To build or not to build software in-house, that is the question.
I’ve sat on many global IT advisory councils in my time, for vendors, distributors and resellers and witnessed so many of these channel businesses attempting to build software in-house to help solve a range of business challenges. I use the word attempt, because very few have successfully built, implemented and maintained these systems or software. Yet, it’s still happening, and I’m baffled as to why it continues to be a recurring theme.
I recently interviewed the CEO’s/Founders of some of the most advanced software as a service (SaaS) platforms available to the channel today. Called the Channel Collective, the group is made up of global ISV’s that offer solutions dedicated to increasing revenue and efficiencies for channel businesses. So, I asked this group to share what they are seeing amongst their prospects.
Together, we identified two key misconceptions regarding building enterprise software in-house.
#1: It’s more cost effective to build it ourselves
Speaking to the CEO’s from the Channel Collective, and it was interesting to see that all of them had the same experience when it came to engaging with many of today’s vendors, distributors, resellers or service provides. Their sales teams would spend a considerable amount of time engaging with the business unit who has the business challenge/need. However, once the IT and Purchasing teams got involved, the opportunity would hit a major roadblock.
Peter Olive, CEO of Vortex 6 shared his experience: “A recent example is where we had a business unit issue a tender which was specifically around our offering. The problem was, it went to purchasing and they were making the decision. The issue in that case was, firstly, they didn’t actually understand the business problem we were solving. And, when they do a cost comparison, it’s not a pure cost comparison that takes into account everything that matters, such as employee time and productivity, cost of ongoing maintenance/updates, etc. The comparison needs to be all encompassing.”
iasset.com CEO Scott Frew added: “One of the biggest (and most important) cost that is always overlooked is the value of lost opportunities during the time it takes to build and implement that software internally. We had one customer uncover $100M of opportunities immediately after implementing iasset.com. Businesses need to take this into account.”
Kenneth Fox, CEO of Channel Mechanics also added: “I often hear the argument ‘if we build it, we’ll have it and then we won’t need to pay you every year’. But it’s like anything, if you build any piece of software, it just doesn’t stop. You have to maintain it. Why take that on when there’s SaaS providers like us that have been evolving their platforms for 10+ years and continue to meet the needs of the channel as the channel evolves?”
It’s clear that the business unit needs to have more control over the decision-making process, because the technology is meant to address their challenges and needs. The business needs to run IT rather than the other way around, but we still see IT calling the shots - especially amongst large US vendors.
#2: We have unique issues/needs
Nearly every organization believes they are unique or have unique issues/needs. Okay, that might be true - to an extent. But are these differences vast enough to justify the years and resources required to build something that’s only meant to solve the problems that they have identified (or are aware of)? What if they could do a whole lot more with an existing platform that has been designed as best practice and is constantly being fine-tuned and further improved to meet the changing needs and nature of the channel?
I understand the idea of building your own if it doesn’t exist and you realize that you have an innovation that needs to be executed and it can only be executed by building your own. But, if you take a look at Forrester’s channel software tech stack – there are 159 companies out there that have built software to help your organization! Most of these businesses (especially those within the Channel Collective) come with 20-30+ years of channel experience and understand the complexities that come with indirect sales and the IT channel ecosystem. As Kenneth put it: “It’s not just our solutions that we are bringing to the table, it’s the 20 odd years of know-how having done this, understanding it inside out, top to bottom and as you move up the channel to tier 2 distribution, it gets even more complex. And bringing that know-how is really important point of what this team brings to the table.”
Jon Scott, CEO of ScopeStack added: “As SaaS providers, we build thinking at a global scale. I think the problem with doing it internally is that it’s very much limited to the size or location of their organization – at that point in time. We offer scalability, ease of use and access from anywhere in the world.”
My final parting words - just don’t do it! Don’t allow your IT team to justify their job by trying to build it for you. Let’s face it, in most cases it never gets finished and even it does get built, it is going to be inferior to any SaaS available on the market. I might sound very blunt right now, but it is the reality of what we are witnessing day in day out. Your IT department cannot build a comparable platform in the matter of 6 months, it’s simply impossible. As a vendor/distributor/reseller, would you recommend that your end customer built the technology that you’re trying to sell them? That would be ludicrous right?
Please reach out if you’d like to chat further about any of the above, or of course, if you’d like to know more about how iasset.com can help your business.
Our full video interview with the Channel Collective can be found here.