- Oct 1, 2018,
We all want a better return on investment. That’s how businesses thrive! A better return on every dollar spent is key to scaling up, key to growth, and critical to having a solid foundation and a business that’s headed in the right direction. But sometimes deciding where to spend each precious dollar means evaluating different priorities, different outcomes, and a future you can’t yet see.
Investments in sales and marketing are a gamble that the right market can be found and sold in to. Investments in research and development are a gamble that what is discovered will create efficiencies and excite the market. Investments in operations are a gamble that new, better ways of doing things will be discovered. Is making investments a good idea? Absolutely! But making the right investments and making them at the right time…that’s another story entirely.
Here at Capriza, our experience has been that the toughest place for large organizations to weigh return on investment comes when choosing whether to build new enterprise software, invest more in an existing system, or employ a new system designed and built by a third party. Why? Because investments in internal tools have a compounding effect on both employees and customers. Choose the right tool for marketing automation, data analytics, business intelligence, or operations and your business can see huge gains in short order both in and out of the building. But make the wrong decision and you might be ‘stuck in the mud’ for months, or even years.
In this post we’ll cover the advantages and disadvantages of a number of scenarios when it comes to building or buying enterprise software. If you’re struggling to understand the overall total cost of ownership when it comes to your next system investment, we hope that the information provided below will help you find your way.
Building new enterprise software
Building a new system brings the benefit of getting exactly what you want. From features and functions to integrations and compatibility, investing resources in a new tool all your own guarantees that you’ll get exactly what you need…eventually. And therein lies the rub; allocating people and budget in building a new tool means a commitment of finite resources that might be better served elsewhere. Pulling engineers away from one task to work on another brings with it not just a financial cost but an opportunity cost as well. Additionally, building a system on your own isn’t a one-time expense. Ongoing support, maintenance, and updating also requires significant investment. So even if you end up with exactly what you want and exactly what you need, you’ll be left with a continued investment in keeping the system stable and updated to the ever-evolving needs of your business.
Advantages to building the system you need in house
• You get exactly what you want
• System capabilities address the exact needs you know you have
• Control and ownership of IP and technology
Disadvantages to building the system you need in house
• Resource allocation – every dollar or work-hour invested could be used somewhere else
• Ongoing maintenance and upkeep is a requirement
• Integration with other systems can be challenging or even impossible
• De-focuses/takes away from your company’s core competency
Expanding the use of a current system
Many businesses have already made investments in tools and systems so they think the path of least resistance is to continue investing in that tool. Nothing could be further from the truth! This perspective can cloud even the best judgement and put off until tomorrow a decision that really requires attention today. Investing additional good money and resources into the wrong tool isn’t always a good idea. In fact, as your business changes and your needs evolve, it is entirely likely that your tools will need to change and evolve as well. While incumbent systems have the benefit of being known quantities, that doesn’t mean that the continued utilization of those systems will fit the current and future needs of the business.
Advantages to investing more in the system you already have
• Reduced training and adoption costs
• Integrations with currently used systems are already taken care of
• Preferred pricing, licensing and commercial terms
Disadvantages to investing more in the system you already have
• What was ‘right’ for you in the past may not be right in the future
• Features and capabilities are not under your control
• Never-ending cost increases to get the newest features and capabilities
• System lock-in creates friction when adopting new tools
• On-prem software requires continued IT investment in hardware and networking infrastructure
Partnering with a third party vendor for a new tool or system
A growing number of medium and large businesses are recognizing that flexibility and agility are necessary to keep up with their business needs. Utilizing third party systems means having the right tool without making outsized investments or wasting precious time. True, training and integration sometimes give reason for pause. But a growing number of offerings are intuitive, easy to integrate, and feature rich. The return on investment in these partnerships can pay huge dividends without creating the tie-in found in building your own system from scratch. Additionally, third party providers take on the support and maintenance burden so you and your team can focus on more mission critical and growth oriented activities.
Advantages to partnering with a third party partner
• Plug-and-play or ready-built systems reduce time to adoption
• Increased agility and innovation
• Security and support are handled by someone else
• Roadmap managed by a partner with greater domain knowledge
• Reduced total cost of ownership
• Increased efficiency that can be recognized almost immediately
• Cloud-based software offers cost savings in IT infrastructure and usage-based licensing
Disadvantages to partnering with a third party provider
• Potential mis-alignment of key functionality and general requirements
• Reduced control over feature set and roadmap
• Users must be trained. Proper tools and documentation are a must
The goal of business isn’t to create complexity…it’s to reduce or remove it! By partnering with trustworthy vendors you can recognize the benefits of specialization and reduced cost without missing out on the features and functionality you need.
At Capriza, our entire mission is built on partnering with those that need tools and are smart enough to recognize that building their own or sticking with the status-quo isn’t the best business decision. For example, we’ve purpose built ApproveSimple to help forward-thinking teams recognize that the status quo isn’t always best. If you’re wondering about the potential for a better way to do things, we would love to chat. We work with enterprises and large organizations every day to streamline approvals, saving millions of dollars and thousands of hours in needless expense every day. If you would like to learn more about how Capriza’s tools can reduce friction in your organization, contact us now.