With the percentage of non-cash reward elements trending up in almost every corporate total reward portfolio, some firms are examining the feasibility of a custom build software (for communications, reporting and award fulfillment) internally, in lieu of using an outside firm’s resources or acquiring some type of ready-made solution.
Over the last few months I have worked closely with several firms in examining their build vs. buy business case. And while it goes without saying that internal cost parameters and resource alignment and supporting structures vary widely across business models, invariability each finding came down to five critical points in favor of outsourcing.
A distraction for internal resources
In examining the ramifications of canned vs. custom build software each organization would rely upon internal resources (usually some type of shared services group) to build. All would be doing so while taking these assets away from supporting mission critical applications. The issue of keeping dedicated internal resources focused on the core business was ultimately deemed as a priority.
Several firms identified opportunity costs to the business and used this in their financial analysis as a potential outcome of core applications being delayed or postponed in any way as well as the time delays associated with launching the recognition platform.
The experience and relevant acumen of internal resources
All firms recognized that an internally lead led design would reflect a limited level of expertise and spoke to the benefits of using an outside firm with successful experience in building platforms.
All firms placed value on immediately gaining cutting edge functional enhancements generated by a wide range of users over time. Concern that a custom build software would not reflect the most progressive strategies prevailed in the findings.
Ongoing support and future development of a custom build software
All cited concern over ongoing support and future development. Collectively the business cases went beyond the launch phase and addresses ongoing support (and potential internal resources required) as a concern. The prevailing opinion was that ongoing support of a self built recognition system would not be a priority for internal resources.
The issue of support transcended the program administrator level and was applied to all stakeholders. Companies looked at the resources that would be required to assure seamless operation for participants and other program sponsors within the enterprise. Ultimately firms rationalized (financially) that having technical staff at the ready for technical issues, questions, fixes, and any other unforeseen problems that may arise was A) more critical with an unproven platform and B) Not a cost component they were willing to carry.
Financial advantages
Ultimately the business case pointed to outsourcing the project, citing both an accounting and economic benefit. In addition to positioning the direct internal cost of resources and the opportunity cost of potential delays to the recognition project as well as mission critical applications as barriers to building, in each case most companies made the case that using an outside firm over a custom build software solution allowed them to amortize the costs of development over time.
How do you know if you need a pre-build software or you should spend some resources on building a custom software? Share your thoughts with us.
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