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Deck 3.2: Computer Software

Custom vs Off-the-Shelf Software

ICT 110: IT for Business

Today's Learning Objectives

By the end of this lecture, you will be able to make informed software decisions for any business function.
  • ✅ Differentiate between custom and off-the-shelf software models.
  • ✅ Analyze the strategic advantages and disadvantages of each approach for a business.
  • ✅ Evaluate software choices for various business departments like Finance, HR, and Operations.
  • ✅ Understand the business implications of software licensing and ownership.

The Fundamental Business Question

Your department needs a new software tool to improve efficiency. Do you...

BUY? 🛍️

Purchase a ready-made solution available to everyone.

BUILD? 🛠️

Create a unique solution from scratch, tailored to your exact needs.

This is the core "Buy vs. Build" decision every business faces.

Option 1: Off-the-Shelf (OTS) Software

Definition: Commercially available, ready-to-use software designed for a broad market and sold to the public.

Think of it like buying a ready-made suit. It fits well enough for most people and is available immediately.

  • ⚡ Immediate Availability: Ready to deploy right away.
  • 💰 Lower Initial Cost: Development costs are spread across many customers.
  • 🤝 Vendor Support & Updates: Maintained and updated by the developer.
  • 🌐 Large User Community: Often has extensive documentation and forums.
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OTS Software Across the Business

OTS solutions are the backbone of most standard business operations.

📊 Finance & Accounting

  • QuickBooks
  • Tally Prime
  • SAP Business One
  • (For bookkeeping, reporting)

🤝 HR & Collaboration

  • Microsoft 365
  • Google Workspace
  • Zoho People
  • (For payroll, communication)

⚙️ Operations & Marketing

  • Salesforce (CRM)
  • Asana (Project Mgmt)
  • Mailchimp
  • (For customer & project tracking)

Option 2: Custom (Bespoke) Software

Definition: Software designed, developed, and implemented to meet the specific, unique requirements of an organization.

This is like getting a suit custom-tailored. It costs more and takes time, but it fits perfectly.

  • 🎯 Precise Functionality: Built exactly for your business processes.
  • 🏆 Competitive Advantage: Can support unique workflows that competitors can't replicate.
  • 🔗 Seamless Integration: Designed to work perfectly with your existing systems.
  • 💼 Full Ownership: Your company owns the intellectual property (IP).
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Why Build? The Case for Custom Software

Businesses invest in custom software for strategic reasons:

⚡ Unique Business Processes: When your way of doing things is your competitive advantage.
Example: A custom logistics algorithm for a delivery company.

⚙️ Complex Integration Needs: To connect multiple legacy and modern systems that don't talk to each other.
Example: An HR portal that pulls data from payroll, training, and performance systems.

📈 Scalability & Performance: For mission-critical systems that need to handle massive transaction volumes.
Example: A bank's core transaction processing system.

At a Glance: Custom vs. Off-the-Shelf

Off-the-Shelf (OTS)

  • Cost: 💰 Lower initial cost
  • Deployment: ⚡ Fast
  • Features: General, may not fit perfectly
  • Fit: You adapt your process to the software
  • Best For: Standard processes (e.g., accounting, email)

Custom (Bespoke)

  • Cost: 💰 High initial investment
  • Deployment: ⏳ Slow
  • Features: 🎯 Perfectly matched to needs
  • Fit: The software is adapted to your process
  • Best For: Unique, strategic processes

The Hybrid Approach: Best of Both Worlds?

It's not always a strict "Buy vs. Build" choice.

Many businesses use a powerful OTS platform as a foundation and then build custom modules or integrations on top of it.

Business Example: Manufacturing

A company like CG Foods might use SAP (OTS) for its core Finance and Supply Chain management.

However, they could develop a custom module for real-time monitoring of their noodle production lines, which integrates directly into their SAP inventory system.

🔍 A Manager's Decision Framework

As a future manager, ask these questions before deciding:

  1. Business Process: Is our process standard, or is it a source of competitive advantage?
  2. Budget & TCO: What is our initial budget vs. the long-term Total Cost of Ownership (TCO)?
  3. Timeline: How quickly do we need a solution operational?
  4. Internal Resources: Do we have the IT team to build, maintain, and support a custom application?
  5. Scalability: Will this solution support our projected business growth over the next 5 years?

🇳🇵 Software in Action: The Nepali Context

Let's look at how local companies make this choice.

eSewa (FinTech) ➡️ Custom

Built a completely custom platform from the ground up. An OTS solution for a digital wallet tailored to Nepal's banking system and regulations simply did not exist. This is their core competitive advantage.

Daraz (E-commerce) ➡️ Hybrid/Custom

Uses a highly customized e-commerce platform. The core functions are standard, but they need custom modules for local payment gateways (like eSewa), complex logistics across Nepal, and seller-specific tools.

A Local Hospital ➡️ Hybrid/OTS

Might buy an OTS Hospital Management System (HMS) for patient records and billing. But they may build a custom mobile app for patients to book appointments, which integrates with the HMS via an API.

Most Small Businesses ➡️ OTS

A typical trading or service company will use OTS tools like Tally for accounting and Microsoft 365 for collaboration because their processes are standard and these tools are cost-effective.

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Beyond the Price Tag: Total Cost of Ownership (TCO)

The initial purchase price is only the beginning. A smart manager analyzes the Total Cost of Ownership over the software's lifespan.

OTS TCO Includes:

  • Subscription/License Fees
  • Annual Maintenance
  • Customization Costs
  • Integration Costs
  • User Training

Custom TCO Includes:

  • Developer Salaries
  • Infrastructure/Hosting
  • Ongoing Maintenance & Bug Fixes
  • Internal Support & Training
  • Future Upgrades

Key Takeaways for Future Managers

  • ✅ The "Buy vs. Build" decision is a strategic business choice that impacts budget, operations, and competitive advantage.
  • ✅ Off-the-shelf is best for standardizing common business functions (Finance, HR) quickly and cost-effectively.
  • ✅ Custom software is an investment to enhance unique processes that give your business an edge.
  • ✅ Always look beyond the initial price to the Total Cost of Ownership (TCO) to make a financially sound decision.
  • ✅ The right software empowers ALL business functions to operate more efficiently and effectively.

Thank You!

Any Questions?

Next Topic: Choosing Software and Licensing

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