What is Custom Software Development?

Custom software development is the process of designing, building, deploying, and maintaining software for a specific group of users, function, or organization. In contrast to commercial off-the-shelf software (COTS), custom software development aims at a narrowly defined requirement profile. COTS targets a wide range of requirements so that it can be packaged and commercially marketed and distributed.

For example, Microsoft Office and Sitebuilder.com are bundled commercial software products and services. They meet general office productivity and website building needs.

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

  • a field equipment maintenance program for a manufacturer; or
  • An online banking app designed for the unique needs of the bank and its customers.

Individual software and its development is also referred to as individual software. The term has its origins in Old English and tailoring.

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

Efforts related to 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 an organization’s custom software to meet evolving user and market demands. Application management makes software effective by supporting tasks such as installation, updating, performance and availability tuning, and service desk functions.

Why is Custom Software Development important?

Custom software development is important as it helps to meet unique needs at a competitive cost by purchasing, maintaining and modifying commercial software.

Some of the benefits include:


Custom software is specifically designed to support processes quickly and productively without the need for tinkering or customization to COTS applications.


Custom software can grow as an organization or business grows and changes. Designers and developers can estimate future requirements as part of their requirements gathering. These factors can then be built into the application rather than incurring costs through the purchase of additional licenses or application bundle subscriptions.

Lower integration costs:

One of the main considerations with commercial software is: does it work with existing and legacy applications? If the answer is no, companies face another investment in commercial software that communicates and works with their existing infrastructure. Custom software can be created to integrate with the intended environment.


It is possible to make money from custom software development. Depending on the terms and conditions of the project, companies that develop their own software can own the software and therefore license or sell it to other organizations.


The benefits of being independent of a commercial software vendor go both ways. On the plus side, companies can avoid price hikes for licensing and support—and falter on maintaining software packages if the vendor goes out of business or discontinues a product. On the negative side, the cost of supporting and maintaining custom software falls to the organization that created or developed it. As the equation works, each organization must carefully consider whether it is better to build or buy.

Key to Effective Custom Software Development

Be sure you are building or buying

The first key to an effective custom software development project is to ensure that custom software is actually needed, as opposed to buying a packaged solution – and there’s good reason to be sure. Software solution finder and researcher Capterra reports that 75 percent of business and IT leaders expect their software projects to fail, and that over the course of 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 whether there is already a packaged software solution that provides more than 80 percent of the functionality required to:

  • Support or automate unique business processes and transactions
  • Dealing with industry or business-specific information and data
  • Meet unique privacy or security needs
  • Facilitate integration with legacy applications and data
  • Replace or consolidate existing solutions at a lower cost
  • Replace or consolidate existing solutions to achieve higher productivity
  • Enable new opportunities or improve competitive advantage
  • Grow and adapt to changing requirements.

Collaboration is key

When making the decision to build, an important first consideration is to get the buy-in of key stakeholders and ensure they are communicating and collaborating on the project. Employees include sponsors, users, developers, even customers and business partners outside the organization.

In this context, collaboration means business users working together on requirements, sharing knowledge between global development teams, and working hand-in-hand between development and operations teams to improve quality and responsiveness.

Requirements are required

One of the key outcomes of collaboration is a clear, shared understanding of what the software should and shouldn’t do. IBM has noted that “organizations must define and manage requirements effectively to ensure they meet customer needs while seeking compliance and staying on schedule and on budget” and that “requirement definition and management is an activity that unlocks the potential has a high, fast ROI.”

A “good” requirement is…

  • Correct (technically and legally possible)
  • Complete (expressing an entire 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 done within cost and schedule)
  • Modular (can be modified without undue impact)
  • Design independent (does not impose specific solutions on the design).
  • Methods, Technologies and Practices

With requirements defined—and they are likely to change more than once—the application of mature, modern development methodologies and practices can help deliver effective, even innovative, software efficiently and quickly.

Development methods to consider :

Agile development breaks down requirements into consumable functions and quickly deploys those functions through incremental development. A feedback loop helps find and fix bugs while still providing functionality.

DevOps is a combination of development and operations. It is an agile approach that brings together software development and IT operations 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 cohesive 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:

  • Open source is software source code open to the public and developer community for use. Linux, for example, is an open source operating system. It can increase development productivity by reusing software components and improve interoperability by avoiding proprietary architectures.
  • Cloud-based development brings the benefits of cloud computing to software development by hosting development environments in the cloud. These environments support programming, design, integration, testing, and other development capabilities to build both on-premises and cloud-native applications, with the cost control, speed, and on-demand convenience that the cloud offers 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 of computers and software to understand human language—can be used to analyze requirements text and suggest improvements based on best practices. AI technologies such as machine learning and modeling can also be acquired and integrated into applications through application programming interfaces (APIs) and services from the cloud.
  • Blockchain is a secure, digitally linked ledger that eliminates costs and vulnerabilities created by parties such as banks, regulators, 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 up capital and accelerate business processes.
  • Low-code is a development practice that reduces the need for coding and allows non-coders or citizen developers to build or help build applications quickly and at a lower cost.
  • Analytics technologies help 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 easy to integrate analytics into applications.
  • Mobile application technology can simply be a must. 54% of global executives believe customer buying behavior is shifting from products and services to experiences. Many of these experiences are delivered through mobile software. Connecting mobile apps to data to enhance and enrich user experience is a key requirement for developers.

Outsourcing for maintenance and management

After applications are deployed, they must 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 can also provide support for enterprise applications such as SAP, quality and testing services, and application lifecycle management.

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

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

By outsourcing these tasks—and reaping the benefits of automation—IT organizations can improve software performance while focusing on core business tasks. A Forrester Total Economic Impact study sponsored by IBM found that automating application management reduced tier-one service desk tickets by 70 percent, increased availability by 80 percent by reducing system recovery time and costs, and improved capital efficiency through the Shifting 10 percent of IT improved support budget to more proactive work.