7.2 In-House Development

In addition to outsourcing options, the organization can choose to develop its own system, or purchase, possibly customize and implement a software package as Figure 7-1. There are several reasons that may affect the decision, but the most important consideration is total cost of ownership.

Figure 7-1: Three Options; In-house Development; Customized Software and Buying a Software Package

7.2 In-House Development

7.2.1 Develop or Purchase?

The organization need to make a decision either to develop themselves or purchase a system. The organization's IT unit makes builds and develops in-house software. A software package is obtained from an outside vendor or application service provider. The package might be a standard commercial program or a customized package designed specifically for the purchaser. Companies that develop software for sale is refer to software vendors.

A software packages are available for every types of business activity. If the software package can be used in many different types of organizations, it is refer to a horizontal application such as accounting package. If the software package developed is only can be used in a specific types of business; it's refers to vertical application such as course registration designed specifically for Medinah University.

7.2.2 In-House Development

Many project teams assume that it's easy to develop the system from the beginning. Organization chooses in-house development because it allows the team to be flexible and creative in the way to solve the problems because they have complete control over way the system looks and functions. In both cases, it could be effective to create a new system from beginning that meets these highly specialized requirements.

There are many reasons why the organization decides to develop their own software. Normally, organization chooses in-house development to satisfy their unique business requirements. Organizations choose to develop their own software because no commercially available software that meets their unique business requirements. For example, in Medinah University, they have their own curriculum requirements, student demands and also administration jobs.

7.2 In-House Development

But, it's hard to find packaged software that meet their unique requirements, so the best decision is to develop in-house software. Some organizations develop in-house software in order to meet the constraints with the existing system. Any new software installed must work with existing system. Besides the needs to meet the constraints with the current system, they might as well meet the constraint with existing technologies.

7.2.3 Purchasing a Sotfware Package

If an organization decides not to outsource and develop their own software, they can choose any commercial available software packages in the market. Many organizations choose to purchase a software package over developing in-house include because it's advantage of lower costs. Because many organizations use software packages, the vendors spread the development costs to many customers, so the costs are less compared to other type of development. When we purchased a package, normally it's ready to be used, so all the stages of in-house development are eliminated. Organizations that use commercial software packages often are able to reduce the number of programmers and systems analysts on the IT staff. Software vendors regularly upgrade the software by adding the improvement and enhancements to create a new version.

Some of the business needs are similar with each other's. Many organizations buy packaged software rather than developing their own custom solution. For example, most companies need a payroll and account system where this system can be met well by packaged software. Purchasing and ordering are common transaction for business, so, it's better to buy a packaged purchasing and ordering system rather than developed it themselves. It's much more efficient to buy an application that already been created, tested and proven by an expert.This application can be bought and installed directly after purchased. Packaged software can range from small single-function tools such as shopping cart program, shout box program to huge program such as a payroll and account system.

7.2 In-House Development

Advantage of purchasing packaged system is the application is already developed by using a specific functions and it has been tested from errors and bugs. Some of the application are well established since have been used by other organizations. Purchasing packaged software is chosen if the system is needed urgently and there is packaged software that fulfills the requirements. Besides this advantage, one problem occurs if chosen this approach is the companies must accept all the functionality that is provided by the system.

7.2.4 Customizing a Software Package

If the standard version of a software product does not satisfy an organization's requirements, the vendor can consider adapting the package to meet its need. In Shelly et. al., 2006, there are three ways to customize a software packages:

	Purchase basic software that vendors will customize to suit the organization's needs
	Negotiate directly with the vendor to make enhancements to meet organization's need by paying the changes
	Purchase the software and make our own modification based on organization's needs if it permissible under the terms of the software license

Normally, in customizing the software, most vendors put the charges of modifications to the customers. The customized software will cost more and may take a longer time to obtain.