Recently, I noticed a few things about custom software development that made me conjure up this week’s blog topic. First, I read this interesting article about the Washington Post, which discusses how their most valuable asset is now the software that powers the operation. Everyone knew when Jeff Bezos bought the company that things would change. Turns out, his play wasn’t about journalism or the news but rather the opportunity to create software solutions, which in turn could then could be licensed to other companies, even outside the publishing space. By the looks of it, he succeeded, having recently signed BP on as a customer.
I also have been mindful lately of how subtly software is powering almost everything we do. The other day, my Amazon app showed the location of the delivery truck, and how many stops until it delivered my package. UPS has a similar tracker now too. I ordered food via Door Dash, and the driver was trackable. Sure, not all of this is recent developments, but as a guy who has worked in the industry for over 20 years, I’m taken aback by how far we’ve come.
So what do Amazon, the Washington Post, Uber, Door Dash, and countless other companies all have in common? The answer is software. They all took old-school business models and crafted solutions to solve problems, introducing efficiency to the process, and a better experience to both the consumers and those offering the services.
Take Uber, for instance. Uber isn’t a transportation company, and they are the first to admit it. While I believe the long term plan there may be to become an autonomous vehicle transportation company, for now, it is simply a software company. Same for DoorDash. These are applications that tie together buyers and sellers by serving as middlemen, making the transaction easier for both parties. Without the software, the companies don’t exist.
But what about more traditional models where software changes the operations of traditional businesses? Well, take mortgages as an example. New players such as Rocket Mortgage are making software the centerpiece of their process. Now, the process of applying, progressing through the process, and securing your home loan is driven primarily by software. What about investments and wealth management? Betterment and WealthFront have automated this process as well – not only making account management easier via an online interface but automating the control of the funds themselves via robo advisors.
The fact is if you look at the services you utilize, which are the easiest and which are the most frustrating? Personally, anyone I have to write a check to is a pain in the neck. I’m tired of writing checks. Other than some old-school companies and my own town’s water bill, I barely ever write any. Truth be told, it has now gotten to the point where we avoid the places that make it hard to do business and look for those that make it easy. This is the way that software affects your company’s bottom line – if you aren’t competing, you are missing out.
So, the value of custom software is easy to understand. It makes doing business with your company easier. It systematically can ease the processes your company has in place. And with the right implementation, it can be fun for your customers and not a chore. But how does a company use custom software and really leverage the value it brings? Well, there are three steps that you need to undertake to ensure you get the most of your software investment.
Step 1: Fix Your Own Problems First
First, you need to build software that fixes the problems your company has. Because, as we’ll get to in a bit, if you have problems, then your competitors likely do too, and so do other companies in your space. Let me share a secret with you: most companies are simply too afraid to work on building out software to fix their problems. They will try over and over to license something off-the-shelf, repeating a process of trial and error because they are too scared of building something. This, to me, seems like an opportunity.
Obviously, it’s not like I’m entirely unbiased in this debate of build versus buy. You have to make that judgment yourself. The majority of our customers come from the scenario I just mentioned. They have licensed software which has either made things worse or simply not made things better, and they are ready to build something the right way. There isn’t any magic formula I can give you, other than that you should consider the following variables:
- Cost to License: What are you paying, or will you pay, to license?
- Percentage of applicability: How much of your problem will the software solve?
- Cost to Maintain & Predictability: What does your solution cost to operate, and how predictable are the upgrade cycles?
- Value to the company: does your current solution add value to your organization? How much value would a new solution offer?
- Opportunity cost: Does your lack of a proper solution cost you money? How much over what period?
Having answers to those questions can help you formulate a value to the build versus buy debate.
Step 2: Differentiate From Competitors
Building lets you take a look at your business, your competitors, and develop solutions that make the customer experience better. When you contemplate how you are going to build out software, think about the user first, and how their experience can be streamlined and made simpler. Granted, many software fixes happen on the back-end, where customers never really see the system in action. In that case, open up some of the platform so they can receive some real-time information about the service, whether it be during fulfillment, installation, production, or whatever your business may be.
As I mentioned earlier, Amazon and DoorDash (Uber, too) give the consumer much visibility into the services they are acquiring. The more a consumer or client is involved in the process, the more ownership they will take over the transaction, and the more personally attached they become to not only the individual transaction but the relationship with the company as well.
Software that isn’t differentiated is a waste of time. Just go license, rather than build something that probably already exists. When you custom build software, the ROI and opportunities exist in the fringe features that differentiate you from everyone else.
Step 3: License the Solution
After you’ve built a solution, deployed, and are utilizing it, you may have a great opportunity available to you: the possibility of licensing the software to others. This happens all the time, both in large cases and small. As we mentioned, the Washington Post is now a CMS vendor, licensing its software to other enterprise environments. We’ve seen clients do it successfully more often than you would think – clients who make investments in software often seek to take the next step and license it for the use of others.
This is a good step, and it does help you offset costs or even monetize to profitability. However, the slippery slope that exists is the transition from software that is bespoke to you, into an off-the-shelf platform for use with more than one installation. Yes, you guessed it; the minute you license your software, you become the off-the-shelf solution you are trying to avoid.
The best tip is to not be greedy, or as the cliché goes, don’t be a pig. Stay specific, stay niche, and license to people who fit the mold of what you’ve created. Trying to expand outside of your area of understanding leads to all sorts of negative outcomes: technical debt, rising maintenance costs, and the introduction of new responsibilities such as tech support. With this said, licensing is smart and effective, and we recommend it, but stay within your lane unless you are planning on becoming a software company specifically.
I believe that the strongest offering always survives, especially in an economic downturn. I'm unsure what the future holds from a macro-economic perspective, but I do believe in the next recession, the companies that struggle the most will be the ones least invested in improving their customer experience. And for many customers, ease of use and efficiency of operation will be the deciding factors on where they do business. Custom software is the easiest and quickest way you can affect a customer's experience. We all know that the economy today is heavily dependent on experiences, and the sooner you invest in optimizing how customers work with your company, the sooner you will start to see returns and separate yourself from the competition.