The Ultimate Software Showdown: Custom vs. Off-the-Shelf for Travel Execs

Audrey Alves-Cunka ・ Marek Pałys

May 24, 2024・9 min read

Technology in TravelInnovations in travel

Table of Content

Introduction
How to balance the pros and cons?

Introduction

In the competitive landscape of today’s travel industry, selecting the right software solution is crucial for maintaining a competitive edge and ensuring operational efficiency.

Businesses often face the choice between custom-developed software and off-the-shelf (OTS) solutions. While OTS software offers quicker deployment and lower initial costs, custom software development provides numerous long-term advantages that can significantly benefit organizations.

In an era of digital transformation, the choice between an off-the-shelf solution and custom development has become critically important and commonplace.

According to BCG, 100% of travel and tourism respondents plan to invest in next-generation sales and marketing, allocating an average of 29% of their total digital investment (BCG - Global Digital Transformation Survey). Furthermore, 92% of travel and tourism companies plan to increase investments in infrastructure and cloud enablement, with AI and big data accounting for about 33% of total digital enabler spending allocations.

What’s more, McKinsey reports that 66% of companies are at least piloting the automation of business processes, highlighting the trend towards digital transformation (McKinsey - Digital service excellence). These statistics underscore the significant potential of both custom and off-the-shelf software solutions in the travel industry.

How to balance the pros and cons?

Benefits of Off-the-Shelf Software (OTS)

Quick Deployment OTS software can be quickly deployed to address immediate business needs, making it an ideal choice for travel companies looking to implement solutions rapidly. This is particularly beneficial in a fast-paced industry where timely responses to market changes are crucial. Examples include Salesforce, widely used for customer relationship management, and Amadeus, a leading global distribution system for booking travel services.

Lower Initial Costs The initial costs of OTS software are generally lower than those of custom solutions, making it a viable option for startups and smaller travel agencies with tight budgets. This cost-effectiveness can be an essential factor for companies looking to minimize upfront expenditures. Products like Microsoft Dynamics 365 for finance and operations, and SAP Concur for travel and expense management, are popular choices. However, it should not be overlooked that the business and cost model of the OTS needs to be reviewed, which, for example: billed on the number of users, can prove very expensive at larger scale.

Standard Features OTS software comes with a wide range of standard features that can meet common business needs. For many travel companies, these features are sufficient to run their operations efficiently without the need for extensive customization. For example, Oracle Hospitality offers comprehensive property management solutions for hotels, and Travelport provides solutions for travel bookings and itinerary management.

Vendor Support OTS software typically includes comprehensive vendor support, ensuring that any issues or updates are handled promptly by the provider. This can reduce the burden on internal IT teams and ensure that the software remains up-to-date with the latest features and security patches. Examples include Zendesk for customer service management and HubSpot for marketing automation.

Benefits of Custom Software

Competitive Advantage Custom software provides unique functionalities not available to competitors, giving businesses a significant edge. This proprietary technology can lead to improved efficiency and innovation, making it a strategic asset for any company. For instance, travel companies that have invested in custom solutions for personalized travel experiences, dynamic pricing, and real-time customer service have seen notable improvements in customer satisfaction and operational efficiency. Good example is +248.1% increase in engagement rate, +52.3% increase in entrances and more thanks to custom solutions in Rainbow Tours.

Tailored Fit and Flexibility Custom software is designed to fit an organization’s unique business processes. Every feature and function supports specific workflows, user roles, and business rules, ensuring complete personalization. Unlike OTS software, which may force an organization to adapt its processes, custom software adapts to the organization, offering unparalleled flexibility. No matter the industry ranging from dedicated sales operations tools for Siemens Healthineers to Fish farm management systems.

Integration and Scalability Custom solutions can be designed to integrate seamlessly with existing systems and other software tools, ensuring smooth data flow and operational efficiency. They can also be scaled easily to accommodate business growth, unlike many OTS solutions that may not offer the same level of scalability.

Enhanced Security Custom software can be designed with robust security measures tailored to specific needs, reducing the risk of unauthorized breaches or malicious attacks. This is particularly important for industries with stringent compliance requirements, such as travel, which handles vast amounts of personal and financial data. BCG highlights that 41% of travel companies emphasize building resilience via cybersecurity and compliance.

Assessment Framework: When to Use OTS and When to Opt for Custom

Criteria	Off-the-Shelf (OTS) Solutions	Custom Software Solutions
Deployment Speed	Quick deployment to address immediate needs	Longer development time, tailored to specific business processes
Initial Costs	Lower initial costs, suitable for tight budgets	Higher initial investment but potentially lower long-term costs
Feature Requirements	Standard features sufficient for common business needs	Custom features designed to meet unique business requirements
Scalability	Limited scalability, may require additional costs for scaling	High scalability, easily accommodates business growth
Security Requirements	General security features, may not meet all compliance standards	Robust security measures tailored to specific needs, better compliance
Integration Needs	May face compatibility issues with existing systems	Seamless integration with existing systems and workflows
Long-Term ROI	Lower long-term ROI due to ongoing licensing and subscription fees	Higher long-term ROI, eliminates ongoing licensing fees
Competitive Advantage	Limited competitive edge, similar to competitors using the same solutions	Unique functionalities providing significant competitive advantage
Maintenance and Updates	Dependent on vendor for updates and maintenance	Full control over updates and maintenance, tailored to business requirements

Conclusion

Choosing between custom software development and off-the-shelf solutions depends on the specific needs and long-term goals of a travel business. While OTS software can be a quick and cost-effective solution for immediate needs, custom software development offers significant advantages in terms of personalization, long-term cost efficiency, competitive edge, security, and scalability. Nonetheless the selection, both require a smart operational implementation plan.

It’s important to note that you don't have to be a large enterprise to benefit from custom software. Medium-sized travel businesses can also harness the power of custom solutions by partnering with dedicated tech experts who understand their unique challenges. This collaborative approach allows businesses to implement tailored solutions that enhance competitiveness and drive growth.

By leveraging the expertise of a dedicated tech partner, travel companies can ensure that their custom software solutions are designed to meet their specific needs, providing a solid foundation for future growth and innovation. Custom solutions not only meet current business needs but also position companies for sustainable success in an increasingly competitive market.