By: Jordan Zommick, DirectScale CIO
Whether you’re a startup or established Fortune 500 company, making the ‘Buy vs. Build’ decision for your company is one of the most important decisions for you to make. To start, it may be beneficial to look at the decision more holistically rather than focusing on any one particular driver.
Strategy and Competitive Advantage
Build when the capabilities are core to your business and differentiate your company in the marketplace. If it doesn’t give you a competitive advantage, you should consider buying that capability and integrating it into your overall strategy.
You must consider all costs associated with the effort, including implementation and ongoing costs. Do you need additional tech infrastructure? Do you need additional staff to implement and others to support after it’s launched?
It’s also important to consider the long-term costs for at least five years because 70 percent of all software costs generally occur after implementation.
A Software-as-a-service (SaaS) partner will be able to clearly articulate the total costs, including implementation, infrastructure, and ongoing support. Choosing to build a solution that your organization hasn’t built previously or attempted to build often leads to greatly underestimated costs and timelines. Often, those complex projects are not finished on time or within budget. Sometimes they are two or three times larger of an effort than originally projected.
Scale and Complexity
Just because something may be simple and easy to build doesn’t necessarily mean you should always build it, and that is generally a good guideline. If a project is complex and requires specific expertise, find a SaaS partner who can offer a mature solution. Generally, SaaS partners tend to offer economies of scale as their costs per client go down the more clients they add.
Maturity vs. Commoditization
Buying a solution often means receiving industry best practices as well, which are obtained directly from the feedback of many clients over the years. These product-based solutions will constantly improve their development over the years, so they come with many great features baked into the platform. It’s tough for a company to build best-in-class solutions when they haven’t had the luxury of learning for years about what works and what doesn’t. The market’s maturity will generally weed out poor solutions from the best ones.
Advantages of SaaS
- The software already exists and has many of the capabilities your organization needs today and tomorrow.
- The software often allows extensive customization through configuration rather than software modification.
- The software often allows for various integration and extendability to meet varying client requirements.
- The software is primarily debugged, so you don’t have to do that, saving months of time testing for complex projects.
- The vendor often provides extensive training, user manuals, and ongoing support.
- The vendor consistently updates and improves the set of capabilities to anticipate tomorrow’s needs.
Time to Value
Building software is generally an enormous effort requiring many internal employees across multiple departments to envision, build, deploy and maintain. Unless you have the subject matter expertise in-house, it will almost always take longer than buying something and configuring it for your needs. Buying allows you to deploy and start receiving value much faster than building it yourself. If you are slow to the market, it gives your competition the advantage of innovation, allowing them to reach consumers with new products, services, or offers before you do. It also allows other businesses the opportunity to dominate the market, even with a substandard product simply because they got there before you.
Internal Resources Availability and Expertise
Are you creating something that requires specific expertise not available within your company? Has your company ever done something like this before? Do you have the confidence that your internal team can deliver a product as good as something commercially available? If the answer to these questions is “No,” you should strongly consider buying something to solve your business challenges instead.
On the other hand, your company may have specific expertise that nobody else has. You should not want to share that intellectual property (IP) with someone else who could negate your differentiator. You’d want to double down and build something you own in this case.
There are inherent risks to buying software and building your software. When thinking of buying something, maybe you’d like to do it because it offers the least risk option. In this scenario, risks such as resource management, development problems, and launch timelines then fall on the vendor. But if you build it yourself, those problems land directly on your desk.
Support in Place
Buying a solution will also allow an organization to rely on professional support structures with well-defined SLAs, whereas building it yourself requires training individuals in-house or hiring additional support staff. The other benefit of buying a solution is that the vendor gets feedback from their clients and often finds and resolves bugs before you even encounter them. SaaS products have a team to build new features and support their platform.
A business executive often doesn’t think about these specific tasks when building a solution in-house vs. buying something:
If a product or solution is differentiating for the marketplace or very well understood and requires a small effort, then send it to your product development teams to build. However, if it’s a commodity product that requires fast time to value, always go with well-known, industry-proven SaaS providers.
Knowing that most IT shops can build just about anything, the trick is to know which path to choose based on the company’s best interest and setting aside egos.
The top priority should be delivering value to your business stakeholders as soon as possible for the least cost. At the end of the day, unless you are a pure software company, you should be buying more than 10 times as often as you build. If you aren’t at this ratio, you are likely not considering the enormous cost you incur for your business, both in dollars and time.