Commission Software: Should You Build or Buy?

For years, sales commission solutions were affordable primarily for enterprise-level organizations with extensive sales teams. These businesses typically used on-premise solutions that required significant investments in local hardware and IT infrastructure. For small-to-medium-sized businesses (SMBs), the costs and complexity associated with these solutions made them impractical. The rise of cloud computing and SaaS applications has changed the landscape. Now, commission software is available to companies of all sizes. With enhanced integration capabilities, it’s now easier than ever to automate commission processes.

Despite these advancements, some companies still choose to build their own commission management tools using existing systems, such as their CRM. Salesforce, for example, is often seen as a versatile solution capable of handling commission management, thanks to its customization options. CRMs like Salesforce can help manage commissions. However, they might not have all the features needed for complicated commission structures.

So, which approach is right for your business? Let’s explore the key factors to consider when deciding between building or buying commission software.

1. Cost Considerations

• Building: Developing an in-house commission management system often requires significant upfront costs. These include hiring or reallocating IT staff, investing in development resources, and possibly purchasing additional hardware or software. Ongoing maintenance can also be costly, as in-house systems need regular updates, troubleshooting, and dedicated support. Some companies may see that creating an internal tool offers flexibility. However, they should consider the long-term costs of keeping a custom solution.
• Buying: Purchasing a ready-made solution, especially a SaaS product, often involves a subscription model with predictable monthly or annual fees. This can be more manageable for SMBs and large enterprises alike, as it eliminates the need for hefty upfront investments. Additionally, SaaS solutions often include maintenance and support, which can reduce costs over time. However, these costs can add up, especially for companies with large sales teams or complex needs, so it’s crucial to evaluate the pricing tiers and potential add-ons.

2. Development and Implementation

• Building: The process of developing an in-house commission tool can be lengthy and requires a thorough understanding of both your sales commission structures and the technical resources available. Internal tools need to be designed, coded, tested, and deployed, which can take months or even years, depending on the scope. Custom development does allow for greater control over functionality, enabling a highly tailored solution. However, changes in commission structures, scaling issues, or updates in compliance requirements can add to the development timeline.
• Buying: Off-the-shelf commission software is designed to be ready for use with minimal setup. SaaS solutions typically provide templates, customization options, and integration with major CRM and ERP systems, streamlining the implementation process. Most vendors offer onboarding and training services, which can further reduce the time needed to get the system running. This can be especially beneficial for companies looking to quickly transition from manual processes to an automated solution.

3. Features and Flexibility

• Building: Developing your own commission software gives you the freedom to include only the features you need and the flexibility to change them over time. You can create custom workflows, calculations, and integrations that align perfectly with your unique commission structures. However, this flexibility comes at a cost, as adding new features requires additional development time and resources. Additionally, ensuring the software keeps pace with evolving industry standards and compliance requirements can be challenging.
• Buying: Most commission software platforms come with a robust set of features tailored to common commission management needs. These include automated calculations, workflow management, real-time dashboards, and integration with popular CRM and ERP systems. While SaaS solutions may not be as customizable as a homegrown system, they are regularly updated with new features and compliance updates by the vendor. This allows businesses to benefit from best practices and emerging trends in commission management without additional development work.

4. Reporting and Analytics

• Building: Creating an in-house solution enables you to build custom reporting tools that deliver exactly the insights your organization needs. Custom-built reporting systems can be configured to match specific KPIs, performance metrics, and data visualization preferences. However, this also requires a deep understanding of both the data involved and the reporting tools necessary to create meaningful reports. Additionally, developing advanced analytics or predictive modeling capabilities can be complex and resource-intensive.
• Buying: Commission software vendors understand that reporting is a key component of commission management. Many off-the-shelf solutions offer robust reporting features, with pre-built templates and customizable dashboards that provide insights into sales performance, commission payouts, and more. Advanced solutions may even offer AI-driven analytics or predictive tools to help forecast sales trends and commission payouts. These tools are generally user-friendly and designed to be accessible to non-technical users, making it easier for sales leaders to gain valuable insights without the need for specialized skills.

5. Scalability and Long-Term Viability

• Building: A custom solution can be scaled, but doing so often requires additional development and may become increasingly complex as your sales team and commission structures grow. If your organization experiences rapid growth, an in-house system may struggle to keep up with increasing data volumes and more intricate commission rules. The risk here is that scaling can lead to performance issues and require continuous investment.
• Buying: SaaS-based commission solutions are typically designed with scalability in mind. They can handle a wide range of team sizes and commission structures, and many vendors offer scalable pricing options based on usage. As a result, SaaS solutions can grow alongside your business, with minimal disruption. Moreover, cloud-based systems can handle significant increases in data volume without compromising performance, providing a future-proof solution.

Conclusion

Deciding between building or buying commission software ultimately depends on your organization’s unique needs, budget, and technical resources. Building an in-house solution provides a high degree of customization and control, but comes with significant costs and requires dedicated resources for ongoing maintenance. On the other hand, buying a SaaS solution offers faster implementation, scalability, and ongoing support, but may lack some flexibility.

Assessing these factors carefully will help ensure that you choose the option that aligns best with your business goals, delivering the right combination of functionality, cost-effectiveness, and scalability to drive sales success.