Custom software development is the designing of software applications for a specific user or group of users within an organization. Such software is designed to address their needs precisely as opposed to the more traditional and widespread off-the-shelf software. Such software is typically created just for that specific entity by a third-party by contract or in-house group of developers and is not packaged for reselling.
Customized software development entails the commissioning, development and release of a software product tailored to a single specific entity. For example, an application created for any company would only be used by that company and the department for which it was designed. The software is designed keeping the company's infrastructure, branding and implementation needs in mind, implying it can only work for that organization.
Custom software development is often considered expensive compared to off-the-shelf solutions or products. This can be true if one is speaking of typical challenges and typical solutions. However, it is not always true. In many cases, COTS software requires customization to correctly support the buyer's operations. The cost and delay of COTS customization can even add up to the expense of developing custom software. Cost is not the only consideration however, as the decision to opt for custom software often includes the requirement for the purchaser to own the source code, to secure the possibility of future development or modifications to the installed system.