The debate about whether companies should build their own custom software or buy* it off the shelf has been raging for years. Most enterprise-level businesses will face multiple build versus buy decision points over their life cycles. Should they solve a pressing business problem by building a homegrown software solution or find a third-party technology provider with an existing tool that will meet their needs?
Software as a service (SaaS) solutions are growing more numerous and powerful each year, and the stiff competition has set a high bar for exceptional user experience and product performance. It’s easier than ever for companies to find technology in the market that will suit them. At the same time, the urge to maintain total control over design and development has prompted some large companies to build in-house custom solutions.
But the ability to create in-house software and the viability of that approach are two entirely different things. True, no pre-existing solution will fit 100% of a company’s criteria 100% of the time. But is building a custom tool worth the time, risk, expense, and maintenance headache?
In answer, consider that some of the world’s most widely known tech companies have outsourced at various stages of their development, deferring to outside expertise when they lacked the manpower or bandwidth to do the job well by themselves. Think Google, Slack, Whatsapp and others. The lesson being that the choice between build and buy isn’t cut and dry, even for companies at the cutting edge of tech.
To that end, here are five critical elements to consider when making the build versus buy decision.
At first glance, it might seem easy to compare the cost to buy with the cost to build in-house. However, one thing to remember is that you aren’t necessarily comparing like for like. The buy cost is generally fixed, while the build cost is just an estimate. Building in-house software may be preferable for an organisation with significant capital. But in most other cases, architecting a homegrown software solution is not as cost-effective (or straightforward) as it may seem.
Many companies assume that because they’ve already invested in their team, they will save money by building an in-house solution rather than partnering with a provider. But apart from the time to build the software, consider the opportunity cost of time spent, alongside the sheer effort of maintaining the solution once it exists.
Software giant HubSpot built—and later scrapped—a homegrown behavioural analytics platform solution because even after the build work was done, the cost of running their own system was much higher overall than the cost of partnering with a vendor.
While a technology partner may be an added expense, they often do the bulk of the footwork for you, including most of the exercises that are critical for success like implementation, training, and maintenance.
As experts in their field, technology providers have already developed a solution targeted for your industry, delivering speed to value and rapid ROI. You can hit the ground running and reap the rewards of your tech right away, rather than waiting for a homegrown solution to be built and enduring the pain points inherent in development quality assurance.
Perhaps the biggest appeal of in-house technology is a perceived sense of control—over your data, your specifications, your IP, etc. With full control over build requirements, a custom-built solution can appear to offer the quickest path to solving a market problem. On top of that, your organisation will be the first (and only) one to put said solution to use, offering a unique point of differentiation.
However, firms often find that this level of control comes at a much higher cost than they anticipated. For instance, with your data stack under your direct control, it is up to you to keep that database clean, well-maintained, and safe from bad actors. Cyber-security is a constantly evolving area, and database maintenance alone can be a gargantuan task. As the needs of the business change, so will the demands on your software. Simple maintenance alone can easily outpace the bandwidth of in-house teams—not to mention scalable growth.
Often, organisations find that what they lose in control by purchasing a third-party solution, they gain in consistent improvement and ongoing development. One notable example is the shift in higher education institutions towards outsourced solutions. Even universities famous for their research and development are turning to expert providers to fill the gaps in their e-learning processes
Building an in-house tech solution isn’t just more expensive than you might initially expect; it can also be surprisingly difficult to find the right resources with relevant technical expertise. Top tech talent is generally drawn to innovative software companies rather than the big corporate clients who buy from them.
Even when you do attract the right team, retaining them is another matter. Leveraging the talents of a small team to develop and build software may be cost-effective, but consider the risk of attrition. Even the most loyal employee may leave the company or retire, taking a wealth of knowledge out the door with them when they go.
If you opt for a homegrown solution, be wary of knowledge silos that will have a ripple effect down the line. If the lead developer leaves, can your in-house software survive? By outsourcing to a third-party tech provider, you don’t just hire out the initial build. Ongoing support, albeit often tiered based on chosen package, generally forms part of the partnership as well. You won’t have to worry about scaling staff up or down based on your current requirements or risk losing valuable first-hand product knowledge as employees churn.
Either way, the most critical element in the resourcing discussion is whether or not the chosen technology path will be embraced company-wide. In our recent webinar on ‘Embracing Data and Digitisation’, Davina Rooney of the Green Building Council explained, “We need to embed technology correctly, so that our teams feel they have useful new tools in their toolbox that help them achieve their aims. Because it's only when you see that engagement that you reap the enormous transformative change and progress.”
Scalability is often overlooked in the decision-making process, but don’t let the needs of today overrun the possibilities of tomorrow. The best technology solution for you can scale as your business does, without limiting your growth or disrupting your customer experience.
One common drawback to in-house solutions is that they are custom architected to solve today’s problems. If not handled carefully, they can keep the business stuck within existing parameters. Can your homegrown solution adapt if your business grows by 2X, 5X, or 10X within the next two years? Will it be worth the resourcing strain to accommodate that level of growth? Resilience in the face of change, headwinds and disruption is key for long-term viability. WiredScore, for example, advocates through its Accredited Solutions for proptech that is future-proofed and adaptable to future threats like that of climate change.
Even after Facebook decided to build an in-house sales software, Timothy Campos, the former CIO who made that decision, said this: “I take the build vs. buy decision very seriously… When you begin a project, the software that you are ‘going to build’ always looks better than the software someone else already has, because you haven’t yet run into the limitations that inevitably show up in software engineering. As such, we will buy wherever we can.”
Finally, crafting a technology solution in an internal vacuum poses the risk of stagnation. Machine learning and AI tools are one notable example; training these algorithms often requires data on a massive scale, which is difficult for any one company to develop alone. Better data sets inform better decision-making, and diversifying data inputs is one sure path to a well-trained machine.
Further, once the initial pain point has been resolved, new ones will likely arise that the made-to-order solution cannot accommodate. When yours is the only firm to use a solution and provide feedback, you won’t benefit from the learnings—and missteps—of others in your industry.
If you encounter problems or limitations with your technology, it’s a safe bet that others in your industry have, too. Partnering with a third-party provider enables you to leverage the experience of others, learning from their challenges without having to reinvent the wheel. Existing tech products have been tested and refined over many years with similar clients, so you can be sure that you’re staying on the leading edge with that compounded knowledge.
* Note that given the nature of SaaS, we use the terms ‘buy’ and ‘partner’ interchangeably in this article (more precisely, a customer enters a ‘partnership’ with a vendor by ‘buying’ access or ‘subscribing’ to a platform).