There was a time when the word “Business Automation” suggested complicated interfaces, intimidating workflows, high cost and lengthy adoption cycles. It was a prerogative of a few and daring. With time, complicated interfaces gave way to intuitive UI/UX designs, efficient workflows replaced their bulky predecessors, Software as a Service (SaaS) enabled the ‘pay as you use’ model and adoption cycles reduced to days. In recent times, the best example of this shift is in the offline travel sector. The travel community from being averse to the idea of tech, is now among the most active adopter. The applications of technology range from dynamic websites, to travel CRMs, travel booking engines, complex travel ERPs, itinerary APPs and the list goes on……
Its not uncommon these days to find travel companies either in the middle of an implementation or at an advanced stage of consideration on the what, when and how of technology. The consideration, however diverse, often end at the one big question – whether to develop it in-house/customized or use an existing solution already available in the market (SaaS).
To begin with, lets try to understand the difference between a SaaS and a Custom developed software. An in-house, custom solution is developed as per specification of the client and maybe hosted on a dedicated server at the client side or on the cloud. As far as a SaaS solution goes, it is usually hosted on the cloud and developed (for sale) keeping in mind majority of work flows prevalent in the market. It may be partially configurable to specific requirements but may require some workflow adjustments from the client side as well.
As far as, which of the two would be a better fit to ‘YOUR’ organizational objective – let’s try to understand the different considerations that will enable you to take the right decision i.e – “Custom or SaaS?”
Core business or support function:
By far, the most important consideration when making this decision is whether the solution will serve as your core business or will enable efficient management while helping you meet certain key business objectives. In other words, is technology your key value proposition or something that helps improve specific KRAs (Key result areas).
For example: technology is the backbone of an OTA and perhaps it would make sense for them to develop the technology in house. But for an offline tour or MICE operator, whose business primarily hinges on personalized touch, it might be argued to consider a relatively low risk, low cost alternative such as SaaS.
Degree of Customization:
Degree of customization here refers to delta (difference) in offerings already available in the market VS your ideal solution. A higher delta is likely to make you consider a custom solution over SaaS. However, it’s important to consider that a SaaS solution is designed to accommodate 80% of the workflows and, in most cases, configurable (unless change is incisive) based on customer requirements.
The questions to consider – is there a solution available that fits my workflow with little to no adjustments required? Now, assuming there is a solution that largely meets your requirement (you will rarely find the perfect solution), to what degree and cost do I need to configure it to fit my workflow? Am I just better off tweaking my offline workflow to meet the solutions available? What are my non-negotiables and where am I willing to compromise?
This is an important consideration for a business owner who has pre-defined timelines and specific goals he would like to achieve within a fixed time frame. SaaS solution offers the sweet upside of instantaneous deployment, although case to case configurations may take time.
The questions you need to ask yourself – how long will a custom solution take to deliver vis a vis a SaaS solution? Am I factoring enough time for training and testing? Can I deploy in phases to meet the timeline? Would it be faster to go with a SaaS solution and have it configured to meet my needs? What is my opportunity cost (advancement in technology, loss of business to a competitor) of delay?
Cost of project:
Custom-built software is much, much more expensive than SaaS. These days a mid-level engineer will cost you a minimum of INR 3-4 lakh per year. A project manager will cost 10-20% higher. Even when most of the coding work is outsourced, you’ll end up spending 10-15 lakh, at the very least. You’ll be also footing the bills of maintenance costs which is roughly 20% of development cost. Additionally, if you build a team in house – that can be a lifetime liability and certainly an avoidable cost centre.
Last but not the least, none of this factor the cost of failure, which typically affects 30% to 70% of enterprise development projects. SaaS businesses distribute the costs of development across many customers. As a result, the costs are much lower. What’s more, with SaaS businesses, the costs are completely variable: you pay a subscription per month.
The questions you need to be asking yourself – Am I ready for a lifetime commitment to a cost centre that is not my core competency? Is my expense in custom development sustainable, in other words, do I have runway for further development in case its required? Will I save cost if I use an existing solution and customize? Have I factored in cost of maintenance, changes in technology, future developments into my cost of development?
These are two secondary consideration that are absolutely mission critical, if you wish for a hassle free and long-term technology journey.
An assessment of the experience and technical competence of the development team is important to establish, early, the cost (risk) of engagement. Its easy to find coders and programmers with knowledge of a certain language. However, it takes a certain degree of understanding and experience with UI/UX, workflows, architecture designing etc; to develop a comprehensive solution. Think of it as knowing a language VS writing a full-length novel. It seems easy but takes a fundamentally different skillset and involves a team (writer, proof-reader, editor etc) to get right.
Similarly, its important to spare a thought on who you pick as your partner in this journey. Implementing technology is a transformational decision for any business owner and once committed there is no going back. Vetting the businesses and checking the legitimacy of the IT company, being dealt with, is important to avoid heartaches in the future. This becomes especially important when you deal with freelances or remote teams, without a legitimate presence or office in the city.
Few questions you can ask yourself – how old is this company? Who are the promoters of the organization? Do they have any brick and mortar office? Do I know anyone who is using them?
This, by far, remains the strongest argument in favour of custom development or on-site hosting of a solution. While on site hosting does increase the cost significantly, it does offer the business owner a peace of mind in terms of data theft or misuse.
Determining which solution is the best fit for security will require some objective thinking. On the one hand, no one will care as much about the security of your data as much as you do. This is because outsourced or not, you ultimately retain liability for its safekeeping. On the other hand, you are prone to overlook areas such as creating data backups and server redundancies due to lack of experience in the domain.
While data may seem more secured in house, it might help to consider the reputational and business cost of data theft, loss or misuse to a serious SaaS player. It might not be obvious, but a third-party SaaS operator is more likely to build in necessary contingencies and have multiple safeguards in place to protect your data. Additionally, legal obligations and NDAs are usually a part of these engagements and further enhance the cost of mishandling or misuse of data.
Few questions you might want to ask yourself – has the developer taken the necessary steps to protect and safeguard my data? Does my fear of data theft, justify the high cost of custom development? How sensitive is my data?
When deciding on the best way forward- there is no right or wrong answer and often can mean different things for different people. But there is no debating the decision potential to transform the organization and take it to heights that were seemingly impossible otherwise. Its time we view technology as an investment and not necessarily a cost, and as with any investment – carefully and objectively, consider all options before taking the plunge……