“Fresh Air, Deep Dive” is Jonah Group’s new public-facing newsletter, and this is the first issue! We highlight a current topic of conversation in the software industry and how it may impact you, as well as to give you an update of what’s happening at Jonah.
Welcome to issue #6 of Fresh Air, Deep Dive 🐳 — Jonah Group’s monthly newsletter, which highlights current topics of conversation in the software industry and how it may impact you.
In the last issue, we chatted with Ken Rother about how to avoid becoming roadkill on the software start-up superhighway. This issue aims to help you to start thinking about why both buying (and selling!) custom software solutions is difficult, and what you can do to give yourself a leg up.
Why custom solutions are so difficult to buy and sell — A mindset shift is necessary!
Resources — Suggestions for further reading
Why Custom Solutions Are So Difficult to Buy and Sell
We recently spoke with a seasoned sales executive in the long-term care industry who was seeking our advice on how to break into IT sales. At one point we spoke about the distinctive nature of selling custom software solutions, which was an unfamiliar topic to her (and indeed, many sales executives in other industries).
Custom software solutions are one-off, tailor-made, built-from-scratch applications. These are solutions created to address a unique business challenge. They either help a company run their business more efficiently than their competitors can, or they give the company’s users something valuable that they couldn’t otherwise get, and as such warrant the investment of time, effort, and money to develop and own.
Most sales professionals sell products. For example, a potential long-term care customer may not know if they are seeking an assisted or independent living apartment, but they certainly have retirement home products in mind at the start of the buying journey. This scenario is very common across industries from financial services, to automotive, to real estate. Typically, the market exists before the product, and the product exists before the sales opportunity.
The COTS (commercial off-the-shelf) product cycle
Buyers inquire about products and inspect them for fit during their buying journey. Seems about right.
In the world of custom software however, the development contract is often signed before the specifications of the solution are well-defined, i.e., long before there is a “product.”
The custom software solution product cycle
A huge leap of faith is therefore an inherent part of the deal at the point of sale. With only the notion that their needs cannot be met by commercial off-the-shelf (COTS) applications, the client embarks on a journey to understand their own business case, explore different solution approaches, and evaluate potential vendors – often concurrently. The problem is that a shallow understanding how the problem will be solved does not lend itself well to finding solution providers or evaluating ROI.
Note that the same leap of faith is equally integral to the seller of the solution. The sales team invests time and effort upfront to coarsely define an application and estimate the cost of development without a complete picture of the final requirements. If the client lacks a firm grasp of their requirements, eschews an iterative and exploratory approach to solution definition, or simply doesn’t anticipate the budget required to drive such an initiative to conclusion, then even the best vendor will not be able to deliver success.
Furthermore, unlike COTS products, the responsibility to manage and evolve the solution falls on the procurer, who may not realize that there is no real endpoint to an app delivery effort, even though the setting of project schedules and budgets seem to suggest otherwise. Custom applications are never “finished.” They should really be managed as any product would be if they are to remain relevant to their user base.
So yeah… it’s difficult to buy something that has yet been created. By the same token, it is just as difficult to sell and deliver something that has not been fully defined. Custom software solutions are hard.
How can you improve your chance of success with them? Here are four recommendations.
A clearly articulated problem statement is your starting point. You should capture the problem in the context of the company’s strategic goals. You should also understand the value of the system to the business, expressed in dollar terms related to new revenues and lowered costs. Don’t forget to model long term impacts, as well as the cost associated with the risk of not procuring the system. For example, continuing to support outdated technology may introduce significant security and reputational risk.
This is business modelling 101. If you find your organization lacks the right resources to conduct market research (interviewing both potential solution vendors and future customers of the product), define the product boundaries, and map out a solution strategy, then engage with a professional to help wrap your arms around the problem. Consider a Jonah Group Discovery to help you get started. With a Discovery you aim to spend a small portion of the eventual budget (about15%) to gain design clarity and better price accuracy on the initial project as a whole.
The buy vs. build decision is critical. Market research helps you find out how your peers and competitors are dealing with the same problem. Evaluate existing COTS applications relative to your requirements and business workflows. Compare the best COTS solution you can find with the dream scenario in which you buy a custom application that addresses your precise needs. In either case, secure the necessary budget to not just buy / build the app, but to sustain it post go-live in support and enhancement.
As a custom solution provider, Jonah Group may be biased, but we find that many underestimate both the benefits of custom, and the costs of COTS. The diagram below might help you to understand some of the dimensions to consider, even if you don't draw the same conclusions in your context.
Professional assistance should be available to help guide your buy-vs-build decision.
Acquiring and operating a custom application is a distinctively different experience than buying a COTS product. The acquisition journey is longer, and the upfront investment is often higher. However, the resultant operational efficiency is typically superior to COTS, and the serviceable lifespan is usually longer. Therefore, a different management mindset is necessary to guide the initiative. The mindset change starts with a tailored definition of success that encompasses every stage of the application from development and implementation to steady-state operations. Not surprisingly, this is often called the “Product Mindset.”
Comprehensive and stage-appropriate metrics are needed to measure progress and ROI throughout. After go-live, “care and feeding” is an essential part of custom application ownership, which necessitates a dedicated budget to evolve the solution as well as the staff to lead the process – another dissimilarity with COTS that requires a shift in management attitude. While projects have a beginning and end, products must continually evolve to meet shifting customer needs. If not, customers will eventually choose something else that does meet those needs.
All the planning, preparation and requirements gathering will come to naught unless the project is entrusted to a reputable vendor who is culturally compatible with your team and vested in your success. The right partner that will invest time to understand your business, offer you expert advice instead of just following orders, and focus on the end user experience instead of just features and functions.
Your partner should also commit to the journey over the long term with you because knowledge continuity, support, and stability will be important for your product. They should understand that your buyer’s journey is often fraught with fear, not the least of which may be your relative inexperience in building custom digital solutions.
A good partner will help you overcome the fear of digital solution development inexperience.
Among other things, your development partner should help you overcome these and develop trust with you before the point of sale. With all of this, your solution has a much better chance to remain relevant for many years to come.
Final Thoughts
Custom software solutions are hard, but for many organizations they are the preferred way to overcome unique challenges, improve operational efficiency, and hone their competitive edge. Self knowledge, a product mindset, and the right development partner all help to set you on the right track before the first line of code is written.
