What is custom software development?

Custom software development is the process of designing, creating, deploying and maintaining software for a specific set of users, functions or organizations. In contrast to commercial off-the-shelf software (COTS), custom software development aims at a narrowly defined set of requirements. COTS targets a broad set of requirements, allowing it to be packaged and commercially marketed and distributed.

Microsoft Office and Sitebuilder.com, for example, are packaged commercial software products and services. They meet the generalized needs of office productivity and website creation. 

Custom software, on the other hand, is designed for a specific set of needs, such as:

  • a field service equipment maintenance program for a manufacturer or
  • an online banking app designed for the unique requirements of the bank and its customers.

Custom software, and its development, is also referred to as bespoke software. The term has its origins in old English and the tailoring trade. Think tailor-made suit.

Custom software development is usually performed by in-house development teams or outsourced to a third-party. The same processes and methodologies apply to custom software development as other types of software development. A custom project would move through the familiar steps of requirements gathering, code construction, testing and deployment and apply the same methodologies, like Agile, DevOps  or Rapid Application Development, as any other software project.

Efforts associated with custom software development include application customization, application modernization and application management. Application customization refers to modifying COTS applications to support individual requirements. Application modernization plays a critical role in maintaining the viability of a business’s custom software to meet evolving user and market demands. Application management makes software effective by supporting tasks like installation, updating, performance and availability optimization, and service desk functions.

Apps up to date? Learn more about application modernization

A report from analyst Forrester examines application modernization through the lens of digital transformation. See how modernizing back-end and legacy applications can lead to better digital experiences for customers and users.

Why is custom software development important?

Custom software development is important because it helps meet unique requirements at a cost competitive with purchasing, maintaining and modifying commercial software.

Some of the benefits include:

  • Efficiency: Custom software is purpose-built to support processes swiftly and productively, without the need to tinker with or adjust COTS applications.
  • Scalability: Custom software can grow as an organization or business grows and changes. Designers and developers can assess future needs as part of their requirements gathering. These factors can then be incorporated into the application, rather than incurring costs by purchasing additional licenses or subscriptions of packaged applications.
  • Lower integration costs: One of the chief considerations of commercial software is: will it work with existing and legacy applications? If the answer is no, organizations face a further investment in getting commercial software to communicate and operate with their existing infrastructure. Custom software can be built to integrate with its intended environment.
  • Profitability: It’s possible to make money with custom software development. Depending on the terms and conditions of the project, businesses that develop their own software may own the software and therefore be able to license or sell it to other organizations.
  • Independence: The benefits of being free of a commercial software vendor cut both ways. On the plus side, organizations can avoid price hikes for licensing and support — and getting stuck maintaining packaged software should the vendor go out of business or terminate a product. On the negative side, the cost of supporting and maintaining custom software falls to the organization that created it or had it developed. How the equation works out requires each organization to look carefully at whether it’s better to build or buy.

Get the edge and the t-shirt

The software edge

cover of the IBM software edge executive report

See how organizations are positioned to use software for competitive advantage.

Become an IBM coder

: graphic icon with keyboard symbols for greater than and underscore

Access code. Get material to host meetups, hackathons and more. And get the t-shirt.

Keys to effective custom software development

Be sure about build vs buy

The first key to an effective custom software development project is making sure that custom software is truly needed, as opposed to buying a packaged solution — and there is good reason to be sure. Software solution finder and researcher Capterra reports that 75 percent of business and IT executives anticipate that their software projects will fail and that, over a year, fewer than a third of projects are completed on time and on budget.

One approach to a build-vs-buy analysis is to ask if there is already a packaged software solution that delivers greater than 80 percent of the functions needed to:

  • Support or automate unique business processes and transactions
  • Handle information and data specific to an industry or line of business
  • Meet unique privacy or security requirements
  • Facilitate integration with legacy applications and data
  • Replace or help consolidate existing solutions at lower cost
  • Replace or help consolidate existing solutions to achieve greater productivity
  • Enable new opportunities or improve competitive advantage
  • Grow and adapt to changing requirements.

Sources: RTS Labs, Praxnet

Collaboration is key

If the decision is to build, an important initial consideration is to get buy-in from key participants and ensure that they communicate and collaborate on the project. Collaborators include sponsors, users, developers, even customers and business partners outside of the organization.

According to IBM®, collaboration means “collaborating with business users on requirements, sharing knowledge among global development teams, and working hand-in-hand across development and operations teams to improve quality and responsiveness.”

Requirements are required

One of the critical outcomes of collaboration is a clear, shared vision for what the software is required to do — and not do. IBM has established that “organizations need to effectively define and manage requirements to help ensure they are meeting customer needs, while addressing compliance and staying on schedule and within budget” and that “requirements definition and management is an activity that has the potential to deliver a high, fast ROI.”

A “good” requirement, according to IBM, is…

  • Correct (technically and legally possible)
  • Complete (expresses a whole idea or statement)
  • Clear (unambiguous and not confusing)
  • Consistent (not in conflict with other requirements)
  • Verifiable (can be determined that the application meets the requirement)
  • Traceable (uniquely identified and tracked)
  • Feasible (can be accomplished within cost and schedule)
  • Modular (can be changed without excessive impact)
  • Design independent (does not impose specific solutions on design).

Methodologies, technologies and practices

With requirements defined — and they will likely change more than once — applying mature, modern development methodologies and practices can help deliver effective, even innovative, software efficiently and rapidly.

Development methodologies to consider:

  • Agile development breaks requirements into consumable functions and delivers rapidly on those functions through incremental development. A feedback loop helps find and fix defects as functionality continues to deploy.
  • DevOps is a combination of development and operations. It is an agile-based approach that brings software development and IT operations together in the design, development, deployment and support of software.
  • Rapid application development (RAD) is a non-linear approach that condenses design and code construction into one interconnected step.
  • Scaled Agile Framework (SAFe) provides a way to scale agile methodology to a larger organization such as a global development team.

Technologies and practices to consider:

  • Open source is software source code that is open to the public and the development community to use. Linux, for example, is an open source operating system. It can enhance development productivity through software component reuse and improve interoperability by avoiding proprietary architectures.
  • Cloud-based development brings the advantages of cloud computing to software development by hosting development environments in the cloud. These environments support coding, design, integration, testing and other development functions to build both on-premises and cloud-native applications, and do so with the cost control, speed and on-demand convenience that the cloud promises.
  • Artificial Intelligence (AI) enables software to emulate human decision-making and learning. It can be applied to improve the development process. For example, natural language processing — the ability for computers and software to understand human language — can be used to analyze requirements text and suggest improvements based on best practices. AI technologies like machine learning and modeling can also be acquired and incorporated into applications through application programming interfaces (API) and services from the cloud.
  • Blockchain is a secure, digitally linked ledger that eliminates cost and vulnerability introduced by parties like banks, regulatory bodies and other intermediaries. Developers are using blockchain ledgers and open source Hyperledger technology to build new types of secure transactional and financial applications that can free capital and accelerate business processes.
  • Low code is a development practice that reduces the need for coding and enables non-coders or citizen developers to build or help build applications quickly and at lower cost.
  • Analytics technologies are helping software applications, and their users, make sense of a deluge of data through dashboards, visualizations and predictive capabilities. As with AI, cloud-based services and APIs make it relatively simple to incorporate analytics into applications.
  • Mobile application technology may simply be a must. Fifty-four percent of global executives believe that customer buying behavior is shifting from products and services to experiences. Many of these experiences occur through mobile software. Connecting mobile apps with data to improve and enrich user experiences is a key demand for developers.

Build and train AI models in one integrated environment

See how to develop, train, manage models and deploy AI-powered applications using a SaaS solution on IBM Cloud.

Outsourcing for maintenance and management

After applications are deployed, they need to be maintained and managed to be effective. One option to consider is outsourcing these tasks through an application services provider. Application services can include development but also provide support for enterprise applications like SAP, quality and testing services, and application lifecycle management.

While some organizations opt to test, manage and maintain applications themselves, IBM has found that that application services can reduce costs and optimize efficiency; improve flexibility, feedback and user experience; and increase speed and innovation.

An additional argument for outsourced application management is automation. Automation can support everything from software installation to critical updates.

Outsourcing these tasks — and taking advantage of automation — enable IT organizations to improve software performance while focusing on core business tasks. A Forrester Total Economic Impact study sponsored by IBM found that automation for application management reduced tier-one service desk tickets by 70 percent, boosted availability by reducing system recovery time and costs by 80 percent, and improved capital efficiency by shifting 10 percent of the IT support budget to proactive work.

Forrester Study: The Total Economic Impact of IBM Automation for Application Management

Case studies

Nationwide Mutual Insurance Company

Nationwide worked with IBM to support its agile transformation and enable a DevOps approach to application development across its distributed and mainframe environments. The result was a 50 percent improvement in code quality over three years.

Intact Financial

Intact Financial deployed IBM Rational® DOORS® Next Generation software to facilitate requirements management throughout the application development lifecycle. As a result, the company has improved quality control, reporting and traceability, with associated reductions in the cost and time required to release new applications.

Schneider

Logistics and transportation provider Schneider found itself facing a new IT environment after implementing 140 new applications — and the support issues to go with it. Working with IBM application development and management services, Scnheider was able cut support costs by over a million dollars (USD) per year and ticket volumes by 70 percent.

Custom software development resources

developerWorks blog

News and insights for developers, from developers

IBM developerWorks

Find tutorials, tools and communications for developers

Build with IBM Watson®

Integrate the world's most powerful AI into applications

IBM Cloud Garage

Start up speed at enterprise scale

Blockchain app development

Blockchain tools and resources for all skill levels, including code patterns, courses, tutorials and more