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The hidden costs of off-the-shelf software

05 July 2021 | Blog

When looking for new software, the options are to license an off-the-shelf solution or develop your own bespoke software. Businesses often choose an off-the-shelf solution as they perceive it to be cheaper than building something bespoke. While it is true that a bespoke solution often requires a greater initial outlay, at KLOC we believe that it is often more cost-effective in the long run.

Here are some things you should consider about off-the-shelf software before making a purchase:

  • Customisation costs
    Off-the-shelf solutions are often sold with the promise that they can be customised to meet your needs. This comes at an extra cost, as well as delaying when you are able to go-live. If you plan on making customisations, it is worth finding out costs and timescales beforehand as it is likely to be a lot more than you might think!
  • Feature fees
    Many off-the-shelf solutions offer pricing at a basic level of functionality, with prices increasing when new features, capabilities or transaction volumes are needed. Make sure that you check which features are included in your plan before you purchase.
  • License fees
    You may find yourself paying more than expected if you need extra licenses for new members of staff. This is particularly significant if you have many users, leading to annual licensing costs measured in tens of thousands.
  • Lack of scalability
    An off-the-shelf solution might meet your needs for now, but what about in future? Will it need to be replaced in a few years, costing you more than you initially budgeted for? As your business grows it can lead to increasingly complex technological requirements which cannot be met by a mass-market solution. It is important to consider where your business will be in a few years’ time and whether the solutions you are considering are future-proof.
  • Higher training costs
    Training costs may be higher with an off-the-shelf solution as it has not been created with your unique needs in mind. Staff can find it more difficult to use and may need to adapt their processes to fit in with the functionality available.
  • Implementation costs
    As well as training and license costs, there can be multiple other implementation costs which need to be considered. These can include converting or accessing data from an old system, configuring the new system to meet your needs visually and functionally, and project management for a large rollout.
  • Lost revenue
    Bespoke software lets you easily adapt your business to take advantage of new opportunities or to reach new customers, making you more successful.
  • Resource
    There is a common misconception that off-the-shelf solutions require less effort or resource to implement, and organisations rule out developing their own solution due to this belief. However, the resource needed to manage a large software implementation project should not be underestimated, especially if it involves customisations and configurations to the product. Complex implementations can easily take years to complete which comes with huge staffing costs.
  • Project failure
    The biggest cost of all can arise if a large software implementation cannot be completed. This may be because additional requirements were uncovered during the implementation process which could not be met by the software selected. Perhaps a trial wasn’t available and the customer has realised that the solution doesn’t deliver what they expected. You may remember a few years ago when Lidl cancelled their SAP introduction after already spending €500 million on it.

Bespoke software development

Developing your own bespoke software solution means that your unique business needs are met, you only pay for what you need rather than paying for a wide range of functions that you may never use, and once it has been developed there will be no extra costs for additional licenses as you own the intellectual property. There are also many ways you can reduce the cost of developing your own solution, such as:

  1. Establish a deep understanding of your requirements
    The definition of your project requirements is the basis for your implementation project and the quality of the requirements will dictate how well the development project meets your needs and thus how accurately the budget can be met. When defining what the system needs to do, we recommend speaking to all stakeholders and never assuming that you know how the system needs to behave. It never ceases to amaze us how many requirements emerge after coding has started (or finished!). Time spent up-front, understanding how processes really work, will pay back double in time saved coding.
  2. Build resalable intellectual property
    When building a bespoke software solution, you are generating intellectual property (IP) which can be a valuable asset.  Once you have built and started using your solution then KLOC can help you earn a direct return on that investment by licensing it to other businesses. KLOC has all the facilities to market, develop and support your IP, and you can be as involved as you like with the process – either helping to sell it or simply counting the income! If you decide to take your solution to market, it might not cost you anything at all and end up becoming an additional revenue stream.
  3. Claim Research and Development tax relief
    When you build your own solution, you are likely to be able to claim corporation tax relief if your project meets HMRC’s definition of Research and Development (R&D). The tax reliefs support companies that work on innovative projects in technology and seek to research or develop an advance in their field (it can even be claimed on unsuccessful projects!). Many of our clients have been able to do this and enjoyed the advantages of bespoke software at a fraction of the cost. KLOC can offer advice and guidance on how to claim so you can benefit from this.

About KLOC

We are experts in software development. We design and build bespoke business systems, mobile apps and high-end websites to help our customers improve their competitive advantage, increase profitability and achieve greater agility. The KLOC team have years of experience developing software solutions for a wide range of companies.  Our technical skills cover all the major development platforms including .NET, PHP, Xamarin, iOS, android, HTML5 and JavaScript.

Software development services

KLOC’s software development services include:

  • Bespoke software development
  • Custom mobile apps
  • Advanced e-commerce
  • Website development

Contact us

For more information or to discuss your requirements, please complete our contact form, call us on 01488 685112 or email enquiries@kloc.co.uk.