Custom Software and Competitive Advantage

The Different Roles of Custom Software and Off the Shelf Software

Since the essence of strategy is being different in a way that matters to customers, we find it curious when prospective clients consider off the shelf software for the business activities that are at the heart of their differentiation. To be clear, we aren’t against off the shelf software (we have subscription software products and a subscription software implementation service that are important parts of our business). But we see off the shelf software being best suited for generic activities the firm doesn’t want to differentiate itself on. For instance, if best practice is good enough for the HR function, then off the shelf solutions like HR Advanced and CloudHR can be better than going custom (although this may not be true for firms differentiating on talent). Or if little differentiation can be derived from the Accounting function, then cloud services like Xero or Oracle Financial may make better sense. Using off the shelf software in such situations makes sense because it can lead companies to best practice almost overnight for functions and processes they may have underinvested in or not prioritise for investment in future.

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