Buy or Build: The Million (Plus) Dollar Software Question
Average annual salary for a skilled employee: $70,000. Yearly enterprise cloud storage subscription: $800. Software that actually meets your business needs: priceless. There comes a time when every leader needs to think about how to use technology to move their business forward. Cost concerns usually weigh heavily on their decision, but there’s another key question to answer: whether to buy or build the solution. This is where buy vs build analysis comes into play.
To unlock the projected Return on Investment (ROI) without wasting resources, business leaders need to weigh up their choices carefully. There are only two real options when it comes to enterprise software like a Customer Relationship Management (CRM) system: buy it from a vendor or build it in-house.
A Binary Choice
A bespoke house-built solution might tick all the right boxes, but it’s vital to ensure that it serves a specific purpose. Building a solution can draw your resources away from core business functions and disrupt revenue-generating activities.
The alternative is to opt for an external solution that could be ready to run right out of the box. While bought solutions can be cheaper, you may need to make peace with certain missing functionalities. You won’t be getting a fully bespoke solution, so it’s important to choose one that includes any ‘deal breaker’ features your business can’t live without.
How to Conduct Buy vs Build Analysis
The three phases of usability testing should start before you ever sit down with a user and ask them to review and work with your new applications.
It starts with mapping the journey of how users will interact with your design. From this, you’ll be able to understand the contexts, use cases, and real-world scenarios of how the software will be used in practice. These scenarios and use cases will become the tasks in your usability test and will help you identify the business metrics to measure success. Reuse these scenarios across all of your usability tests. The only things that change are the fidelity of the application and the test moderator’s level of involvement. The usability tests should evolve across the three phases from the moderator being hands-on, to being hands-off.
1. Focus on Core Competencies
A simple way to choose between building software and buying it is to look at the purpose of your business.
It’s important to ask whether software aligns with the business’s mission and purpose. Apple’s mission statement, for instance, is “to bring the best personal computing products and support to students, educators, designers, scientists, engineers, businesspersons and consumers.” It, therefore, makes sense for them to build software products, and doing so is what makes them unique.
Contrastingly, Adidas's goal is “to be the global leader in the sporting goods industry.” While they’ll still need useful technology like every other large business, building their own could distract them from making great athletic products.
2. Know Your Requirements
It’s only by understanding your business’s requirements on a granular level that you can weigh up the ROI and benefits that certain software offers.
Knowing the requirements and understanding how the user journey will look in the future will allow you to assess your existing software. Without an in-depth understanding of your requirements, you’ll be at risk of buying or building software that doesn’t have the features you need.
For common issues, there are likely to be numerous solutions already on the market, whereas niche requirements may only be addressed by creating custom software.
3. Understand the Real Costs
Costs will always be a major factor in your build vs buy analysis, but firms need to look beyond the initial price tag. Around 70% of software costs occur after implementation, so you can’t afford to ignore the total cost of ownership.
When calculating total costs, consider the full software lifecycle over a period of around seven years. The total figure should include the costs of deployment, maintenance, and other work that’s needed to keep the solution delivering its promised return.
Know the Risks
Both building and buying software come with their own distinct (and often overlooked) risks. Buying in particular requires you to accurately assess the vendors you deal with to determine if your investment is safe.
A few items to consider include several things such as whether the vendor:
has adequate customer support facilities and can promptly resolve issues;
can provide training and related materials;
is likely to stay in business; and
can keep your data secure.
Any business considering buying software should also take time to look beneath the surface. It’s all too easy for vendors to disguise vapourware as a fully functioning solution. Daito has helped previous clients to vet software that turned out to be little more than a prototype. If bought, it could have exposed the business to an unquantifiable level of risk.
A Viable Alternative
Outside of the build vs buy binary, there is another alternative. By partnering with a trusted vendor, you can create software that deals with very niche issues without the need to build it in-house.
While this approach technically counts as building software, it helps businesses to avoid the risks associated with taking on a project themselves. It also negates the need to employ new staff to handle the build and subsequent maintenance.
It’s a viable way to gain access to truly custom software but can only work when you have a good relationship with the partner(s).
Weighing the Options
Enterprise software is costly no matter which way you look at it. The keys are to really know the problem the software seeks to address, understand its build complexity, and assess its value for your business. Daito helps its clients to map out these factors, making it easier to minimize risk and maximize the benefits whether they build or buy the software.
Using thorough analysis and preparation you can make the right choice for your business, and that really is priceless.