Build Versus Buy – The Business Case

Build v Buy - business case

Data Management

Last month, my CIO wrote a blog about the dilemma in building versus buying an enterprise application from a technical perspective. This month, I wanted to expand on this discussion by looking at it from a purely business point of view.

To recap, the major disadvantage outlined was the lack of scalability of any in-house solution. Scalability is a business issue as well – especially when you consider how to grow a business process with an application that isn’t scaled to handle your growing volume of data – after all, you’re building this so you can grow your bottom line.

But there’s some other essential business considerations for anyone thinking about building an enterprise application in-house:

It’s a competitive market

If you’re like us or any of our customers, you’ll be operating in a competitive market. Can you afford to wait until an application is developed? We typically see development of this nature taking a minimum of 2 years to get to a Minimum Viable Product (MVP), with 3 years being more realistic. Will this delay cause you to lose market share to your competitors who potentially have more robust and streamlined systems? Will the initial specification remain relevant in your company in a rapidly changing market or could it be out of date by the time it’s actually delivered?

Learn from other customers, markets and even competitors

One of the incredible values of using cloud applications is that others have already trodden this path and have fed back other value that you as an organization can immediately benefit from. Building an application in isolation means it will only ever be as good as your internal people. By buying one, you are directly getting millions of dollars worth of code and years of innovation for a relatively low ongoing cost (and in that ongoing cost you continue to receive huge incremental benefit from sharing the load with other organizations).

Quantify the opportunity cost

With any major business decision, there’s always trade-offs. What other projects need to be put on hold or even cancelled through funding restraints and how will this affect other business areas. My advice is that this investment would need to be your number one company priority in order to justify foregoing other projects as it is highly likely a project of this nature will be all-consuming of your IT resources.

Hosting infrastructure

Most modern day IT applications today are built in the cloud. If you build your own solution are you going to host it in the cloud or in-house? Regardless of which way you go, there is a significant cost and productivity impact. SaaS companies, like, are typically able to negotiate lower costs based on economies of scale of running many customers concurrently often across redundant geographical clouds and in turn offer these savings on to customers. 

Other expenses

There are a multitude of “hidden” costs that always crop up when your build your own solution, which can easily blow the budget.  Those who build their own solutions often overlook the following expenses:

  • Technology: Systems need to be constantly reengineered to support adds/moves and changes in business initiatives and often need to be completely reconfigured. If this results in downtime of a business-essential system, the loss of business can be catastrophic. Other technology costs associated with maintaining a business-essential application include: system monitoring, planning and scaling, constantly evolving security requirements, documentation and more. With an outsourced solution, these are typically covered by your license fees.  
  • Staffing: The risk with building your own solution is the unplanned cost associated with recruitment, training and other general staffing costs. As this subject is extensive, I have dedicated an entire blog to the people aspect of the build versus buy dilemma. Read it here.

Generate an ROI faster with an outsourced solution

Although there is an associated integration cost, you will usually find that an outsourced product will generate a much faster ROI. Our best example is one of our vendor customers ROI was 95mins!  For most though it’s between 3 and 6 months.

So, if you don’t want to wait 3 long years before realizing gains on your renewals programs, you need to seriously consider a solution like

It doesn’t just make sense. It makes dollars too!

Build vs Buy


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