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IT Discussion: Long and short term costs associated with build an buy scenarios

IT Discussion: Long and short term costs associated with build an buy scenarios

Please answer the question in 300~400 words, and comments on the 3 students’ examples, each comment write about 70~100 words.

Question: In last week’s meeting we discussed long and short term costs associated with build an buy scenarios using a house as an example.  Take the same concepts and apply them to a software development project scenario.  ie building a custom application for the business touse versus buying that application and implementing it.  Respond here and list out the criteria you would review to consider the decision…..labor costs long and short term, support costs etc

Student Example 1: 
Custom application is designing a software application that is tailored to a specific group of users and to address a specific need of the organization. When it comes to making a buy vs. build decision for a custom software, many things should be taken into consideration. Buying a wrong software can hamper your companys process while trying to build one can be time consuming and costly. The analysis of these two approaches will take into consideration labor costs, long and short term costs as well as support costs.
The most common reason why a company build or get a custom software is that it is unique to their business and if the software is successfully built, it can maximize the efficiency of the business and build its own competitive edge. Building a custom software, however, requires a large upfront expense and also takes a lot of time to build a right one. Labor costs for building a custom software is also higher than buying off-the-shelf solution because the company has to hire a software developer and build an IT team in order to build the right software as well as maintain it. In the long run, there will be cost of maintenance however it would not be as gigantic as it was in the building and creating phase. The more important than cost, however,  is the value that it brings to the company in the long run. A unique application can enhance the companys workflow, help the company to keep space with the rate and volume expansion, all of which will help to bring in financial benefits as well as differentiate the company with other competitors.
On the other hand, buying a package off-the-shelf software will help a company to save time, save money as upfront cost is low and ongoing support from the vendor. The drawbacks of this off-the-shelf software, however, is limited functionality or not generic enough that can speak to the businesss specific needs and achieving business goals. The labor costs of establishing an IT team is not needed since the vendor will provide check-ups and add new feature if required by the firm. However, this undifferentiated off-the-shelf software can hamper the business workflow in the long run and thus, slumper its revenue. 
Businesses around the world are trying to be unique in their application and become more competitive in the market. Thus, even though buying an off-the-shelf solution can be cost effective for start-up companies, it is recommended that the company should build their own software in the long run to get its desired results and achieve competitive edge.

Student Example 2:
Buying a software development will be cost-effective but not customized to match your specific requirements. You will be using what the buyer has built without any additional features to match your specific requirements. The cost of getting a customized software will be higher than buying an existing product. The customized software will match your needs and specific requirements and you will be in control of how the product will be built to match your specific requirements. 
The benefits of buying existing software development are that you will save time, save costs of buying as its less expensive, quickly install the product. On the contrary, getting the software customized to your requirements will be time-consuming but will match your companies requirements, it can be adjusted to your business needs and can save costs over some time by reducing repetitive work.
The criteria you would evaluate to make the decision:
Costs: cost of developing a software vs. cost of buying a custom made software. The difference will be quite high. 
Time: Determine the time it will take to start with the ready to use software and how it will help the business immediately vs. developing the software and waiting to start using the system.
Need to control: Determine how ready are you to adapt to the existing software available in the market to match your business. You can also evaluate the flexibility the system offers you and whether it matches your requirements. The customized software may create efficiencies in the business.
Business requirements: The nature of business and how suitable the existing software matches the business needs. If there are many variations and if you are not able to use many features then it is better to get customized software.
Future business requirements: The customized software can normally be upgraded and adapted by the developer if the business requirements change over a while but existing purchase the whole system has to remove and a new system installed. 

Student Example 3:
In the Internet era, people tend to use the Internet to complete all things, such as payment, food ordering, taxi hailing, etc. The rise of these service industries is based on application, so it can be seen that the application market is very large, and many entrepreneurs have successfully transformed from traditional to modern through application (Lager & Storm, 2013). To develop an application, the cost should be carefully considered. The smallest team of an independent application consists of a front-end engineer, a back-end engineer and a designer. The following is analysis of the real cost of developing an application from the perspective of cost. First of all, the labor cost, developing a complete application, involve the front-end and back-end development, in addition to the user’s actual perceived product, the team also need to develop a set of. In general, this mini team should have at least two-year experience in development to make sure there are no too many problems in the underlying architecture, future extensions, development of specifications and make it convenient to upgrade and develop later (Qi, 2014). After about two years, the level reaches to commercial level development requirements. As a consequence, with the rising of level, cost of labor, these engineers will accordingly increase. Whats more, a commercial product needs to be supervised at the level of director of business docking development and planning, with administrative costs, office rental costs and other hidden costs. The cost of application development furtherly increases. If you need to develop application for both android and IOS operating systems, and you need to recruit front-end technical engineers for both android and IOS, the cost will continue to climb. Generally, it takes two months for an independent application to be developed, tested and finally launched. If the project is relatively large or some special requirements need to be implemented with some assistive technologies, the time will continue to be affected. The cost will increase with time goes by. Compared with developing an application, the cost of buying an application is relatively fixed if no other functions added in the future. In general, buying an application will be much cheaper than develop one as it avoids the development period. In conclusion, the cost of developing an application is long-term and continuous and the cost of buying one is fixed and relatively cheap. As a consequence, from the perspective of labor cost, it is reasonable to buying an application rather than develop one.
References
Lager, T., & Storm, P. (2013). Application development in process firms: adding value to customer products and production systems. R & D Management, 43(3), 288-302.
Qi, C. (2014). Analysis and application development strategy of telecom enterprise big data based on small data. Telecommunications Science.

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