for off-the-shelf solutions can accumulate over time, leading to higher monthly payments, especially when you need to significantly scale the application’s userbase. However, if you build custom enterprise solutions with scalability in mind, you can justify the cost of initial investment over time and easily scale your software along with you buisness growth.

Apart from long-term cost-efficiency, custom enterprise software development brings several other benefits.

• Tailored functionality. Developing custom enterprise solution allows companies to fully address their unique business needs and implement only relevant features and workflows, which is not the case with one-size-fits-all enterprise systems.
• Well-integrated with your systems. Custom enterprise solutions are easier to integrate with your existing ecosystem of business software and databases. In contrast to off-the-shelf enterprise software, where vendors usually provide built-in connectors and predefined data migration roadmap, you are in charge of planning and creating integrations when it comes to custom enterprise software. This ensures a more seamless connection between your systems, minimum compatibility issues, and better data flow across departments.
• Ownership. Opting for custom development, your company is the one and only owner of the final solution. What’s more, you can freely introduce changes and upgrades, add new features, and scale and tailor your custom enterprise software to your needs.
• Security. When developing a custom enterprise system, you can implement all security measures that your industry requires, as well as ensure the solution’s security and reliability yourself by performing rigorous security testing. Furthermore, when a custom-built enterprise software solution is hosted on-premises, you don’t need to transfer its data to any third-party software provider and can ensure its safety yourself.

Maximizing custom software ROI

When choosing custom development over an out-of-the-box software, companies need to take proactive measures to maximize the ROI of a new solution and earn back the invested money.

First of all, define clear measurable objectives that you intend to achieve with the new software. For example, if your goal is to increase customer satisfaction and sales, establish tangible milestones in percentage, like 20% increase in sales and 50% increase in customer satisfaction. Defining clear goals will help evaluate the effectiveness of a new solution in the future.

Next, consider collaborating with an experienced software development partner that will guide you throughout the project, from solution conceptualization to deployment and user support. Handing your custom development over to professionals will help ensure that the software is high quality and its functionality is fully aligned with your requirements. Entrusting your project to thrid-party experts can also guarantee optimal time-to-market for you to start getting ROI faster.

Additionally, establish measures and implement continuous monitoring and assessment tools to track the software’s performance against the predefined set of metrics and KPIs. Thus, you will stay informed about the software’s effectiveness and immediately spot the drop in its performance to timely address it.

Measuring the ROI of custom enterprise software development

In order to properly measure the ROI of a custom developed enterprise solution, companies should analyze such factors as cost savings that the system brings and the amount of revenue it helps generate.

Depending on its purpose, custom software can help automate routine tasks and significantly increase operational efficiency, improve data management, and enhance supply chain management or customer service. Companies can measure the effectiveness of their custom solution by comparing pre-implementation and post-implementation expenses and considering reductions in manual work and error-related financial losses.

Companies should also analyze how new software helps them generate more revenue. For instance, the effectiveness of a new analytics solution can be expressed by how quickly it can analyze vast data amounts fast and offer valuable opportunities for upselling and cross-selling that increase revenue. Another example is the increase in the company’s sales volumes after implementing a custom CRM system that streamlines day-to-day activities of sales managers, increases their productivity, and improves customer interactions.

Summing up

Custom enterprise software development requires considerable investment of money and resources, but results in solutions with more tailored functionality, seamless integrations, solid security, and lower long-term TCO compared to out-of-the-box software. To tap into these benefits and get high ROI, we recommend partnering with an experienced consulting and software development company that will help you tailor the system to your needs, avoid common project risks, and ensure the solution’s maximum value.