To build or to buy? In the world of software, it’s an age-old question some might even consider a “question of Shakespearean proportions,” according to InfoWorld. This question also applies to the real estate industry. Should you build your own real estate broker software or should you implement a pre-existing solution built by a third party vendor?
There are typically two kinds of brokers who choose to build custom software. The first kind finds the perfect developer and is able to say they’ve saved money in their first year. The product they built was better than they could get off-the-shelf; it was tailored to their exact needs, and it didn’t cost as much (likely because they only built what they needed).
The second kind finds what they think is the perfect developer. But as time goes on, they discover (after the third “re-write”) that they’re not great at defining software requirements and the scope of the project, and that the developer isn’t quite as knowledgeable about their business and the industry as they’d thought. Consequently, they don’t save money that first year.
What is clear – from either broker who takes the “let’s build our own” approach – is what happens in the second and third year. That’s when all the money saved, if any, goes into the support and regular upkeep of their custom solution. Because here is something everyone eventually realizes – for as hard as software is to build correctly, and as costly as that is, nothing compares to the cost of maintaining software. And that assumes the same developer is around and available in the long term. It only gets worse if they choose to leave, and in that, take the entire knowledge base with them.
After that first year, many brokerages realize the “true” cost of building home-grown software. A lot of time is spent on deployment and further development. Custom solutions are often built without anticipating future needs, and these systems can quickly become obsolete and turn into much larger time and monetary investments when changes in processes are required in order to support future technologies. What’s more, businesses often do not anticipate the prolonged cost of IT resources needed in order to perfect and maintain the custom software, and support end users.
The Standish Group, a widely referenced source in the research environment of software development, illustrates just how costly in-house software projects can be. In 2009, the percentage of failed or challenged software projects across several major industry segments equaled 68 percent. Failed projects are defined as projects being cancelled before completion, and challenged projects as projects that are completed and operational, but over budget, over the time estimate, and with fewer features and functions than initially planned. Some reasons for project failure include lack of user input, incomplete or changing requirements, and lack of executive support and resources.
High support and maintenance costs are unavoidable when you build custom software. Consider just how fast technology evolves. If you don’t want your system to become obsolete, you’ll have to make changes rather frequently. Not surprisingly, those changes come with high design, development, implementation, and training costs, and usually offset the ability to achieve any real economies of scale. Consider developers whose standard cost per hour may range anywhere from $100 – $150 for development time. If they have to spend hours developing new features every time technology evolves (and it never stops!), you’ll end up paying much more than if you had an outside technology partner doing all the development for you. With such a partner, you can then concentrate your development spending allocation on specific customizations inside of the vendor’s framework.
Brokers who start on projects to build their own application often end up moving back to buying pre-built solutions. They do this because they realize something: when you venture outside of your core competency, you pay for sub-optimal results. This is especially true when multiple disconnected office applications are slowing down business processes and communication flows, instead of enabling growth. That in itself defeats the purpose of the system. Isn’t the reason you want software to support your core business functions, and to facilitate the information flow between all involved parties?
If software development is not part of a brokerage’s core competencies (and it probably isn’t), why should you invest resources in a project that shifts the focus away from them? This concept of specializing isn’t new. It’s the reason countries export some things and import others, and it’s why we choose to focus on a certain career from the time we start school to when we become working professionals in our field.
In today’s rapidly evolving environment, the “Jack of all Trades, Master of None” business model simply isn’t a sustainable one. Instead, focus on your core competencies and get your real estate broker software from a vendor, rather than building your own. This way, the system can effectively support your core business activities without shifting your focus. Using a trusted software provider allows your brokerage to:
- Lower overall software costs even when your business is growing
- Spread the knowledge base among different sources and users
- Direct less resources towards internal IT support and more towards your core business
- Easily keep your systems current with evolving technologies
Shift your focus to those activities that make your brokerage successful. Focus on recruiting the best agents, creating life-long relationships with your clients and business partners, and growing your business to reach new heights. Strive to become the master of your craft, and leave software development to someone who has made it theirs.