Tech View John Agsalud

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Building versus buying an information system

WHEN tasked with implementing critical information systems, many business owners or IT managers are faced with a vexing question. Should we build a custom system from the ground up, or should we buy a package off the shelf?

In many cases, this is a no-brainer. For systems that will perform relatively homogenous functions, such as accounting, customer management, or point-of-sale, a myriad of proven choices are available on the market today. You'd pretty much have to toys in your attic to build a system to perform these functions.

The bulk of commercially available software is targeted at horizontal markets. As such, the build versus buy question comes into play when you're looking for a system to handle functions that are unique to your industry or otherwise less common.

Buying software to handle such functions is usually less expensive in the short term. Recurring costs, such as support, maintenance, or licensing sometimes (but not always) can make such software more expensive in the long run (three to five years), but of course, allows you to spread those costs out over time.

The biggest downside to buying software is that it sometimes forces you to change your business operations. This is because the software developer has made assumptions about how your business works and forces you to operate in that manner. Sometimes such changes are drastic; other times, not as much.

Similarly, sometimes such change can be beneficial; other times, less so. If the package is built for an organization very similar to your own, it may, in fact, be beneficial on several fronts. Likely, the package already is in use and has been "put through its paces." Other users probably have provided input and insight into improving and using the package. Further, such packages often have user groups that allow you to exchange information and experiences with like-minded folks in other organizations.

Building software allows you to determine exactly how the applications should look, feel, and function. As such, it does not force change onto your business operations. Implementing custom-built software, however, usually takes a lot longer than implementing software packages that have been purchased.

Of course, building software is usually much more expensive up-front. It may be cheaper in the long term especially if you can avoid licensing costs associated with purchased software. Of course, licensing costs, while often perceived as evil, grant you the right to updates of the purchased software package. Such updates for custom-built software may, in fact, turn out to be more expensive than licensing costs.

John Agsalud is the President of ISDI Technologies, Inc., a Honolulu-based IT Consultancy, specializing in software development, systems integration, and outsourcing. He can be reached at jagsalud@isdi-hi.com or by calling 944-8742.

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