Build vs. Buy

All in all, Eian says, fully customized software primarily makes sense for $500-million-plus companies. “It definitely is a luxury for almost every company, unless it’s a company that’s totally different, new, and separate from every other kind of business,” he says.

In reality, though, companies are presented with more than two choices. Custom and off-the-shelf are just the two extremes, not the only options. Say you can find an existing product that meets 60 percent of your company’s needs. It may be designed so that you can customize it a bit.

“As the market has evolved, it’s less often now that you have to completely start from scratch,” Pearson says. “At one end of the spectrum is where you start with absolutely nothing and the programmer writes everything from scratch. At the other end is where you go down to Best Buy and pick up TurboTax and install it. But then there’s everything in between. If you look at Microsoft Office, it is customizable so that programmers can do add-ons and tailor it to a specific application.”

It turns out you don’t have to have access to the source code in order to make some changes, he explains. Many developers have published APIs, or application programming interfaces, for their wares. These interfaces allow programmers to create plug-ins that expand the capabilities of the generalized software.

Developers may even customize their software for you. But if you go that route, be careful that the changes will not interfere with your ability to receive upgrades. Otherwise, you’ll be stuck on Version 2.0 forever—or at least until you can afford to have the customization done all over again.

Another option is hosted, on-demand software, in which software owned and maintained by the seller is provided via the Internet . Some of these products are not customizable, but some can be configured via plug-ins, like other packaged software. When new versions of the software are put into effect, they are designed not to interfere with the plug-in interfaces.