If you search across the Internet, you’ll find that the average length of an ERP implementation project is around 21 months, assuming everything goes right. Timelines for ecommerce software development projects average around five months but can last much longer for larger companies or complex builds.
Knowing that information, let’s pretend we’ve been tasked to decide on which projects to pursue. In this dream scenario, budgets for these projects have been pre-approved, so let’s just focus on the potential duration of each project.
- ERP implementation/update = 21 months
- Ecommerce software development project = 5 months
Now, imagine your team members have presented reports that clearly demonstrate that you need to pursue both projects to achieve goals and major initiatives within your organization.
Do you commit to doing everything as a long-term project, or find ways to break the projects into smaller, more manageable pieces?
Choosing between project types is more than just committing to either a long-term or short-term investment. It’s also about understanding whether your company can commit to the project and get it done.
In this article, we will examine the pros and cons of different investment styles in relation to project timelines. While this article is part of a series focused on ERP and ecommerce platform investment strategies, the information that follows can still be applied to similar investment decisions for other industries and software development projects.
Software Development Investment Options: Big Bang vs. Incremental Growth
Ecommerce organizations that want to upgrade to state-of-the-art tech as quickly as possible are often willing to do a “Big Bang” style investment. In other words, they see more merit in committing to a long-term project, paying upfront with everything for the build carefully specked out, and doing a major cutover or launch when everything is ready.
Other organizations are a bit more risk-averse and prefer an "incremental growth" style investment. For them, instead of committing to a long-term project, they would rather divide the project into prioritized phases, (short-term projects) and get through each phase one at a time. In their eyes, this method shows the more immediate business value and allows them to make adjustments as needed before moving on to the next phase.
Big Bang or Incremental Growth: Pros and Cons of Software Investment Strategies
As time to value often drives business decisions, most leaders prefer the shortest route, provided it delivers on desired outcomes.
But just because the shortest route is preferred does not mean that the incremental growth investment style, or short-term projects, will always win out. Both investment styles have pros and cons that must be weighed within that time to value equation.
Is One Software Development Investment Strategy Better than the Other?
While some people may favor one of the above strategies over the other, both can work. In fact, sometimes one strategy may be more advantageous than the other.
For example, depending on the situation, the Big Bang approach can reduce overall organizational costs, especially in relation to training. With the Big Bang approach, you would most likely only train everyone during the shift to the new software system, as opposed to training and retraining over time for every iteration of the incremental growth method.
If the majority of your employees are hourly, only having to pay them for one training session may be more budget-friendly and worth the expense and time of the Big Bang approach.
Another reason that companies may prefer the Big Bang approach would be to get rid of any pre-existing technology and/or processes that are significantly preventing or stopping positive change in the business. Think of this as the cutting-the-cord option for certain systems.
For instance, if your ERP financial reporting structure is limiting or impeding the growth of your company, getting rid of it for something that will get you to value may be the best option.
While the Big Bang investment strategy has its place, there are also situations where the incremental growth strategy proves a better option.
For example, if your company is investing in a software solution or technology you have never implemented before, taking a more structured approach allows you to limit risk. By scaling down the scope of the project to determine proof of concept, you can verify if pursuing this software solution is viable for the business without wasting significant investments of resources and time.
Additionally, an incremental growth strategy can be useful when budgetary concerns arise.
For instance, if your software and technology budget is capped annually, you may only be able to invest a certain amount for new projects. By reviewing your business growth and technology goals, you can work with custom software development solution experts to prioritize projects and divide them into phases to deliver the most incremental growth while staying within budgetary constrictions.
What Other Factors Will Influence Software Development Investment Strategies?
Before choosing to take on a huge long-term project or to break things out into shorter projects, there are five questions you and your team need to answer first. Your answers to the following questions will shape how you move forward with handling long and/or short-term software development projects. Your answers can also help you identify which investment strategies will give your business the best chances for completing technology projects successfully.
#1: What is your risk tolerance?
Every company’s risk tolerance is different because we all face different industry constraints, competitors, and financial capabilities. With that information in mind, before taking on any software development project, regardless of the length of the project, identify all potential risks and weigh them against your tolerance levels.
#2: What is your history of project completion for longer projects?
Project completion history will prove a major indicator of whether your organization can handle long or short-term projects. In general, projects require proper management and communication from start to finish, and not all companies have the resources to manage that. Check your company’s history to verify your strengths or weaknesses in this area, then plan accordingly. For instance, if you need someone else to manage and drive the project, be upfront about that when you speak with different custom software development companies.
#3: Is there an urgent need for change?
If there is an urgent need for change, define whether that urgent need is a clear and present danger to the business. Most threats require immediate action, often resulting in short-term projects. Nevertheless, if there is something continuously causing problems in your business, it may require a long-term, multi-part solution. Getting a business assessment from an unbiased third party can help you determine the next steps in this situation.
#4: How often will your business needs change?
Leaders must recognize that change is not always within our control. For example, when the pandemic happened, business needs changed overnight and we all had to figure things out. That said, we can plan for some changes. We know that resources and processes experience the most changes, and having the right software tools in place that allow for flexibility to handle those changes may prove the best course of action.
#5: Can the rest of the company wait for the whole build to be completed?
With today’s speed of business, no one wants to be held hostage to a software development upgrade, despite the benefits. It’s essential to understand how a software development project may block other teams from being productive, and what that means for the entire company moving forward. If parts of the company will be blocked by a project, then leaders should make preparations to mitigate slowdowns as best as possible.
Review AltSource’s Other ERP and Ecommerce Investment Strategies Today
As part of our ongoing series on investment strategies for ERP and ecommerce platforms, we highly recommend that you check out our resources page to read the other articles in the series.
We will be collecting all of these investment strategies into an ebook that will be up for release shortly. Keep an eye on the resources page for further updates on how to get your copy of the ebook.