Shrink-wrap software is pre-packaged software that is was developed for sale to many businesses. This is in contrast to custom software development that is developed for a specific customer. Microsoft Word is an example of shrink-wrap software, while a software package to handle a special manufacturing process could be an example of custom software.
Both types of software have their place. Since the development cost of shrink-wrap software is spread over many buyers, it is typically costs less than custom software. Thus, whenever shrink-wrap software can meet the needs of a business, it should be used.
When off-the-shelf software cannot meet the business requirements and the benefit to the business exceeds the cost of custom software development, then it is appropriate to utilize custom software.
However it isn't always one or the other. It is quite appropriate to purchase a set of off-the-shelf packages, then utilize custom software to integrate (connect) off-the-shelf packages together and/or to enhance the capabilities of these packages with custom amendments.