Custom software can bring a lot of benefits to your business, but that doesn’t mean we recommend it in every situation. You need to understand the costs required and compare them to the benefits your company will gain from your custom software.
To make this vital decision, let us help you weigh the costs and benefits so you can make a wise choice about your custom software project.
Custom software can provide numerous benefits for your company. While every project won’t offer all of these benefits, it should offer several of them.
Use the following questions to help you identify the benefits a custom web app or mobile app can bring your company:
1. What new product or service can you sell?
Custom software can launch a new business or a new product offering for an existing business.
New product offerings mean new revenue streams. These can be hard to project, but they can create major opportunity for businesses.
One note here for startups: We have encountered far too many entrepreneurs with stars in their eyes who projected such huge return on investment that their entire business model was out of whack. It’s far better to plan on solid but unspectacular returns and then surprise yourself and your investors.
2. What products or service can you sell more of?
You don’t have to launch a new product or service to create new revenue through custom software. Sometimes you can use custom software to increase revenue from an existing service.
Think about what Adobe has done with its suite of products. It first came to prominence by developing the PDF in 1993, but it has since become a go-to source for design software like Photoshop and InDesign. Now Adobe has branched out into design-related products like stock photography (through a custom e-commerce system) and ongoing software subscriptions (managed through a web app) that create recurring revenue.
Even if your business isn’t software products, you can use custom software to accelerate sales. We have built custom mobile apps for Continental Tire to empower their sales people with more information at their fingertips while they’re in the field. We have helped other clients like Tactical Medical Solutions clone the functionality of existing web apps and e-commerce systems so they can launch their product offerings into new market segments.
3. Which customers will stay instead of leaving?
Another way custom software can create revenue is by making it easier to retain customers, so they buy from your business time and time again. Think about how Dollar Shave Club disrupted the personal hygiene market with a subscription service supported by an e-commerce system. Now countless copycats have leveraged subscription services for recurring revenue that customers are happy to pay because of convenience.
Custom software can enhance customer retention in B2B settings as well. When we built a custom software integration for CUI, they saw a significant spike in customer satisfaction. It was easier for customers to find the information they needed, which made it easier for their customers to order and order again.
4. How many manpower hours will you save?
Sales are not the only benefits you’ll find from custom software. You can also improve net profits by lowering the cost of doing business. One of the major ways to do this is by making your employees more efficient.
Automating a business process makes life easier on your employees, which allows them to accomplish more. This efficiency makes a real difference to the bottom line, because it can reduce the need for outsourcing or new hires. A one-time investment in custom software can often pay for itself in a year or even a quarter, because of the man hours it saves.
5. How many customer service calls will you avoid?
One specific way custom software can help you save time is by eliminating the need for employees to spend time fielding phone calls. When customers can access the information they need online, your customer service representatives can spend more time closing sales and ameliorating customer complaints than reading off project information or emailing product sheets.
Our recent website launch for KM Fabrics has provided this benefit in a noticeable way within the first 30 days — which is a huge benefit for a company with front-office employees that juggle several types of duties at once. Our clients at CUI have seen similar benefits from their online product catalog — which is vital for them because of the volume of orders they must process during the busy season for heating products.
The benefit here isn’t just saving time — it’s being able to spend more time on tasks that directly lead to sales and customer retention. That’s a wiser use of resources for any business.
6. What mistakes will you avoid?
Mistakes happen to every business. It’s the tradeoff for the creativity, ingenuity, and perseverance your employees bring to your bottom line.
Most mistakes can be overcome, but it takes time to do so. Whether it’s re-entering an order or rebuilding customer trust, your business has to invest resources in making things right.
Custom software can help to limit mistakes so your business can focus on advancing rather than recovering. This could be through something simple like form validation that helps your customers and/or your employees get it right the first time.
Sometimes, mistakes come with greater consequences, and so you need to take greater care. If you have to comply with HIPAA regulations about the security of patient information, a mistake can leave your business liable for a significant judgment. The same is true when you’re processing employee claims that deal with federal regulations like FMLA or OSHA.
Custom software that automates compliance and creates a paper trail to help you gain and keep certifications like those established by ISO. It can also protect your business against mistakes, and help you defend your company and its profits if a claimant ever alleges you made a mistake and wants compensation.
7. How much will you speed up the sales cycle?
Another way custom software can create ROI is by accelerating sales. If you can decrease the time and cost required to make a sale, you can realize top-line revenue faster.
One of the obvious ways to do this is with a marketing website that tells your business’ story and speaks to your customers in a way that makes them more likely to buy, and buy quickly. Sometimes a template website using a SaaS provider like Squarespace or Weebly can work, while at other times starting with a Bootstrap template and adding some custom features and functionality is a better idea. But on some occasions, fully custom website development will be the best fit to accomplish your business goals.
There are other ways custom software can accelerate sales. We saw this happen with Athene Annuity. We created an in-house compliance web app to help them process annuity applications more accurately and efficiently. By eliminating errors and increasing the number of applications an employee could process per hour, Athene was able to approve more applications and capture revenue more quickly. Without a customer ever touching the system, Athene was able to realize seven figures worth of revenue more per month. That’s serious ROI.
8. What market share can you capture?
One of the factors to consider as you assess potential revenue that custom software can provide is what share of the market can you add to your portfolio if you make an upgrade.
Too often, companies wait for a competitor to launch custom software that improves user experience. As a result, these dawdling companies lose market share to proactive competitors and have to go into scramble mode to stem the bleeding.
It’s far better to be proactive and launch new custom software that will put you ahead and the market and allow you to steal customers instead of losing them.
Remember that your customers’ expectations about user experience aren’t formed by a comparison to your competitors—they are formed by other apps and websites they use every day. That means forcing your customers to use antiquated custom software is an unsustainable situation that puts your business at risk of losing them. Now is the time to take a leap forward.
9. What can you accomplish with an MVP launch?
One key to any cost-benefit analysis of custom software is understanding how much custom software you need to launch into the marketplace. This is the idea of a Minimum Viable Product (MVP).
By finding the right size for your custom software project, you can recognize revenue quickly and then use that revenue to add features that will capture more revenue. The rhythm of launch/sales/upgrades/new launch/new sales/new upgrades is far more realistic for most companies than the idea of building a fully polished system and finalizing before launching it. This is why Aaron Erickson recommends a series of small projects instead of large ones.
Of course, the beauty of custom software is that it can match to your business’s specific situation. This is true about the features in your software, and also about the size of your MVP. But regardless of your business situation, you should seriously consider if an MVP approach will help you get to market in the right manner — because it’s the quicker path to real revenue.
10. What software costs can you eliminate?
One specific way we have seen our clients benefit from custom software is by eliminating the need for third-party software services that come with monthly or annual fees. By investing in custom software, they can eventually remove the need for recurring charges while adding more customized functionality and code that can serve as valuable business intellectual property.
This approach also eliminates the risk of a third party jacking up its charges and leaving your business in the lurch. Recently, one of our clients had a vendor that wanted to quadruple its monthly fee. Instead, we built custom software to replace the functionality that third-party software provided, and eliminated a major business continuity risk for our client.
Typically, we recommend companies consider this kind of change when they can realize benefits within 12-18 months. Often, it takes only a handful of months before the cost savings swing in our clients’ favor.
Now that we’ve discussed the myriad benefits custom software can provide, let’s take a moment to make sure you understand the costs — even the hidden ones.
It’s also important to consider the costs that go beyond the initial software build in your budget.
Let’s break down the big categories for these costs so you can start to plan ahead.
1 .Software build
This is the cost of your initial project. It’s important to understand exactly what your software development partner offers in terms of cost. Most agencies will provide a price range but leave themselves wiggle room to exceed that budget number if development takes longer than they expect. That kind of overage ends up being the rule, not the exception.
At Worthwhile, we offer a fixed-cost estimate for custom software development, provided we can create certainty about the requirements of a project. This gives our clients a locked-in price for the initial software build, so they can more accurately understand the cost-benefit analysis for their business.
As part of the build, you also need to consider the time costs of planning and executing a software build for your team, and also the time costs of training employees on new custom software.
2. Bug fixes
Any piece of custom software will need support for bug fixes. While thorough testing and unit tests can limit the bugs that appear, they cannot eliminate them, because users will always find creative and even odd ways to create errors. They are unavoidable, and you need to have a plan to fix them.
Worthwhile offers service for bug errors either on an hourly basis, or through retainers that offer priority scheduling. Either approach can work, depending on the size of your custom software project.
One tip: Install an error tracking system that will log all errors. This will make it easier to identify the reasons bugs emerge so they can be fixed more quickly. Worthwhile now installs a service called Sentry on all projects to create these logs, and to notify us when an error arises. This provides the added benefit of immediate visibility when something major happens.
Hosting is an ongoing cost for custom software. Whether you’re hosting in the cloud or on a secure internal network, you must consider the bandwidth you need now and in the future.
Make sure you consider your security needs when it comes to hosting. For example, if your web application deals with customer medical data, you will need a HIPAA-compliant hosting solution with enhanced security. We work with banks and financial institutions that need similar security measures to ensure PCI compliance. These enhanced levels of security will increase your regular hosting costs.
You will also need to make sure your hosting solution can deal with spikes in traffic. Worthwhile has helped develop custom e-commerce solutions that address significant variations in traffic on a daily basis (such as flash sales or new item release times) or on a one-time basis (such as an album release).
Make sure you understand your company’s unique hosting needs, so you can address them in a proactive and cost-effective manner.
4. Security patches and version updates
Sometimes your software needs work not because of bugs but because of changes to your software code language and/or framework. These version updates can provide additional features and security measures — if you have a plan for installing them.
If you let version updates linger, you end up with a large technical debt with significant consequences:
- You have to pay more for fixes and/or upgrades because your custom software is out of date and therefore does not feature the latest tools and functionality
- You cannot install the latest security patches, leaving your application more vulnerable to attacks
- You have to pay a large lump sum to address technical debt before you can actually add features or fix bugs
We have dealt with multiple clients who had to invest significant sums of money in removing technical debt in order to leverage the most recent features of Python and Django. Their stories have caused us to recommend retainers that include proactive version updates.
In addition to staying current with version updates, you should install all security patches on software and plug-ins as they are released. This is another key to maintaining a healthy technology stack for the long term. Again, being proactive is the key here.
5. Feature upgrades
And now we get to the fun stuff. Feature upgrades are ways to make your custom software even better. They improve the user experience, or automate manual tasks that you do on a regular basis (for example, running reports).
It’s wise to set aside a budget line item so you can add features to your custom software throughout its lifespan. An employee may have a great idea for a piece of functionality that will make everyone’s lives easier. A customer question may reveal an opportunity for better user experience or even a new revenue stream. So plan to add features regularly after your software launch.
How much should you budget for hosting, bug fixes, version updates, security patches, and feature upgrades? At Worthwhile, our 20-plus-year history with clients shows us that allotting 10-20% of the initial software project price for the first year is a wise investment for a business. The amount spent during that first year can inform what the budget needs to be moving forward.
Custom software isn’t for everyone. Conducting a thorough cost-benefit analysis will help you understand whether a custom web or mobile app or piece of cloud software is the right solution for your business at this time.
If you need help discerning what the wise decision for your business is, find a trusted software partner to help you navigate the situation.
Whichever way you get to your choice, make sure the costs and the benefits line up so your technology stack can help your business grow robust ROI.