The True Cost of “Off-The-Shelf” Software

Whether you run a small landscape company or a big, fancy technology firm, you need to get some “business” done to serve your customers. Inventory, accounting, tracking this or that, reports (sooo many reports)… there is a lot of glue that makes your company run.

Practically speaking, that glue is probably some form of software. The problem is most leaders aren’t into technology and have no idea how to start. So how does that glue actually get built?

It often starts with a conversation like this:

Boss: “We need to find software that does X, Y, and Z. Find something off the shelf because I don’t want some developer ripping me off.”

Office Manager: “Well, software A does X and Y, software B does X and Z. I also found software C that promises to do everything, but the reviews are terrible and the manual is in French.”

This goes round and round… often over a period of many, many months… until one of two decisions gets made:

  1. Build custom so that X, Y, and Z can be done.
  2. Buy a software package that gets “close enough”, then overloading the poor office manager with the task of filling in whatever gaps that the software can’t do.

Here is the ugly truth.

Many times we get a call from that poor office manager two years later. They are bored and frustrated…tired of duplicate entry across multiple software suites…tired of having to go to five different places to generate the reports that the boss needs. They want to get back to the job they were hired to do. Finally, the boss has agreed to allow them to try and find another software solution. Enter us.

What’s worse is, aside from that frazzled office manager, we often run into firms who have hired 2, 3, or 5 people over the years to fill in those gaps, all because of the belief that custom software is just too expensive.

The math of buying off the shelf

As you might have guessed, the number one reason that business owners do not want to invest in a custom solution to support their business is cost. Why pay $50,000 to $100,000 when I can pay $300/month, right?

On the face of it, the math just doesn’t add up (see what I did there?). Off-the-shelf clearly wins, right?

Not necessarily. Often it loses and loses badly. Here are the real costs that are often never thought about:

Software X: $300/month. Software X is really impressive and does 75% of what your business needs, but of course you need QuickBooks for accounting, your sales team is in love with Sales Force, etc.

Standard salary of an office manager: $80,000. Six months after Software X is implemented, they are spending 50% of their time “filling in the gaps”. That cost is now $40,000/year.

Software Y: $100/month. Two years in, Software X is still great, but your technicians out in the field need a mobile app to get their work done. Now you need Software Y (or the new add-on that X just released).

Junior 1 and 2: $60,000/year. Another year later and your company is killing it. You need to hire two junior level associates to enter the data, get the reports, and keep everything running smoothly. Let’s not forget the office manager. They are still spending 50% of their time (if not more) helping the Juniors and working with the software.

Fast forward: Ten years total. How much have you spent so you could get the cheap “off-the-shelf” option?

  • Software X: $36,000
  • Office manager @ 50%: $400,000
  • Software Y (8 years): $9,600
  • Junior 1 and 2 (7 years): $420,000

10-Year Total: $865,600

Now, compare that to a realistic cost of a high-end custom software build.

  • Initial cost to get 95% of the “glue” built: $150,000
  • 10% of your office manager’s time: $8,000/year.
  • Server costs, maintenance, security: $5,000/year
  • Updates, new functionality, changes (9 years): $50,000/year

10-Year Total: $730,000.
Added bonus:
You have a much happier office manager.

Huh. A custom software developer telling you that custom software is cheaper. Crazy right? I get it, but the truth is that this is based on real projects and real customers. This happens All. The. Time.

What is really crazy is that the numbers can actually be a lot worse. If your company grows a lot over that ten year period you will need to keep buying different software packages and devoting more man-hours to glue it all together. Aside from the cost this can also cause errors, tax employees, and take a toll on morale. With a custom software suite you can more seamlessly grow, adapt, and change at a much lower cost (on average) as you scale.

Now I know it is easy to write this off and think that the goal of this article is to sell custom software, but it really isn’t. The goal is to help you realize the actual cost of “off-the-shelf” software.

There is a lot of great software out there and, in the end, it might make more sense for your company to buy an “off-the-shelf” software suite. What is important here is to give you the knowledge to make an informed choice, rather than inadvertently making a bad one and having to call me two years later to fix it.

Agree? Disagree? Have questions? I would love to help in any way that I can. Let’s chat!

David is the founder of Big Pixel, a UX and development firm. He specializes in giving tough love to startups and businesses. Learn more at www.thebigpixel.net.

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