May 16, 2023

COTS & Custom Software: Top 5 Security Myths | AltSource

Data gathered from American Express showed that 60% of shoppers in the US prefer self-service online shopping tools, including:

  • Ecommerce store websites (24%)
  • Mobile apps (14%)
  • Voice response systems (13%)
  • Online live chat (12%)

Shopify reported that some of the biggest ecommerce trends for 2023 include expediting the order fulfillment process, leveraging social media for marketing and selling, mobile-first websites, self-service customer portals, and more customer personalization.

The information from both sources paints a picture for ecommerce business leaders about what types of software, services, and applications they will need to invest in to stay relevant in today’s digital marketplace.

When it comes to investing in those software solutions, you have a multitude of options, but it often comes down to whether you buy new software or build it. 

In other words, do you invest in commercial off-the-shelf (COTS) software, or do you enlist custom software development services?

What is COTS?

In a nutshell, commercial off-the-shelf (COTS) software is any ready-to-install software program you can purchase from a retailer. Most COTS software has been designed for very specific functions or job duties. Other terms for COTS software include prepackaged, out-of-the-box, or premade, but COTS has become the more common term.

Technically, many companies that offer software-as-a-service (SaaS) are providing you subscription-based access to their COTS software. The difference is that instead of installing the software programs into your system, you are usually accessing the software platforms through a sign-on via a digital cloud.

What is Custom Software Development? 

If you choose not to buy software out-of-the-box, then most likely you want to pursue custom software development in which you work with custom software developers and business professionals to design bespoke software solutions for your business needs.

Custom software development can be used for a wide variety of projects, including but not limited to:

  • App development
  • Modernizing legacy systems
  • Inventory management software
  • Ecommerce tools
  • APIs for smoother integrations
  • Employee portal systems
  • Customer-facing digital products

(You can read more about custom software development and how it can boost productivity by reviewing this article).

How Do You Pick between COTS and Custom Software Development?

The following three sections will give you the best industry secrets we’ve learned for how to pick software solutions. But first, let’s make something crystal clear:

Investing in software is not an either-or debate! It’s about making the right investment for your business needs.

At AltSource, we often tell prospects that they can always buy or build software. We even recommend buying certain COTS solutions when we recognize that it’s the best move for the customer. True, we don’t make money that way, but our goals focus on partnership and building trust, so we provide the best solutions for the customer, not our pocketbooks.

Additionally, you can both buy and build software. It’s easy and often recommended to buy COTS software to solve some problems and invest in custom software development to address other issues. No rule says you have to go completely one way or the other.

That’s why we're providing these industry insights below to help leaders avoid getting stuck on the question of going COTS or custom. Instead, we want people to move forward, think strategically, and make the best purchases for their situations.

Tip #1:  Maintain ECommerce Software Solutions That Are Working

Before you make any changes to your ecommerce platform, it’s a good practice to go through all the solutions you have and assess whether they are helping you achieve your goals. At a bare minimum, having this list, including what each tool is used for, the cost, and other details, can create a clearer picture of your tech spending and the ROI.

At this stage, it’s a good idea to bring in stakeholders who each use different parts of the ecommerce platform. Find out all the tools they’re using within the platform, what those tools are used for specifically, and how well those tools perform. 

Team members figuring out details with post-its on the wall

Next, go through the complete list and identify the ecommerce software solutions that are working and decide if they need a larger investment, upgrades, or additional changes to help support those solutions and related workflows.

For the solutions that are not working, you and your stakeholders will need to start deciding what to do about them. 

Remember that just because solutions are not working well does not mean you should pull the trigger and cut them immediately. Assess why they are not working first. 

Some questions to consider when you are looking at underperforming ecommerce platform tools include: 

  • Do people know the tool exists?
  • Do people know how to use the tool?
  • Do the right people have access to the tool?
  • Does the tool work with current business workflows?

If the underutilized tool could prove effective with the right amount of training and access, it may be worth keeping, provided you can fix those issues and train your team. That said, if people know how to use it, but the tool just doesn’t provide the level of service you need, getting rid of it may be your best option.

Tip #2: Leverage the Best ECommerce Software Solutions for Your Needs

If asked about their ecommerce platform needs, most leaders would say that they need their platform to work and bring in revenue. They’re not wrong, but those are more outcomes than specific needs.

Take a step back and identify why your business is leveraging an ecommerce platform. 

Some answers may include:

  • Building your brand
  • Meeting customers where they shop
  • Providing instant answers and resources
  • Extending your market reach beyond your dealerships
  • Attracting and retaining customers

Whatever your business needs are for investing in your ecommerce platform, you must ensure that your software solutions support those needs. 

Go back to your list of all your current ecommerce software solution tools discussed in the previous section. Next, match those tools up to your established business needs. Finally, do some research and verify if you have the best tools that match your needs. 

If there are gaps, then you need to address them. 

Start by prioritizing which needs are most important to your success, and which tools might support those needs. Then you can decide whether purchasing existing COTS software or going with custom software development is the best option for your business.

You may not feel knowledgeable enough to know which software tools you need, and that’s OK. When you don’t know what you don’t know, it’s a smart idea to seek out guidance from an expert.  

Software development team members working on a project

We’ve had several clients come to us here at AltSource because they knew they needed a different solution, but they had no idea what that solution might be. For these situations, our software developers and solution experts can perform an in-depth discovery process to get to the root of your problem.

During discoveries, we first assess how the business operates. Then we verify the different needs. Mapping out the various workflows to the software tools helps our team get a better feel for your business so that they can make the best recommendations possible to match your goals and objectives.

For clients that want a robust strategy, we often build technology roadmaps to help them prioritize and plan out what they will need to do to get their ecommerce platform to where they want it. 

Tip #3: Explore the Pros & Cons of Custom Software Development Services

Team members discussing a project plan.

While COTS software can solve any number of ecommerce business problems, it can’t do everything. Some businesses have incredibly unique workflows that cannot be supported by COTS. If you find yourself in that situation, custom software development services may make the most sense for your business.

Some prospects get nervous about exploring custom software development services. For instance, our team has spoken to several small and medium business (SMB) owners who are curious about what we offer. While they may want tech, many of them express the same concern:

“Oh, but we’re not big enough to get a custom software solution.”

One of the things that we tell SMB leaders is that the size of your business does not necessarily dictate your need for software. Your business needs, short and long-term goals, and growth plans have a far bigger influence over whether custom software is the right fit.

Determining if custom software is the right fit for your business involves understanding your needs and determining if building solutions instead of buying ready-made COTS  is the best way for your business to move forward. That’s why we recommend that you check out this additional resource about the critical business questions you should be asking yourself before making any decisions about COTS or custom software.

Custom Software Development Pros

  • Only pay for what you need. Unlike COTS, you’re not paying for extra features you don’t need. You’re only paying for what’s being developed to solve your specific problem.
  • Get solutions that match how you do business. COTS are designed to solve general business problems, and any customization is done as an afterthought and often at a high price point. Custom software development provides solutions designed to fit your business workflows and accommodate your needs from the start.
  • You own the software at the end. With COTS, you never own the software. You only purchase the luxury of using it. With custom software development, you share the risk associated with developing it, so you gain full ownership over the software when it’s done. You could even turn that software into a revenue stream by offering a white-labeled version to the marketplace.

Custom Software Development Cons

  • Pay for costs upfront. Instead of paying to use the software as you would with COTS, with custom software development, you’re paying to build something new. That often involves more money upfront.
  • Wait to get your software developed. Depending on the custom software you want, it could take months to complete. Yes, you’re having it built exactly to your preferred specifications, unlike with COTS, but there is a trade-off concerning time-to-market.
  • Supporting custom software after the build. While people often think that software is built and good to go forever, that’s not the case. Whether COTS or custom, software needs continuous maintenance, so you will need a plan on how to support any custom software you build. Some custom software development services offer a support and maintenance plan, but that does come at an additional cost.

AltSource Bolsters Your ERP Ecommerce Investment Strategies

To help leaders understand how best to invest in their ERP ecommerce platforms, AltSource has been publishing a series of articles on related topics, including this article. If you’re interested in reading the rest of the series, as well as additional resources from AltSource, please visit our resources page here.

We are planning on putting the articles from this series into an upcoming ebook. Keep your eyes on the resources page for info on how to download your free copy of our best ERP and ecommerce investment strategies.