Software development – in-house or third party – the eternal debate

If your company hasn’t been there yet you’re one of the minority.
Most companies in the shipping and logistics industry see this as a crossroad that they come to over and over in the company’s life cycle. And why ever not? Software is the least understood asset in our industry after all.

So lets play it out; this eternal debate – let’s give the proponents of each their time to speak and draw our own conclusions.

Pro inhouse software development team:

Shipping and logistics is part of the service industry, you will have unique ways of doing what you do and the inhouse team (sized between 5 to 20) , headed by a senior IT resource ; will custom make your software and keep changing it to suit your changing needs. Your competitor will not have the benefit of this unique software and you will have total control over source code and changes without depending on some external agency.

IT can be your differentiator and you prefer to invest in your own team than in outsourcing.

Cons:

The cons are best summarized as follows:
Your software will be limited by the vision of your own team; and stay right at that level- while the world might have carried on and reached places. Unless you plan to constantly improve the quality of your resources, and your RnD in technology- you will fall behind soon.
The cost of inhouse software development is a huge cost- and one difficult to trim even as the years go by, as the team size tends to grow, people need salary escalation in their careers and you could reach a point when you realise that the cost to value ratio has completely changed.

Pro outsourcing your software requirements:

Leave the experts to it, and do what you do best.. this is your strategy.
A niche IT company that has a product with a good fit (70-80%) to your current business model or even a strong solutions approach is the solution to your IT needs. You set clear expectations of your IT partner, monitor results and yet keep your own staff focussing on your own core business.
A good AMC takes care of your customer service requirements and for Changes and Upgrades you rely on your IT partners to keep working and roll them out per your need. A good sized company which has a proven track record is what you look for. An in depth study of their current customers – and how long they’ve held on to them deepened your confidence in your IT partners.
The cost value proposition is High since you are not paying for their whole team to service just your needs.

Cons:

The cons here are a series of ‘what ifs’

What if- the company refuses to make changes where you absolutely need something to be tweaked to the way you work? What if – the company closes down within 2-3 years and abruptly, leaving you to maintain your own license without an experienced support team inhouse? What if – the company doesn’t understand your business and communicating your needs is challenging ; while your limited control over them post purchase leaves you frustrated.

Conclusion:

a) IF you go the in-house route you go in with your eyes open that you are in fact running two businesses – your own; and IT – you need to constantly invest in better resources, improved technologies and also to study the market to ensure that your solution keeps up with the times. You go in ready to bear the risks of costly mistakes due to limited in-house vision and you willingly redo what needs be redone maybe with the help of external IT agencies where required. Your IT vision is driven top down and you have a technology friendly Board of Directors. You are probably a market leader with deep pockets and thus willing to make this sort of a commitment to your software.
b) IF you go the outsourcing route you go in with a clear focus on who you want to work with. You employ a core team to evaluate potential IT vendors and guage them for Shipping and Logistics domain knowledge, experience, product portfolio, project management skills ; process certifications and speak to some of their current customers. You go in prepared to bear the risks of realizing you picked a wrong product or a wrong partner by rationalising to the board that you have paid for it a fraction of the cost of self development – you cut your losses and get back to searching for the right partner. You invest in relationship building and ensure a sound AMC provides you and your network 24/7 customer support (which an inhouse team will be stretched to deliver)

So there you go – do think about where your company fits in and write in with your views.

– Ms. Meera Kumar, Head, Business Development.

Disclaimer:The views expressed in this blog are the writer’s and are not an indication of the company’s view, action or strategy.