Running the Numbers: Making Software vs Buying IBM i Software

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Being a software company, we think a lot about why people should buy professionally developed IBM i software rather than programming similar functionality themselves.

After all, many companies have professional developers and their job is to develop software. Shouldn’t programmers always program new functionality rather than buying third-party software?

Let’s look at the financial side of the make versus buy decision and discuss how to create evaluation numbers to support that decision.

The Numbers: DIY Versus Professionally Developed Software

A make versus buy decision assumes it’s feasible to either buy a package or create new programs to provide proposed functions. This is not always possible.

In some situations, there is no professionally developed software for your needs; in other cases, it’s not feasible to program a Do-It Yourself (DIY) solution. There is no make versus buy decision unless you have both choices. Given that, most make versus buy decisions come down to these comparisons.

If DIY software costs more than Professionally Developed Software, it makes sense to buy rather than develop.

If Professionally Developed Software costs less than DIY software, it makes sense to develop rather than buy.

Here are some ideas for creating the numbers to perform these comparisons.

Cost of DIY software

DIY software costs can be created from this equation:

DIY software cost = Design and Programming costs + Infrastructure costs + Software modification costs

Design and Programming costs are what it takes to design and program your solution. Be careful with estimating these numbers as it ALWAYS take more time than planned to create a solution. Factor in additional time for scope creep and resource issues.

Infrastructure costs involves additional server costs, creating new databases and creating user interfaces.

Software modification costs determine what it will cost to maintain and upgrade the software in the future. These costs will vary year to year and may include items such as updating your software for new operating system releases.

Cost of Professionally Developed Software

Professionally Developed Software costs can be created from this equation.

Professionally Developed Software costs = Initial purchase price + Yearly software maintenance – depreciation costs + Infrastructure cost + Additional programming costs

Initial purchase price is what the vendor charges you up-front to buy or lease the software. For purchased software, it’s a one-time cost. For leased, rented, or cloud-based packages, it can be a monthly or quarterly charge.

Yearly software maintenance costs are what you pay the vendor every year to use the software. It can be a yearly fee for purchased software. For leased or cloud software, maintenance costs may be bundled into monthly or quarterly charges.

Depreciation costs are the savings you realize for software depreciation, according to industry standards

Infrastructure costs are similar to DIY infrastructure costs. They cover things such as whether you need Windows front-end servers or whether you need an additional server to handle encryption functions.

Additional programming costs are extra programming costs you’ll incur to use the software. This covers items such as creating interfaces to your production database.

Other considerations

All other things being equal, these are the factors that enter into a straight financial comparison in the make versus buy decision.

In our experience, buying a professional package can be more compelling for inexpensive utility software and higher cost enterprise software.

For utility packages such as IBM i system monitoring packages like my MessageFlex software or an IBM i job scheduling package, professional packages are more cost competitive and easier to deploy. It’s much more expensive to create a utility from scratch, and many packaged solutions don’t require a lot of custom programming.

Similarly, for higher cost enterprise packages like a data warehouse system or a new ERP package, it makes more sense to use a professional package and build additional functionality on that package. Most companies probably shouldn’t program an ERP package from scratch, for example.

Whatever your software needs, feel free to contact us at DRV Tech for help in solving your own make versus buy decisions. We’ll be happy to discuss any project you’re considering.


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