In other cases companies are using an inappropriate platform for their requirements. For example the major 'off the shelf' CRM's have small business licences but in most cases SME's don't use 80% of the functionality offered and yet the system doesn't do their required task well. A simple tailored piece of software is a much more suitable solution in this case instead of trying to make Goliath do David's job.
I believe there is a fear of software as a solution for many companies. The main concerns appear to be:
Many assume the cost of a tailored solution will be excessive yet a one off price for development is often less than 1 years licence fee on a major CRM system.
Investment of company time
In a bespoke system the application is written to meet the specific needs of the company so the testing process can in fact be a great opportunity for a company to streamline an often time-consuming process's. Input by the client on their software will have huge benefits with workflow when the system is live.
You have complete control of your data in a tailored system so you can choose the level of data security. You may wish to encrypt the database, include firewalls, run hourly back-ups etc. You can even choose which jurisdiction the data is stored in.
Reluctance of employees to adopt a new system
It is difficult to convince people who are used to a certain way of working to adopt something new. In my experience no amount of explaining allays fears for users, people need to see software in use before they can truly understand the benefits. You never hear of a company reverting back to a non-software solution so that should speak for itself!
My company is too small for software
In short, no company is too small for software. All administration tasks can be automated so that all employees, however small their number can concentrate on their particular business instead of wasting time on tasks software can do better.