Build or Buy?

In today’s economy, companies must keep pace with technology and the marketplace, and are faced with the dilemma of whether to build or buy. Should the company build new business solutions from scratch or utilize an off-the-shelf application to fit their needs? Having talked to two companies recently who considered building their own solutions, we decided to address the build or buy decision process and identify key factors that should be considered.

1. Will an in-house application create a competitive advantage?

Companies have finite resources and time to devote to projects. Focus on the core areas of your business where you can differentiate yourself from your competition. Whether it is the uniqueness of a product or the operational excellence in supply chain, each company has areas where they have strategic purpose and they excel. If the project is in an area outside of these core competencies, you most likely do not have the right resources in place to build a competitive advantage.

2. Are you truly unique in this area or the same as others in your industry?

If you work for FedEx or UPS, your business is rather unique in its size and scope. A small specialty retailer with 25 stores or a food or liquor distributor has requirements that are probably very close to many companies that are in their space.

3. Are you looking forward to the future or institutionalizing today?

Human nature dictates that your employees are stuck with what they know in your current systems and processes. ‘Because we have always done it this way” is not a valid reason for “Paving the Cow Path.” Just because business processes have evolved over time does not mean they resemble a best practice. Finding a new vision takes time, talent and adequate resources. Using outside consultants can also be expensive.

4. Technology is accelerating, lowering the useful life of software. Are you willing to make a long-term commitment?

Today’s software packages have two large advantages. First, they are a proven product that meets the needs of many companies. Second, they have to adapt to changing business trends, delivering updates on a regular basis. Those development costs are spread across their entire user base. A custom solution requires additional staff to stay current, along with both technical and business training and support resources. Another hidden cost that solution providers absorb is the time, money and intellectual capital spent on R&D to regularly test new ideas. If plan A doesn’t work properly the first time, third-party providers will often try plans B, C, D, until the best solution is identified.

5. Can you properly manage the software’s lifecycle or will you end up being “locked-in”?

One often-overlooked effect is the way a custom solution can become “locked-in” in an organization. Besides pride of ownership, your business and technical people’s careers become linked to that solution. With the rapid change in technology, companies should re-evaluate their software needs at least every five years. An honest assessment of requirements will probably not happen with egos and livelihoods on the line. Your company may stay locked-in to your custom solution for longer period than is prudent. You also have issues of sustainability. You are fine as long as the guru is alive and happy. You could be in serious danger the day he or she gets sick or leaves.

The key is to select a product that best fits your business needs long term. With a buy decision, you need to partner with a vendor that has a future vision and the technology to grow with you. If you are evaluating solutions, we would highly recommend making reference calls to users in a similar business and organizational size. You will gain invaluable insights into the software capabilities along with the company’s ability to support your needs going forward.

Find a partner that you can trust that provides great training, continuing education, rapid installation and the support you deserve. This way you can focus on your customers and your core business.