Do Not Develop Your Own Online Billing Solution

August 21, 2006

Levi wrote this about three years ago. I’m republishing it today because, much of it is as true today as it ever was. Sometimes people tell us they were going to build their own online billing solution until they came across FreshBooks and realized there was no point. Leveraging a proven solution makes a lot of sense – it’s one of the major benefits of Software as a Service (SAAS). Here’s why:

Quality of Application
No organization today builds their own word processing application, they purchase Microsoft Word or Corel WordPerfect, which are far cheaper and superior to anything that could be developed in house. Publicly licensed software designed for mass consumption is generally superior to applications developed in house primarily because of economies of scale. Why would an online invoicing solution be any different? If you do decide to develop your own solution it is clear that the security, features and reporting capabilities will not be as robust, stable or as user friendly as a professionally developed application built by specialists.

Interface Design and Customization
Perhaps the number one reason many SMB’s choose to develop an in-house solution is so that they can design and customize the user interface to fall in line with their corporate identity. You may have noticed that some (roughly 10%) of shopping cart applications will redirect users to external pay pages during the checkout procedure. The other 90% consciously decided to incur other additional costs to ensure their shoppers are not forced to leave the familiar environment of their shopping cart during the payment process. To ensure this, each one has born the additional cost to purchase an SSL certificate ($200 to $700 US annually) and to develop a payment plug-in, which necessitates a proper software development cycle (including specification design, build, test and installation) which costs in the range of $2,000.00 to $5,000.00. These costs alone can finance years of service from an online invoicing application service provider.

Direct Costs
There are high costs associated with developing your own online invoicing system. Looking at the tasks involved, it is easy to see why. A typical online application development project would likely have at least some of the following tasks, if not more:

– Needs analysis assessment
– Business process fit-gap analysis
– Application interface design
– Database design
– Technology assessment, costing and procurement
– Server and security setup
– Application build
– Application Testing
– Pilot Rollout
– BETA Testing
– Production Rollout
– Ongoing Support and Maintenance

If outsourced, projects of this nature will take at least four to eight months to complete and cost from $10,000.00 to $250,000.00 depending on the complexity of the application and the security level required.

Indirect Costs
Furthermore, many application development project costs are hidden. Redirection of resources is one example of a hidden cost that often goes unaccounted for. Every hour your team members spend developing an invoicing system, they could be focusing on your core business activities. Also, if your team members are not experienced in online invoice application development, there will be a high learning cost added to the project, and without question, increased chance your project will fail.

Author Julia King stated that for companies that are not among the top 25% of technology users, thirty percent of all technology projects fail.(i) The good news is that 70% are successful; however Julia did not research how many of those successful projects went over budget. Some research indicates as many as half of all IT projects go over budget. If your company is not among the top quarter of technology users, chances are your online application development project is in jeopardy of failing and/or going over budget. Worse still, it is most likely your final product will be of lower quality and security than one developed by a specialist.

Online applications demand ongoing maintenance, and in rapidly evolving markets like e-commerce, constant change. This maintenance – which can include bug fixes, transitions to superior technologies, server patches to name a few – is a source of organizational stress and in most cases best outsourced to specialists.

Application security is defined by the application design, the technology selection, the safeguards implemented and by the team who vigilantly monitors the application 24 hours x 7 days a week. Most SMB’s do not have the resources to adequately invest in these areas of a project. They only have the resources to achieve the necessary functionality the applications demand and have to sacrifice security. Proper investment in expert developers, testing, dedicated firewalls and round the clock monitoring are all costly components of a secure online application.

Services and Storage
An online application hosted in-house will have costs that can easily be overlooked when initial specifications are done. There is the cost of the space and setup required for a secure and stable server room. Some may say that they have already spent this on their current server room, but adding business critical servers may tip the limits of your current server room configuration. Adding more online servers inherently increases your risk of security threats your entire network from viruses and hackers. In addition, a brief power failure could cost your IT staff – and the rest of your business – dearly when you are hosting your own solution. Another necessary cost when hosting your own solution is the time and money required to do proper backups.

Considering all the reasons mentioned here, and all the reasons not mentioned, it is clear that developing your own online invoicing and payment system is a high cost, high risk undertaking. Will your business be able to afford development and hosting costs when they hit your bottom line? Do you even have the capital and the know how to consider developing your own solution? You owe it to your business to do the research, consider every direct and hidden cost of developing your own system, and then to take a good look at the alternatives. We’re betting it’s not worth the effort, expense or risk – especially when you can leverage an API (like FreshBooks’ API) – and achieve virtually any level of customization

(i) King, Julia. “Survey shows common IT woes“, Computerworld, June 23, 2003

about the author

Co-Founder & CEO, FreshBooks Mike is the co-founder and CEO of FreshBooks, the world’s #1 cloud accounting software for self-employed professionals. Built in 2003 after he accidentally saved over an invoice, Mike spent 3.5 years growing FreshBooks from his parents’ basement. Since then, over 10 million people have used FreshBooks to save time billing, and collect billions of dollars. A lover of the outdoors, Mike has been bitten so many times it’s rumored he’s the first human to have developed immunity to mosquitoes.