Build vs. Buy: A Guide to Enterprise Retail Software
Here Are the 7 Questions Retailers Need to Ask Before Investing in Retail Management Solutions
To Build, or to Buy Retail Software?
That is the question on the minds of many retailers and brands.
Retail management software is a must for modern businesses. Without the right solution in place, chances are your teams aren’t operating as efficiently and effectively as they could be. And, as a study by RIS recently revealed, a lack of brand consistency from store to store can cost retailers and brands millions of dollars in lost sales opportunities.
But deciding whether to build software in-house or seek out an off-the-shelf solution isn’t an easy decision to make: it requires lots of planning, perseverance, and patience.
A Cautionary Tale
In 2000, department store chain Kmart was in a bit of a pickle: they were quickly losing a competitive position to Walmart and Target, and their lack of up-to-date in-store technology was starting to cause major headaches. So they created a two-year, $1.4 billion upgrade plan to build a solution in-house rather than search out an existing software solution, boasting it was “more money than Kmart has spent in the last decade on IT.”
Things didn’t work out well—a mixture of too little too late, and a highly customized platform that was too expensive to maintain. The company filed for bankruptcy in 2002, following a $600 million update to its supply chain management software that failed to improve their standing.
Suffice to say, building a service from scratch can be a costly endeavor in more ways than one.
Still unsure which path is right for you? In this guide, you’ll learn the right questions to ask yourself when deciding whether to build it or buy retail software.
By the end, you should have a better idea of which route is the right one to take for your company. (To us, the answer is pretty clear.)
7 Questions Retailers Should Ask When Deciding to Build or Buy
1. What Must-Have Features Are You Looking For?
Every logical build vs. buy decision-making process should begin with a list of requirements meant to suit everyone from higher-ups to day-to-day end users.
First, start by listing the obvious ones—the features and functions you can’t live without.
Then, reverse engineer job tasks—by breaking down and analyzing each day-to-day duty and the multiple steps it takes to accomplish them—within your company to find out what other capabilities are needed to help alleviate responsibilities related to store execution, compliance, visual merchandising, and store auditing.
Once you’ve compiled and completed your list, the first thing to consider is whether or not there’s an existing tool that meets all of your demands, if not most of them. (Keep in mind that companies will provide custom add-ons and builds at a premium.)
Still unsure if an off-the-shelf solution is a right fit at first glance? Request a demo, a limited trial, or a proof of concept—most vendors will do so at no risk to the buyer.
Still leaning towards building it instead of buying it? Just remember: According to McKinsey & Company, 56% of large IT projects don’t meet their original vision and are launched with sacrificed features and value, while 19% of IT projects never reach the market. Often, building software internally can be more costly (and riskier) than going straight to another provider— especially when jobs are on the line.
2. What’s the Cost of Implementation?
What’s your time worth?
That’s the question ultimately at play when deciding whether or not the cost of implementation is worth it.
With a pre-built third-party solution, you know exactly what the cost is from day one, and can expect only slight variations in price (depending on additional upgrades or add-ons) as the years go on.
The same can’t be said for custom builds.
In-house software is often seen as something that will pay for itself over time—the cost may be substantial upfront, but it’s insignificant (if not non-existent) after that.
Contrary to popular belief, developing software isn’t just a one-time deal. It involves building and implementation, upgrades and patches, ongoing development and enhancements, and near-constant testing and maintenance.
It’s a long-term commitment that can take months and years to create and cost thousands (and sometimes) millions of dollars in extra costs. (According to a McKinsey & Company survey of IT executives, large IT projects often run over budget 45% of the time, and 17% of them go so badly that they threaten the existence of the company that commissioned it, costing 200-400% the original price.)
And to pull it off properly, you need a large IT team—probably much larger than you think, almost like a mini-company within a company—to create a successful in-house solution. (Think about it: if the companies creating software solutions you’re looking at employ 25-50 developers to get the job done, then that’s the number of people you’re probably going to need on your team, too.)
With third-party software, what you see is what you get. And it’s scalable, meaning there’s a lower recurring cost as additional users are added and your company grows.
3. What’s the Opportunity Cost?
Most large companies have the funds and talent available to build a solution in-house. But what would you lose by allocating resources—time, money, and human capital—towards a project, especially one that has likely been solved by someone else already?
Essentially, the question isn’t “can we do it?” But “should we do it?” And those are two very different questions.
What are you losing by taking your IT team out of their natural habitat and moving them towards a more time-consuming project? What other things could they accomplish or resources could be freed up if they weren’t building an entire piece of software from scratch?
It can be hard to think in the long-term, but if fixes are needed soon, if not immediately, don’t let your judgment be clouded.
Just because you can do something on your own doesn’t mean it’s worth it.
4. When Do You Need the Software (or Want It Deployed) By?
Because if the answer is “now,” or “in the near future,” then it’s better to buy a pre-built solution.
When evaluating whether to build or buy, you need to realistically understand the total lifecycle of taking a custom build from idea to implementation. It typically takes longer than you’d expect, with McKinsey & Company reporting that 7% of large IT projects are generally delivered late, while a report by the Apigee Institute found that 27% of app deployments exceeded their original timelines. And the costs associated with it aren’t much better (generally 70% of total costs will occur after implementation due to ongoing upkeep.)
If the software in question is critical to your business operations, then you can’t afford to wait.
The good news is that most third-party software is integrated into your existing workflow within days (our retail task management and communication softwareFoko Retail takes less than a week to set up), and adopted by end-users just as fast. That sure beats the months, if not years, it would take an in-house team to finish a custom build adequately.
5. Would Your Developers Be Able to Do the Job?
We’ve already talked at length about the overall cost of implementation in terms of time, human resources, and financial allocation. But is your IT team even able to do the job, and adequately at that?
In-house developers may lack the expertise and knowledge to create software that handles all your requirements (not to mention the glitches and bugs that result from its creation). Because technology is constantly changing, if your team doesn’t work fast enough, the platform could be defunct by the time it’s ready for deployment, forcing you to spend more money to update it. And if your team isn’t sophisticated enough, additional hires or expert advice may be needed.
On the flip side, software-as-a-service providers take care of all aspects of development, not to mention hosting, support, and maintenance, allowing your team to do what they do best while someone else handles the rest.
6. Could Your Company Provide Support to its Users?
Custom software doesn’t just take time to build, but time to maintain—especially when you’re onboarding new users and forced to keep it up-to-date to prevent security breaches and system failures.
Are your software requirements complex and supposedly complicated to execute? If the end product isn’t intuitive enough for end users, then significant training will be required, especially if it’s going to be used frequently at multiple stores across a variety of locations.
And what about any bugs or issues that may occur? Will your team be able to back up the data consistently and securely in case there are any system errors or (worse) hacking.
If your IT team isn’t prepared for the inevitably of constant monitoring, onboarding, and maintenance, then an off-the-shelf solution is likely the best choice for your company’s needs.
Software providers often provide user manuals, training (either online or in person), and ongoing support to your team, making it the best scalable option. And because you’re dealing with a service, as opposed to doing everything on your own, the standard is that much higher because they’re equipped to deliver the best possible solution at the highest possible quality.
7. What’s the ROI Potential?
That’s ultimately the biggest question here: will the product your team creates provide enough value to justify the costs? Is it worth the time and energy? Is this the best thing your company and IT team could be doing?
If the answer is no, then an off-the-shelf product like Foko Retail is the best solution for your retail business operations and needs.