Build vs Buy Decision – More Art Than Science

In today’s digital world, leveraging software systems to automate business processes has become critical for organisations to gain a competitive advantage. In IT glossary terms, there are two broad classifications of software - custom software where you build it to your business need and off-the-shelf software where you can buy a ready-made software.

In most cases, businesses encounter the dilemma of choosing between the ‘build versus buy’ options while addressing their software needs. It isn’t easy to decide between investing aggressively in long-term initiatives by building a custom software solution or taking a conservative approach of buying and deploying a readily available, tried and tested solution offered by a third-party. There are multiple other aspects to be considered and juggle by any enterprise making such a decision.

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There is no definitive science behind how to decide build vs buy when it comes to software, but making a decision can be made easier by how some questions are answered.

Some of the decisions are intuitive like, the time at hand to launch your solution or the costs that you will incur, skills availability in the market etc. that will help you decide. There are others which more often than not are a function of the above mentioned points, including: the risk appetite, complexity involved.

There is one other critical question that needs to be highlighted. If you have a clear answer to this, it can help you make a decision - Is the problem that we are trying to fix core to the business value that you offer? If yes, you are better of building it, if not buy. For example, it doesn’t make sense for a bank to invest in a custom solution for a chat client on their website. They instead spend the same in building out their core banking platform.

That said, you will see a myriad of cases to suggest that while most organisations begin with off-the-shelf software because it is fast and cheap only to realise later that the canned software solution lacks the customisation which is required to handle their specific business needs. As such challenges grow more and more pronounced, the only option that remains for an organisation is to invest in a proprietary software solution that can scale effectively.

While you might relate to the person above, juggling with all or a subset of those six factors, you must understand the pros and cons of the two approaches. Let us compare custom software versus buying an off-the-shelf software product from a third-party.

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Pros of Building

  • Customisation and Scalability: Among the biggest advantages to building a custom solution for your business is that you get the desired functionality. The custom software, tailored to your unique business model, can scale effectively. You get complete control over further development and the advantage to add new features and functionality as and when you want. To achieve fast time-to-market, an organisation can start with a prototype and grow the software to ensure that the business runs like a well-oiled machine.
  • Enhanced Control: Since you are the sole owner of the solution, you get full control over security, user options, and updates. Additionally, complete ownership enables you to market the software product to the extent of offering it on the Software-as-a-Service (SaaS) model to other enterprises.
  • Competitive Advantage: Building a custom software solution helps you gain a competitive edge by leveraging the latest technologies to act as a differentiator for your business.
  • Greater Integration: Building your solution means that you can seamlessly integrate it with your existing systems, tools and business processes.

Cons of Building

  • Higher Upfront Cost: Although nothing can match a custom software in terms of functionality, it comes with a high upfront cost which is much more than off-the-shelf software. However, that does not necessarily mean that it is economically viable in the long run. Over time, using canned software could lead to revenue loss as it lacks scalability and essential functionality. A custom software solution tailored to your workflow can help increase efficiency, ROI and lead to exponential business growth.
  • Time Required to Build: It takes time to build a custom software solution as it requires identifying your organisation’s workflow processes so that the product can help optimise them.

Pros of Buying

  • Lower Upfront Cost: A primary concern while addressing your software needs is if you have limited resources. In such cases, a pre-built off-the-shelf software solution is the best option. Canned software is cost-effective and easy to implement.
  • Rapid Deployment: There is little point in investing in custom software if an off-the-shelf software solution can address most of your business needs. Canned software is good to go as soon as you buy it and load it into your system.
  • Maintenance & Support: Since third-party software vendors want to stay competitive, they regularly provide updates, new features and functionality. Buying canned software means that you can save a lot on maintenance and support, which is taken care of by the third-party vendor in this case.

Cons of Buying

  • Lack of Customisation: While many off-the-shelf software solutions offer some degree of customisation, it is hard to find canned software solution that is fully customisable to your unique business needs.  
  • Less Control: An off-the-shelf software gives you little control over the updates, features and functionality since the third-party vendor controls it.
  • Compatibility Issues: Canned software solution may not be compatible with your existing IT infrastructure including software systems, devices or products you may implement in the future.
  • Long-Term Cost: Although a ready-made software could cost little initially, over time, its cost could grow. Subscriptions and licences have a limited period. And on expiry of a licence, the third-party vendor will ask you to renew the licence at an inflated price.

Closing Thoughts

Several factors can help you decide whether to build or buy a software product for your business. As you see, both off-the-shelf and custom software solutions have their pros and cons. In most cases, it is your unique business use case which determines the choice. There is no perfect cookie-cutter, and that is precisely why we call it an art and not a science.

Depending on your priorities and the balls you are juggling, while choosing to buy a ready-made off-the-shelf software, you should spend time to review different solutions being offered by third-party vendors to decide which one suits your needs best / closest. In case you choose to build custom software, you need to assess the time, cost and effort required along with the long-term benefits.

Although very subjective, there is an alternative wherein you could leverage the best of both worlds. You start with buying a product to meet most short-term goals and possibly build a solution customised for your needs for the long-run.

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