Build and buy: Where custom software belongs in your universe

As businesses evolve, they will need software as a foundation of their strategy. Whether it’s a product, supporting a service, or driving efficiency in business processes, there is no avoiding it.

Historically, custom software has been infamous for being costly and redundant in the presence of an ever-growing variety and quality of packaged software solutions. There are several areas in your overall architecture where packaged solutions still make the most sense. These include systems supporting generic business functions such as payroll, call centre, and systems-of-record. In these areas, the business needs industry-standard and proven systems which are unlikely to require much customisation.

In recent times, custom development approaches have proven to be back in favour as a critical component of any holistic IT architecture. The key consideration is where.

In a modern enterprise architecture, custom software is essential for innovation, differentiation and integration:

1. Innovation
You are building customer surface areas or digital channels that need to be truly innovative. This is software that defines your business.

2. Differentiation
You are currently in a competitive environment with a niche product or service. You need a solution that differentiates yourself from competitors to stand out from the crowd and win customers.

3. Integration
You have your packaged solutions selected and working well independently, but need to present a more rationalised and streamlined experience to your users. You will need well-designed custom software to achieve this.

Interestingly, there is a parallel to be drawn here with how we often approach investment strategies, and consider risk versus reward over the long term. There is a popular portfolio-building strategy called Core & Satellite. The premise is to build a portfolio designed to minimise volatility and cost, while balancing risk between active and passive funds to provide an opportunity to outperform the market as a whole.

At the ‘core’ of your investment strategy should be assets that are cost-effective, proven, robust, best-practice, and relatively risk-free. Similarly, you need dependable and functional packaged software as the building blocks of your architecture.

At the ‘satellites’ around these building blocks, you need custom solutions in order to innovate and to truly differentiate yourself. You need non-standard and memorable experiences which offer greater impact and reward, but come with some degree of risk.

Balanced correctly, both your IT and investment architectures are geared to yield generous returns.

You need the robust and cost-effective, but static and unexciting packaged products. You also need to deploy custom systems and differentiated user experiences to succeed. Ultimately, your ambition should be to build and buy, to create a holistic strategy which correctly exploits both approaches.