Custom Software vs Packaged Software: Which Is Best?

custom software

Choosing the right software to optimise your business processes isn’t easy.

From off-the-shelf solutions like WooCommerce to full-service custom software, there’s an abundance of choices out there – and don’t even get us started on wrangling the jargon. 

API, ERP, UI, VCF, CPQ, CXM, NLP, SFA… Trying to make sense of it all might just give you reason to grab a paper bag:


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Deep breaths, mate. You’re in safe hands now.

At Human Pixel, we build both custom software and customise off-the-shelf solutions for our clients, so we can guide you as to what’s the best choice for your business.

What should you consider when deciding between custom software vs packaged software? 

Read on to find out.

​​Custom Development and Packaged Software 101

We’re going to start with the basics here but if you’re already clued in – or just very excited about the pros and cons – feel free to skip ahead.

What is custom development?

Custom development is any software that’s created especially for your business. It could be a totally new application, or it could enhance an existing one – the key thing is that it’s fitted to your processes.

Think of it like a custom suit: it might come from a general pattern, but it’s made to your measurements, taste, and design.


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Custom development can be completed in house by your own IT or development departments, or externally, by an agency or freelance software developer.

A common example of custom software development is when businesses decide to create their own apps.

Creating an app is usually a lower-level custom development project (unless you plan on building another Pokémon GO). According to StartupGrind, creating an app can take anywhere between 2.5 and 9.5 months.

App sizeScoping and requirement gatheringUX designDevelopment and testingBeta testing and deploymentTotal
Small1-2 weeks2-3 weeks6-7 weeks1 week2.5-3.5 months
Medium2-3 weeks5-6 weeks14-15 weeks2 weeks5.5-6.5 months
Large3-4 weeks9-10 weeks20-22 weeks3 weeks8.5-9.5 months

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More complex business projects, like a new CRM system, can take much longer, as we will discuss later on in this article.

What is packaged software?

If custom software is a tailor-made suit, packaged software is any off-the-rack option.

We’ll be getting into specific pros and cons below. But, generally speaking, with out-of-the-box software, you might find a perfect fit every once in a while, but for the most part, you’ll be compromising on how closely it fits your exact requirements.


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Nowadays, the majority of packaged software is a SaaS, or Software-as-a-Service, solution.

Just think – a whopping 73% of businesses plan to switch all their systems to SaaS in 2022. And 94% of professionals use SaaS solutions!

The term “SaaS” refers to cloud-based software that is hosted on the vendor’s servers rather than your own. It will likely have a fixed set of features and a set interface, with the option to customise it to your needs using plugins – or “integrations” – from other apps and services. 

These might be:

  • Quote engines
  • Accounting software
  • Email
  • Social media

As an example, we frequently help clients get set up with HubSpot’s CRM.

Like many SaaS CRM systems, HubSpot offers a free tier and the ability to get set up in minutes. Take a look back at that app development table – now imagine just skipping straight to the end. That’s what’s possible with a packaged system.


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​​Custom Development vs Packaged Software: The Head-to-Head

As you might imagine from what we’ve already discussed, there are significant differences between opting for custom development vs packaged software. These include:

  • Cost, especially how that cost is distributed over time 
  • Ramp time 
  • Customisation 
  • Ongoing maintenance
  • Expectations for customer service (though this is a complex point we’ll get into shortly)

Let’s get into it.

The pros of custom development

Built for your company

We know, we know.


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But listen. Here are the two most likely scenarios in which working with a packaged software might get on your nerves:

  1. There are loads of extra features cluttering your screen that you don’t need or use
  2. There are loads of missing features that you actually do need and you’re having to cobble together manual solutions and workarounds to get the desired result

Neither of these will be an issue with custom software.

But not only will custom software be entirely fit-for-purpose, it can also deliver levels of optimisation that are usually out of reach with packaged solutions.

Say you’re a tourism company that wants to implement AI-enabled dynamic pricing to motivate travellers to buy vacation packages. That wouldn’t be a problem for custom software, but if you were looking at packaged software, your options would be severely limited.

And considering that low prices continue to justify the purchasing decisions made by nearly two-thirds of consumers, custom development looks pretty good in this case, right?

Or, say, you’re a company that sells electronics. Your salespeople are great at moving your products, but they struggle with the necessary admin tasks that come with selling. So you decide to go down the sales automation route.

Packaged software can help, but it has a serious drawback compared to custom sales automation software — you’ll have to flex and adapt your sales processes to align with the software, and you know that’s going to be a real pain.

Scalability

Flexibility and adaptability are built into custom software from the outset. Whether you merge with or acquire another company, create a new revenue stream or expand overseas, custom developers can keep up with these demands seamlessly. 

By contrast, lack of scalability is a major drawback of packaged systems. This is often due to the cost associated with business expansion – the more users or data needed, the higher the cost of packaged systems. 

Custom software, however, is often more scalable in terms of cost.

As we’ll discuss in a moment, the startup cost of a custom system may be high, but it levels out over a longer period, and unlike a Saas model, you’re unlikely to see a sudden jump in price as you grow.

Proprietary software

When you use custom software, whether it’s a CRM, voice first development, or a SMS automation system, you get to have your Mufasa moment.


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No, not that one.


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There it is. “Everything the light touches, Simba… is owned by our company and secure.” 

You own the software, which means you’re not locked into a packaged solution – or in danger of having to jump ship when you reach a breaking point with a rigid system. 

And your data is protected. We cannot tell you how many businesses we’ve seen who were still running mission-critical spreadsheets, or as we like to call them in the biz, “a disaster waiting to happen”.

We’re not saying to ditch Excel entirely – Excel remains essential to the management of 99.99% of businesses – but moving key data to a secure system that can’t get corrupted is just good business sense.

Institutional knowledge is captured 

Many businesses fall into the trap of being reliant on a few experienced employees who know everything about their software and all the workarounds.

In fact, studies show that 42% of valuable company knowledge is unique to the individual employee.

By investing in custom development, you can ensure that institutional knowledge like this is captured within your IT systems, so all employees and new hires can operate productively without worrying about losing knowledge or proven processes. 

This also means you’re not over-reliant on seasoned staff who can leave or leverage their knowledge over you. It’s a win-win.

The cons of custom development

Higher initial costs

We won’t lie to you, custom development can be costly.

Take a CRM system, for example. And brace yourself:

*costs in USD – Source

Before you panic, it’s worth reminding yourself that this is a startup cost: an investment in a foundational piece of business tech that will facilitate and adapt to your company’s growth.

When a CRM pays back $8.71 for every dollar spent on it, it’s hard to argue that this isn’t a worthwhile investment.

Even if it’s a simpler project like chatbot implementation, you are still looking at at least US$ 20,000 (AU$ 28,000). So always think: investment, investment, investment.

Longer development and implementation period

Unlike many SaaS systems, which can be up and running almost immediately depending on how complex your company is, custom development takes time. 

You saw the app timeline – and that’s a relatively simple project!

Now let’s say you want to build or overhaul your website. If you go the custom development route, this can take anywhere from two to four months – or maybe even more if you have a long list of special requirements. 

Of course, if you choose to partner with us, we’ll build you a world-class website tailored to your needs without unnecessary delays. And that’s a promise. 

But shameless plugs aside, a good rule of thumb is that most custom software development projects take between four months and a year. This isn’t a hard and fast rule, but simply a figure to keep in mind. And of course, the more complex the task, the longer the ramp time.

And vice versa, a simple project will take less time. Going back to chatbot development, this only takes up to eight weeks. Not bad, right?

However, none of these figures take into account the fact that a third of all software projects overrun their projected timeframe. So, a word of wisdom: if you choose this option, make sure you budget your time as carefully as you do your spending.

Potential risk if using software developers you don’t know

Ultimately, the experience you get with your custom development project will be down to the developers you choose.

This is why we think it’s so important to know how to choose the right development partner.

We know from working with businesses that a major barrier to custom software development for business owners is the perceived amount of time you have to spend briefing a development agency to get the result you want at the end. 

And look, we think this is totally fair enough. That’s time you’re not spending running your business, after all. 

But we also think this only emphasises the importance of working with a software development partner that can jump in and get a handle on your business quickly – then translate that to developers without you having to do any heavy lifting.

In other words, working with a business process optimisation partner like Human Pixel.

When to pick custom development

In short, you should pick custom development if you’re able to spend a big chunk of your budget upfront and want tailored software that can keep up with your growth. 

Here’s a breakdown:

Do pick custom development if you…Don’t pick custom development if you…
-Have the resources upfront to sustain custom development 
-Are entering a high-growth period and need software that can keep up
-Work in a specialised industry that requires custom features 
-Are seeking digital transformation by fixing your broken business processes
-Are looking for software with a quick setup time
-Do not have the resources available to front the initial investment

The pros of packaged software

Try before you buy

Many SaaS solutions have the advantage that you can test them out before you commit to them, which is not an option with custom systems. 

SaaS software examples that offer a free option include:

  • Zoho One
  • Zendesk
  • Freshsales

For example, with Zoho One, you can try it for 30 days free and test out its sales features before deciding to purchase.

User reviews

Presuming you go with an outside hire – i.e. a freelance developer or agency – you’re relying on recommendations and word of mouth about their expertise to make a purchasing decision.

However, with packaged software, you can see what other users think of the exact software and features you would be using if you made the purchase.

When 93% of buyers say reviews affect their purchasing decisions, this can’t be underestimated. Heck, we’ve even referenced a customer review in this blog!

Cheaper startup cost

SaaS software is generally cheaper initially than custom software.

But, you’re putting yourself at risk of becoming locked into a specific vendor – which also means being locked into their price increases as you grow, and being perpetually upsold by their sales team.

It’s also likely that you’ll be making a compromise between your desired features and your price point, as many companies put their most useful features in their higher-priced tiers to motivate people to upgrade.

The cons of packaged software

Lack of control

Forgive us while we state the obvious again: packaged software is not built for your processes.

This means it’s pretty much guaranteed to become clunky over time, requiring you to use workarounds or change your established processes to accommodate the software features at your disposal.

Kind of defeats the whole point, doesn’t it?

Higher long term costs

With a custom system, after your high upfront payment, you’re only paying for maintenance and updates.

With a packaged system, you’re paying an ongoing fee. Forever.

Take HubSpot. It has extensive free features available, but as you scale you will inevitably need to start paying – and boy, will you be paying a lot over time:

PlanCost per yearCost over 5 years
Starter (1 free user)US$ 600 (AU$ 845)US$ 3,000 (AU$ 4,000)
Professional (5 free users)US$ 21,360 (AU$ 30,000)US$ 106,800 (AU$150,000)
Enterprise (10 free users)US$ 60,000 (AU$ 85,000)US$ 300,000 (AU$ 422,500)

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Vendor lock-in

We’ve touched on this already, but it’s one of the saddest issues that we see when working with businesses.

As businesses grow, they often become reliant on a SaaS system, and when the company decides to make changes or remove a feature (which happens a lot), the business gets screwed. 

Well, unless you have a solid business development partner that can hold your hand and help you overcome whatever challenges SaaS developers decide to throw your way.

But with custom-written software, you can outright eliminate the nasty surprises. 

When to pick packaged software

You should pick packaged software if you need your software to be up and running fast and on a low budget. Here’s a full breakdown:

Do use packaged software if you…Don’t use packaged software if you…
-Have a limited budget upfront and need either a low-cost or free option to get started
-Have a great development partner like Human Pixel on board to help you implement it
-Are entering a high-growth period where you’re likely to rocket through expensive pricing tiers
-Have complex or specialist needs best served by custom solutions 
-Have broken processes that need to be fixed before you can automate them successfully

Conclusion: The Final Verdict

Like we said, choosing the right software development option can be overwhelming, but we’ve just helped you clear up one of the biggest questions you’ll face.

Whichever option you choose, you need a business development partner to work with and guide you.

At Human Pixel, we implement packaged software for our clients as well as building state-of-the-art custom systems.

Get in touch today to find out how we could help your business.

In the meantime, rev yourself up by reading about Business Solutions for a Growing Company.

There, doesn’t that feel better?


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