If you’re thinking of building a Customer Success platform in-house, there’s a few things you ought to know.
But first, let’s address the elephant in the article by acknowledging that we’re a software company that is making a one-sided argument in favor of buying. This may seem self-serving, but we promise our intentions are pure. Our goal is to bring awareness to the building considerations that are often overlooked or inaccurately weighed during the cost-benefit analysis of a build-or-buy decision.
Your choice will largely depend on your scope, budget, resources (expertise), and timeline for the software – this is obvious. But just because you can build, doesn’t mean you should. This article will cover the reasons to give pause before undertaking the complex development of a Customer Success platform.
The oft-misunderstood maturity, viability, and complexity of Customer Success software
If your Sales team needed a CRM, you wouldn’t expect it to be built in-house – they’d purchase Salesforce. If your Marketing team required a marketing automation platform, they’d simply buy HubSpot. So, why then would you consider building your own Customer Success platform – a product of equal complexity? It’s true that Customer Success is a newer discipline compared to the aforementioned functions, but that doesn’t make the technology any less sophisticated.
In fact, Gartner’s Hype Cycle report, which helps applications leaders assess the maturity and business impact of technologies, gives Customer Success software a maturity level of “early mainstream,” which possesses attributes of being a “proven technology” with “vendors, technology, and adoption rapidly evolving.”
According to the report, “Customer Success Management (CSM) systems have a high benefit rating for companies that need to improve and automate post-sales processes, including onboarding, adoption, renewal processes, and churn mitigation. CSM system adoption shows signs of extending beyond the technology vertical, and there is also a growing focus on revenue expansion rather than solely retention. Integration with voice of the customer and account-based marketing platforms will help with these goals. These solutions are also relevant to companies with customer experience programs, and can be used to fill the gaps within their existing sales, marketing and customer support processes.”
When it comes to customer retention, there’s business-altering revenue at risk. The role of Customer Success in keeping SaaS companies alive is too substantial to wing it by relying on a homegrown solution that accounts for a fraction of an outsourced product’s functionality.
“Building a complete Customer Success platform presents complex challenges,” says ChurnZero CEO You Mon Tsang. “ChurnZero’s components range from big-data ingestion, advanced analytics, and health scoring to large-scale workflows, numerous native integrations, and fully-automated alerts and campaigns. You must also account for the security, scalability, and interconnection of each element.”
Not to mention the maintenance. “The more complex the software, the more maintenance it will likely need to ensure continued use,” advises LookFar, a software and startup studio. But we’ll get more into this later.
In most situations, it’s advised that you should only build when it serves to differentiate your business or there are no other viable solutions. The latter is demonstrably not the case for the fast-growing industry of Customer Success.
The sacrifice of shared industry best practices and competition-fueled innovation
When you opt to build your own Customer Success software, you miss out on the collective insights a vendor gains from working with thousands of customers of varied sizes, industries, and business models. As we mentioned, Customer Success is a flourishing industry where subject matter expertise and strategy frameworks are in high demand. Vendors are uniquely positioned to act as an industry syndicate by accumulating, analyzing, synthesizing, and distilling customer feedback, ideas, and knowledge into practical product and operational applications.
“‘Buy’ solutions embody and package ‘best practices,’” says Carnegie Mellon University, which cites an example of how Salesforce’s feature set embodies “support for good relationship-management practices.”
Going the build route can limit your product’s capabilities and relevance to account for only what goes on inside your company’s four walls, which may (or may not) reflect your wider industry’s benchmarks, trends, and trajectory.
There’s also the competitive aspect to weigh. The development team is focused on innovating your company’s core product – not an in-house Customer Success platform. So, if they’re not staying on top of the newest product releases and enhancements of the leading tools in this space, who is?
Asking this question isn’t meant to exploit our society’s compulsion to have the latest and greatest; it’s to encourage you to assess the data and technology improvements your competition may benefit from as a vendor’s customer to gain an advantage over you. (At minimum, you should monitor products to make sure you meet evolving industry standards.) Because, if your Customer Success platform isn’t continuously improving alongside you, it’s falling behind.
Competition drives vendors to reduce costs, increase efficiencies, and drive innovation. There’s strength in numbers and customers of the Customer Success vendor community benefit from the unified power of the greater group.
The seemingly inevitable under-scoping of costs, requirements, and time
Software projects have an average cost overrun of 66%, according to McKinsey research shared by Crowdbotics.
“Many proposals to build software instead of buying it originate from a claim that ‘we can build this for less.’ Naturally, one should wonder how an internal team would be able to build a one-off solution cheaper than a software vendor who can amortize the investment across hundreds or sometimes thousands of customers,” says Amazon Enterprise Strategist Gregor Hohpe in an article on the buy and build traps to avoid.
Often, a company’s cost comparison of build versus buy is shortsighted – narrowly focusing on the upfront costs alone – given that software maintenance costs typically comprise 75% of the Total Cost of Ownership (TCO).
“Businesses frequently mistake software maintenance for ‘bug’ fixing, however the bulk of cost issues are caused by enhancements in functionality, as the software solution evolves over time. Software evolution is extremely difficult to factor into costing estimates,” says Galorath.
The unpredictability and immeasurability of your software’s ongoing development and evolution – whether shaped by competitive advancements or outlying situational factors – has a strong potential to skew your life-cycle cost analysis. As Hohpe recommends, “You’ll want to reserve some of your delivery capacity for new ideas or sudden market shifts. 2020 is going to be a stark reminder for how quickly such shifts can take place.”
Lastly, determine where the development of a Customer Success platform falls within both your team’s priorities and your larger organization’s priorities (since you’ll likely be tapping internal dev resources with competing workloads). It goes without saying, but software builds always take longer than expected. If you’re working against time-sensitive constraints, then the likelihood of a project delay should be a main consideration. With today’s market volatility, your company’s internal focus and strategy are more prone to change. This operational fluctuation makes your software build vulnerable to rescheduling and postponement if it’s not viewed as a priority over the core business. That’s a risk you need to be willing to take.
Other major considerations:
- Growth rate: Based on your current and projected growth rate, does the level of effort to build an interim solution outweigh the short-term savings?
- Talent attraction: As Customer Success continues to mature, so will its technology standards. Rising Customer Success professionals will seek out organizations that use leading Customer Success technology – not inbred homegrown solutions. To become more marketable candidates, CSMs will pursue opportunities where they can gain transferable software proficiencies.
- Hostage scenarios: An often cited con of buying is the threat of being held hostage by a contract or an intensive implementation. But don’t be misled; a decision to build holds you captive too. “The very flexibility offered by in-house development often leads to complexity and technical debt, which slow down your delivery velocity. […] So, you’re still locked in, albeit to your own solution,” explains Hohpe.
- Resource support: Unless you’re a Customer Success software company (like us), then your existing internal developers did not sign up to build Customer Success software, nor were they hired to do so. They may lack the functional expertise or personal desire to build a product that deviates from the company’s core business, which can result in adverse effects to the product value as well as the team’s cross-functional relationship. You must also consider the technical support that your team will require on a recurring basis. Is your team highly self-sufficient or do they need handholding when it comes to technical issues? Does your development team have the capacity to support these needs? Will bugs from the core product receive priority over bugs from the Customer Success platform?
- Opportunity cost: This is the loss of potential gain from other options when one option is selected. For example, if you reallocate developer resources assigned to your company’s core product to build a Customer Success platform, you forfeit the new value those resources would have created for the core product (the reason your customers purchased in the first place).
Builders Beware and Proceed With Caution
At the end of the day, you know your business best and what it needs. If you believe building your own Customer Success software can set you apart in a meaningful way, then it may be worth pursuing. But, do your due diligence and weigh the pros and cons of each side.
And remember, every choice has a cost. For most Customer Success organizations, the choice to build their own platform comes at hefty price and sets them back in ways they didn’t anticipate – both financially and strategically. So, while you may have the means to build your own software, stop and ask yourself at the expense of what?
If you’re looking for more resources on making the case to purchase Customer Success software, check out our eBook- How to Sell Customer Success Software to the C-Suite.
Customer Success Around the Web
- More Than Delight: Why Process & Data Matter in CS– Find out why process = success, and a little sprinkling of data (of the Star Trek variety) never hurts either.
- 5 Under-the-Radar Customer Retention Insights From Your CRM – Check out these customer retention strategies that you can use in conjunction with your CRM.
- “Measuring” Customer Success: Where to Start – Make sure your team is capturing these signals to fully understand your customers.
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero.