Build vs. Buy

That self-analysis is crucial. It’s a chance to delve into your operations and determine what’s working and what isn’t working. At the same time, conduct a gap analysis: What is the gap between what the software should do, and what it actually does?

At many mature firms, unique business processes represent a jump on the competition. In a perfect world, they should never be altered for the sake of a software package. But since custom software is usually much more expensive, sometimes an off-the-shelf package has to suffice.

“If I go to a generalized package, am I going to lose part of that business process that has distinguished me in the past?” wonders Nicholas Eian, CEO of Endurant Business Solutions, an IT and management consulting firm in Minneapolis. “Let’s assume that you buy the best possible package and that your competition has also purchased the best possible software. How do you compete in that market? You have to change your business processes so that you can be faster. How you become distinctive from competitors is determined by how well you can fine-tune your processes around the software.”

If you find that you’ll have to make a few changes to fit the best software package you’ve found, it may be a blessing in disguise. “You get to take a look at your own deal and say, ‘Well, wait a second here. Maybe that doesn’t work right,’” says David Bank, Midwest regional vice president for Ascent Business Systems in Minnetonka, which designs software for field-service industries. “So you might think about the possibility of changing some processes to fit this off-the-shelf product, so that they work better and you simplify things.”

Banks says that’s true for his field-service clients—plumbers, electricians, security companies, or other businesses that provide service in the field—which are just starting to embrace technology. Modifying their processes to fit the software package can mean that they are gaining efficiencies that other users of the application have already discovered.

But lest you think you’ll get off cheaply, Sawotin points out that many companies forget to calculate the maintenance contracts that come with established software. And depending on its complexity, the software may require hours of consultative services to get it installed and running.

“Typically, you pay 20 percent of the total cost of the license for maintenance every year, whether or not you need it, and then you have service over and above that,” Sawotin says.