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Thanks to programmer tales and personal experiences in the computer industry reaching back to 1981, I caution small business clients to be careful choosing custom software over off-the-shelf. Here are some financial considerations.
While every industry has some people who are scammers, I have found that most programmers are basically honest. Nevertheless, custom software, except for the simplest things, invariably runs over the estimated cost at the beginning. Some of the reasons are as follow:
- It's New Technology
- Change Orders
- Changes in Government Regulations or Industry Standards
- The Base or Underlying Program Changes
It's New Technology
We call radically new technology "the bleeding edge." Only a fool would give you a firm price commitment. If you jumped in right away to get a competitive edge, you are one of those who will find the problems so those of us who follow can miss them.
Change Orders
Every industry providing a service deals with change orders. As a consultant, I wrote procedures for clients about how to handle changes so their employees would get the change orders signed then input into their accounting system and invoiced.
When you change your mind about what you want done once the project has started, expect your price to increase.
Changes in Government Regulations or Industry Standards
A government regulation or industry standards change can require you to change your software to comply. Failing to make these changes can mean fines or just having obsolete products no one will buy. I sold MS-DOS software when our competitors had Windows based. It was hard to sell.
Base or Underlying Program Changes
If you are going to have a programmer customize an existing program, like adding refinements to QuickBooks for your small business, expect future programming costs. When third party software updates the underlying program that you are customizing, your tweaks often won't work without reprogramming.
For example, a change in Firefox about a year ago meant I had to buy the next version of RoboForm if I wanted it to work with the Firefox upgrade.
Do You Really Need a Custom Program?
As a small business, you lack the capital reserves to handle major cost overruns. I have observed many costly decisions small business owners made that were motivated by ego instead of good business decisions.
Ask yourself these questions:
- Does this custom program give you a competitive edge that will mean more profit?This is the key question for a small business. Will this investment pay for itself plus a profit?
- Will this custom program make you that much more efficient?Will it save you enough in the first year to more than pay for the cost? Plan to invest no more than you can recover in the first quarter. Inevitably, you will make tweaks after you start to make it even better. This way you can make back your investment your first year.
- Is there off-the-shelf software that will do what you need done with little or no programming?This is a reason that I love blogging software, especially WordPress.org's. There are so many people offering free and low cost enhancements to WordPress that you can create a customized appearance for little or no investment.
- Is the change really necessary or will it have only a minor improvement?If it is minor, create a list of future changes but get the job done now.
- If you do still decide to make customizations to a new program you bought, can you wait for second or third version?As I mentioned above, other professionals in the computer industry and I have learned that for most small business needs, we avoid a lot of grief by waiting until the programmers have found the main bugs and fixed them.
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