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.
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).
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:
- Business Process: Is our process standard, or is it a source of competitive advantage?
- Budget & TCO: What is our initial budget vs. the long-term Total Cost of Ownership (TCO)?
- Timeline: How quickly do we need a solution operational?
- Internal Resources: Do we have the IT team to build, maintain, and support a custom application?
- 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.
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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Deck 3.2: Computer Software Custom vs Off-the-Shelf Software ICT 110: IT for Business