Make-or-Buy for Time Tracking Systems

May 10, 2024 by Alexander Huber

Imagine deciding whether to build your own time tracking software or buy a ready-made solution is a bit like facing a “Black Swan” — a concept popularized by Nassim Nicholas Taleb. These are rare, unexpected events with big impacts. Similarly, building your own software can carry unexpected challenges and hidden costs. The decision can shape your company’s financial and operational structure in deep and often unforeseen ways.

Key considerations before you decide

If you are considering building a time tracking system yourself, keep these points in mind:

Resource commitment and know-how loss: You will tie up internal teams and risk losing critical knowledge if people leave. Maintenance and future development may suffer when key personnel move on.
Prioritization and delays: Internal projects often take a back seat to customer work, which means longer timelines and delays in delivery and rollout.
Cross-department involvement: It is not just an engineering topic. HR, accounting, and leadership need to be involved. That takes time and adds indirect costs.
Maintenance and technology dependence: An in-house system needs ongoing maintenance and updates to stay current, plus active management of any technology dependencies.
Opportunity costs: Time and budget for building and maintaining the internal system could instead generate revenue elsewhere or be invested in strategic initiatives.
Security risks: In-house systems may be more vulnerable if they lack the resources for regular security updates and audits that commercial vendors typically provide.
Scalability and flexibility: Commercial solutions often scale and adapt better as you grow. An internal system can hit limits sooner and then needs rework or even a rewrite.
Legal requirements and compliance: Commercial solutions are usually better equipped to meet legal and compliance standards because they are updated regularly to reflect new regulations.

What does building cost?

Here is a simplified example to compare building in-house with buying a commercial solution, including a sample per-user-per-month calculation.

Assumptions

General

Company: 60 employees

In-house development

Development time: 2 person-months (320 hours). Note: this assumes a minimal feature set.

If you build a professional solution with project and attendance tracking, leave management, and compliance, the effort is many times higher.

Monthly maintenance effort: one person-day per month (8 hours)
Internal developer rate: 30 EUR/hour
Lost revenue per developer hour: 130 EUR/hour
Additional annual internal coordination (HR, accounting, leadership): 2,000 EUR

Commercial solution

Annual license cost: 6,264 EUR (example: time cockpit)
[Optional] One-time implementation project: 5,000 EUR

In-house cost

Development cost

One-time: 320 hours × 30 EUR/hour = 9,600 EUR

Maintenance and enhancement cost

Monthly: 8 hours × 30 EUR/hour = 240 EUR
Annual: 240 EUR × 12 = 2,880 EUR

Lost revenue from maintenance

Monthly: 8 hours × 130 EUR/hour = 1,040 EUR
Annual: 1,040 EUR × 12 = 12,480 EUR

Coordination cost

Annual: 2,000 EUR

Total in-house cost

Year 1: 9,600 + 2,880 + 12,480 + 2,000 = 26,960 EUR
Subsequent years: 2,880 + 12,480 + 2,000 = 17,360 EUR

Commercial software cost

Cost per user per month

Per user per month: 10.85 EUR (example: time cockpit)

Annual license cost

Annual: 7,812 EUR

One-time implementation

One-time: 5,000 EUR

Total commercial cost

Year 1 (including implementation): 5,000 + 7,812 = 12,812 EUR
Subsequent years (license only): 7,812 EUR

Critical look at commercial software

Vendor lock-in

Buying a commercial solution carries the risk of vendor lock-in. You depend on a single provider, which can be a problem if prices rise, service declines, or development slows. Switching can then be costly and time-consuming.

Dependency on the vendor’s roadmap

With standard software, you rely on the vendor to develop the product and adapt it to changing needs. If they stop investing in certain features or end support for technologies you rely on, you may face serious issues.

Solution: Customizable standard software

A practical way to address these risks is a customizable standard solution. You get a mature, professionally maintained product and the flexibility to tailor and extend it to your needs. It combines the strengths of building and buying and reduces some of the risks.