Veer Singh, CTO at FoodJet Inc, leads enterprise engineering projects, motivating teams and stakeholders with a customer-first approach.
The SaaS industry has democratized access to technology for businesses of every size. However, once you begin to scale your business, you’ll start to notice the pitfalls of licensing a third-party SaaS solution.
When the seams start to show, you’re faced with a decision: Is it time to stop renting your software systems and owning them instead? There’s no single right answer, but there is a decision matrix to run through.
Customization, Control And Competitive Advantage
The first question to ask is whether the business function(s) is business-critical. The more critical the function, the more you want to control the software system running it and the system’s evolution.
A small SaaS may be highly responsive to your function requirements and customizations. But the SaaS will grow, and its product development plans won’t always align with your priorities. Your subscription fees go up while your ability to get the customizations you need declines.
You can consider finding a different SaaS provider in the same space — one that serves your growing needs better. There may in fact be an established third-party software solution that can execute a business critical function in a way that meets your company’s customized requirements.
The chances you can find a third-party SaaS solution that fits your business goes up when you’re looking to fill a common business function. Nobody needs to build their own accounting software.That SaaS market is well-developed and accounting has well-established business rules. Any company can find an accounting system that meets its customization needs. The same is true for many industry-specific functions.
The last criterion of the business critical filter is how unique your company’s process is. All grocery stores sell food, but how they sell, market or deliver that food may be different.
Is your business process so unique that it provides a competitive advantage? Answer these questions: What’s the value of the way you want to do it compared to the cookie-cutter SaaS? What’s different about your company’s business model that it requires a custom software solution to execute it?
Weighing the business process against the “3C criteria” — customization, control, competitive advantage — you can decide if it’s time to own or if renting still makes sense. If you’re leaning towards owning, the decision matrix continues.
Where Is Your Company In Its Digital Transformation?
If your company still runs legacy systems, a third-party SaaS integration will be a challenge. You will certainly have to build a custom integration, perhaps some middleware. If this is your situation, it may be more cost-efficient to modernize the software in-house.
Conversely, this may be the opportunity to start phasing out the legacy systems. If the function doesn’t hit high enough on the 3C criteria scale, turning to a proven third-party SaaS becomes an easy first step into the cloud.
How’s The ROI On Your SaaS System?
Recent research into SaaS utilization found that “about 80% of features in the typical cloud software product are rarely or never used.” How much does your company pay a month in subscription fees? Are you paying for bells and whistles that you don’t need when you can be hyper-focused on your own needs instead?
Building and maintaining software systems in-house is expensive. No question. But going in-house may still provide a higher ROI than ongoing subscription fees.
The long-term benefits of spending a chunk of money now on building a development team could help you reap large benefits later. Having an in-house development team will position you to be able to shed multiple long-term, expensive licenses over time. It will also boost your agility in responding to evolving organizational priorities.
How Will You Build Your In-House Team?
When building software isn’t your organization’s core competency, assembling a talented development team is a serious challenge. You can hire one from scratch, or you can buy one through merger or acquisition. Either way, your first consideration must be finding the engineering leadership experience needed to assess your existing in-house talent and the outside opportunities.
Clearly, your budget and the urgency of the solution impact how quickly you can build an in-house team. If you have budget and urgency, you can bring on an experienced development team en masse through acquisition or through aggressive recruitment. These are the quickest paths to getting a lean solution of core functionality up and running. From there, the team can expand its functionality in accordance with the company’s needs.
Otherwise, it might still make sense to turn to a third-party SaaS solution as an interim step while you take time to grow an in-house development team. Fortunately, the growth of PaaS solutions means you can minimize your in-house hardware requirements and networking expertise and focus on software development talent.
Process And Customer Experience As A Differentiator
Taking on responsibility to build, maintain and develop an in-house software solution is a big deal. There are great costs and potentially great benefits if you do decide on in-house development. The way your company provides its service or operates its processes can be a key differentiator that provides a competitive advantage, in this case, making in-house development a smart choice. If your company is looking to build something inventive, then keeping it in-house may be your best option.
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