Both “horns” are unfavorable, in that they will cost money. And precious “overhead” money to boot! But are they equal? I would venture to say that they’re not. Going with an “out-of-the-box”, also known as “Commercial Off The Shelf (COTS)”, solution is the better decision for a company. Here’s why.
Company ChallengeLet’s assume the Executive Board of company ABC Limited has decided that their current approach to managing projects, which involves using a combination of spreadsheets and scheduling software, is not working for them. It is deemed too risky and would reflect badly on their reputation if they were to continue managing their projects in this manner.
To remedy the problem, the new Director of Projects was tasked with finding a solution. She subsequently contacted the Head of IT for his assistance. She explained to him that the solution must replace all their Excel project functions, which included estimating, cost management, engineering progress, and construction progress. For project scheduling, they were already using a 3rd party COTS product. And finally, their existing ERP, which was also COTS, would suffice for purchasing and accounting functions. But, the new solution would need to integrate with both of these 3rd party systems.
Researching OptionsThe Head of IT, after reviewing the requirements and researching possible solutions, presented 3 approaches:
- Develop an “in-house” solution.
He explained that 5 years prior, ABC Limited used an in-house system that was developed by his department using a MS Access database. While it wasn’t an integrated solution, it did meet their needs at that time. However, due to company cost reductions brought about by a downturn in the market, he was forced to let go of a lot of his programming staff. Hence, his department could no longer support the software which eventually resulted in the move to Excel. He said he was still in contact with members of his old programming team and would probably be able to convince some of them to return. That way they could take advantage of their past knowledge of the company’s processes and develop a custom solution that would exactly meet their needs.
- Develop a “customizable” solution.
He also contacted a couple of software vendors who specialized in providing a solution that could be customized to meet their needs. Both vendors provided a basic product with named user license and maintenance costs, but specialized in enhancing and customizing their basic product to meet all their requirements.
- Purchase a “COTS” solution.
He explained that this software vendor provides an integrated solution that would meet all their needs, but it would require ABC Limited modifying some of their existing work processes in order to adapt to those of the software. Also, because it was a COTS product, the named user licensing costs were a little higher.
The Director, being a pragmatic woman, understood that although the Head of IT offered three (3) possible solutions, there were really only two (2). Developing an “in-house” solution was not an option she would consider. Market downturns would happen again, which may lead them to again reduce IT overhead costs. While a customized in-house system could eventually provide them with the best fit to match their current work processes, in the long term, they could end up in the same boat they were currently in. Also, she was wary of the increased overhead costs in supporting an in-house system, especially in today’s competitive market.
So, the Director asked the Head of IT to provide the estimated costs for options 2 and 3. Interested in viewing a side-by-side cost and savings comparison? Download the white paper for free: Business Case for Making a Software Investment: Custom vs. Commercial Off the Shelf (COTS) Software.