Whether you’re leading an IT Department or undertaking a home improvement project, we’re all familiar with the challenges associated with coming to a ‘Build or Buy’ decision. It’s nearly impossible to make an educated decision without fully understanding the problem at hand and absorbing enough data to have a fluid understanding of what your options truly are. Ultimately, the decision to ‘buy or build’ comes down to three factors:
- Cost (financial and opportunity)
There are certainly ‘build or buy’ decisions that are easy to make. Why would you build your own microwave, when you can purchase a microwave at a (relatively) nominal cost? As we move further down the complexity spectrum, the decision becomes much more challenging.
Assess the Cost
The example of an IT Director seeking to implement new functionality illustrates this complexity. Let’s imagine you’re operating in an enterprise environment with defined Finance, HR, and Purchasing/Supply Chain departments. At this stage of business maturity, you likely have an ERP system (or at least defined workflows and data interchange between these different lines of business) – and thus dependencies and oftentimes innumerable downstream effects resulting from implementing new technology. You are tasked with implementing a new AP Automation tool and your business requirements dictate that the tool also incorporates OCR (Optical Character Recognition) functionality.
Now, let’s sketch out a grossly simplified ‘build verse buy’ decision tree. We probably don’t have an unlimited budget, so let’s consider cost first. If we begin with assessing the pre-packaged AP Automation tools – evaluating the potential ‘buy’ options – we will need to factor in a monthly subscription or annual license cost for the lifecycle of the software (depending on whether they’re being delivered in the Cloud or on-premise). We’ll also have to map business requirements to the software functionality delivered ‘out of the box’; implementation will almost certainly not just be a ‘flip of the switch’, so let’s factor 2-3 months of implementation labor costs, and potentially the need for some customizations or at least the business requirement mapping necessary for exception handling.
In the ‘build scenario, we would first need to understand if we can take advantage of any development platforms/frameworks that may be available in our currently installed infrastructure. A tool like Oracle APEX, offered for free in the Oracle database, is a good example of a development platform that would fit the bill.
After all, why would we elect to build if we would need to pay additional license costs to build an application? Understanding if APEX (or any other development framework) has the capability to build out the features elicited in your business requirements gathering sessions is of course a critical next step. The benefit of taking the ‘build’ route, in this case, is that you will avoid pricey on-going licensing costs – you’ve built the solution yourself. At the same time, you have to consider the opportunity cost; you likely dedicated several months of your developers’ time to building out the solution, which shifted their attention from supporting other components of your business.
Weigh the Risk
Interrelated with the above points, the next core consideration would be current and future risk. Again, the ‘dependencies’ question rears its ugly head. If you were to migrate your application stack in two years, what would that mean for the AP Automation tool? Would you be on the hook for another year of licensing costs without using the software? Or, would your custom-built solution be able to integrate with a new set of financial applications?
Again, this comes down to building or buying for the future. The challenge is reaching a decision that considers your present and future states. If the business function you’re looking to achieve is less complicated, that might be all the more reason to build – why pay license costs when you can build a solution that pays for itself in short order?
If you’re in a ‘build or buy’ dilemma, we would love to start a conversation and help you explore your options.
Learn More from Traust Consulting
By weighing the cost, risk, and complexity of your situation, you’ll be able to answer your pressing build vs. buy question. Learn expert tips from Traust Consulting by visiting our blog page.