When Is It a Good Idea to Develop Software In-House Instead of Licensing It?


Whether your company-of-employment needs accounting, communication, or human resource management, software plays a crucial role in automation. From time to time, outside forces will nudge businesses to procure software in order to obtain real-time data and automate purchasing functions. Ordinarily, it’s not an easy feat. Businesses usually face a difficult decision on whether to develop software in-house or license it. 

Whether built or bought, a responsible business owner won’t overlook the importance of well-developed software in modern businesses. Unfortunately, not all software is equally efficient. You’ll need a robust and reliable system that causes little or no disruption to your business. But how can you be sure your software will run seamlessly? 

As a first option, you can hire professionals to test the integrity of your software. These professionals will not only troubleshoot the occasional system error but will develop your software to operate optimally for the long-term. 

Can you trust these professionals to cater to your in-house needs? It’s a resounding, “yes.” Companies like XBOSoft have the vast experience and expertise necessary to offer comprehensive solutions that fulfill your business’s needs.

Should I develop software in-house?

Before proceeding much further, you’ll need to decide whether to license or develop software in-house. For those unfamiliar with the pros and cons of each option, start by studying the basic definitions. In-house software development involves the use of internal developers to engineer your software. On the other hand, licensing software consists of outsourcing your software needs to a third party.

As a business owner, you might have weighed the two options and settled on developing software in-house. On second thought, you might question your knee-jerk reaction and wonder whether you made the right decision. Before finalizing your decision, there are a few factors to consider when opting for developing software in-house.

Level of customization

The level of customization offered is one of the primary reasons a higher-up may justify having the software developed in-house. While outsourced software may suit many businesses’ unique needs, it’s limited in the level of customization available. Even when customization is possible, incremental costs are significant.

You could eliminate these restrictions by developing your software internally. You’ll have the freedom to incorporate every aspect of your business into the software program’s design without incurring additional costs. Again, since in-house developers have a better understanding of the company, day-to-day operations, customer needs, etc., they’re better equipped to develop software that sufficiently addresses your business needs.

If it’s financially viable

In most cases, building software in-house is always more expensive than licensing, at least in the short-term. Why? In most cases, those developing complex software programs will encounter various unforeseen costs that accumulate into sizable final totals.  

However, it’s prudent to develop the software in-house if you plan on using the program for an extended period, and financial projections reveal it will be cheaper in the long-run. Let your finance department forecast the duration it will take to recover the initial software development costs vis-a-vis the savings from licensing fees. If the period is reasonable, consider building the software yourself.


Beyond costs, control is the other significant determinant of whether to buy or build software. When outsourcing software, most of the power lies within the third party’s hands, granting these outsiders a considerable amount of discretion. However, when you develop the software in-house, you assume ownership over the program and can exercise your right to modify the software as you see fit. 

Why is maintaining full control during the software development process better? For one, you can scale your software program to meet the needs specific to your business. In the whirlpool of an unpredictable political climate and state-of-the-art technological innovations, customer needs are subject to rapid change. To respond to their needs, you’ll need to react swiftly by updating your software solutions. This adaptability may not be possible with off-the-shelf solutions.

Quick response

In the case of technical hitches, an in-house team is likely to respond more quickly than an outsourced team. In-house software developers often share the same office facilities, allowing for streamlined communication and quick response times. Face-to-face communication also lowers the chances of misunderstandings. With a minimized risk of miscommunications, software development professionals can resolve customer issues promptly. 

When nurturing relationships with clients, responsiveness is crucial. When you’re able to respond to customer feedback or inquiries, you build trust and secure lifelong clients. 

If considering in-house development, draw inspiration from companies like Amazon, PayPal, and Salesforce that have deployed an internal team to handle their software development needs. For optimal results, you can model your team’s structure after these larger corporations’.

On the flip side

Developing software has its drawbacks. When comparing and contrasting these options, accounting for the cons of in-house software development will help you steer your business in the right direction. These cons will impact every business differently, depending on size, budget restrictions, and retention rate. For your reference, these detractions include: 

  • Ballooning internal costs
  • It’s risky, distracting, and time-consuming
  • It’s likely that software teams will cut corners to save costs
  • Staff turnover could put software development in jeopardy


If you currently operate in the business world, software development is a ubiquitous part of running your operations. When deciding which software method will propel your business forward, some business owners may experience difficulties when faced with the options of in-house software development or purchasing an existing program. 

Explore the benefits and drawbacks of each option and select the one that suits your business needs. Ultimately, build software if there aren’t existing solutions available on the market.

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