There are advantages and disadvantages for both acquiring a software package where you pay monthly maintenance fees to the software vendor and bringing software development in house. Purchasing software is an effective way to stretch the company’s budget. The software sold by the vendor is reliable and proven over time. It is less costly since the vendor will customize the package to suit your need. It has lower costs and requires lesser time to implement. You are better able to control your cost since the software is tried and tested. There’s no need of training personnel who will implement the system.
The company will just have to appoint somebody who will be trained by the vendor and vendor will take charge of the software’s maintenance and do the troubleshooting when problems arise in the future. It requires less technical staff. The company is also assured that the vendor will take charge of the future upgrades for a fee. However, there are some software vendors who sell the package reasonably but charge high monthly maintenance fees since they found out that, the easiest way to increase revenue is through the maintenance fees which is really profitable for vendors.
Sometimes, software buyers are too focused on the purchase price and not pay attention to how much they are paying on the back end--in software maintenance fees. Buyers forget that when they pay a dollar for a software license, they pay that dollar once. But when they pay a dollar on software maintenance fees, they pay that dollar again and again, year after year, as long as they stay on maintenance. Over the life of the system, most customers pay far more in maintenance fees than they ever pay in up front license fees. On the other hand, a company may choose to have an in house software development.
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The most important consideration is the total cost of ownership. It will require cost-benefit analysis by the management to see if it’s more advantageous to develop their own software or purchase from vendors. Having an in house software development will give the company complete control over resources, staffs and schedules. This may be costly in the development stage but it will give a long- term benefit to the company if carefully studied and analyzed before ventured in. It’s also good to have the complete modification and system under the control of the company.
The company through their trained technical staff may change and modify some unique business requirements of the company with lesser cost. The organization utilizes its own staff for the planning, definition, analysis, design, and implementation of the applications. New staff may be hired or existing personnel can be trained in information systems and computer technology, which will require training costs. Another disadvantage is the need to train another employee in case the one previously resigned, terminated or become incapable of doing the job.
The company might be so engrossed in resources and may take much time software development that they loose sight of its more important and profitable activities. The return of investment as well as the payback period must also be considered.
The Enterprise System Spectator. Retrieved Feb. 21, 2007; from: http://www. fscavo. blogspot. com Business Week Online Retrieved Feb. 21, 2007; from: http://www. businessweek. buyerzone. com Ambysoft. Comparing Approaches to Budgeting and Estimating software Development Project Retrieved Feb. 21, 2007; from: http://www. ambysoft. com
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