The IT Conundrum: When to Build and When to Buy Enterprise Software
As technology continues to play an essential role in business growth, choosing between building or buying software has become a dilemma for many organizations. The decision on whether to build or buy software depends on various factors, including cost, time to market, specific needs of the organization, and project goals. In this guide, we will offer advice on how to perform an internal build vs. buy analysis the explore the pros and cons of each option to help you make an informed decision.
When deciding whether to build or buy, two major considerations are at play: firstly, whether the organization requires a solution that does not exist in the market, and secondly, whether the software is needed to enable core or proprietary business processes. In such cases, it is essential to weigh the pros and cons of building versus buying. While building in-house software can offer greater control and customization, it may be more expensive and time-consuming. On the other hand, purchasing software from a vendor can be faster and cost-effective, but may not fully meet the organization’s specific needs. Ultimately, organizations should carefully analyze their requirements and resources, taking into account factors such as cost, time, quality, flexibility, risks, and project goals. Additionally, for proprietary business processes, building a custom solution may be the best choice to protect the organization’s secret sauce.
To make the right decision, it’s crucial to contextualize these points in relation to the business needs and identify what is working well and what requires improvement in the organization. This requires consulting with internal stakeholders and staff, researching requirements, and assessing ROI and TCO to make the right decision backed by data.
In this article, we’ll walk you through how to decide whether your organization should purchase software off the shelf or build it in-house, and offer suggestions on how to expedite the process.
The Build vs. Buy Decision: Understanding Your Business Needs
When choosing software, there are two main options: build vs. buy. “Build” software requires customization before deployment, while “buy” software is ready-made and addresses a particular business problem out of the box. Let’s say an IT company wants to introduce an ERP system to optimize its business processes. Although there are many ready-made options available, none of them may appear to be a good solution. That’s when you may need to create a custom ERP that will be valuable and tailored to the requirements of your specific company.
The Great Software Debate: Pros and Cons of Buying vs. Building
Pros of Customization:
- Ideal custom software will complement the capabilities of the current tool and won’t conflict with current business procedures or tools.
- Your solution can eventually be turned into a for-profit product that you can sell because the code you write is your property.
- You continue to have total control over how the product functions. Therefore, any modifications or updates are planned components of your business strategy rather than unanticipated events.
- You can easily make changes to the software if you believe it requires a revision or new features.
Advantages of Off-The-Shelf Software:
- A ready-made solution can be put into place quickly, providing value right away.
- The cost of commercial software may be considerably lower, particularly if it is a monthly subscription model.
- You do not need to resource product maintenance because it is handled by the vendor.
The Right Fit: Determining Which Approach is Best for Your Business Needs
When it comes to deciding whether to build or purchase a specific technology, there is no one solution that fits all Business. Every business calls for a different choice, one that takes into account the particular requirements of the organization in question. Having said that, there are some considerations to take into account when deciding whether to build or buy:
Costs for building software include creating, maintaining, and updating the software over time. The cost of purchasing software includes the purchase price as well as the costs of licensing and upkeep. The cost difference between these two methods can help you determine which is more economical. It might make more sense to buy an off-the-shelf solution if the cost of developing the software is prohibitive for your company, and vice versa. Don’t forget to include the time it takes to build. On average, custom software development usually takes about four to twelve months. Nevertheless, it’s worth noting that, based on a study conducted by KPMG Information Technology, 85% of software development projects exceed their scheduled timeframe.
The time needed to develop software internally can take a lot longer than purchasing software from a vendor. In this situation, buying an existing solution might be the better choice if the organization needs a quick fix. Large and complex solutions require a significant implementation time, but this allows for greater configurability to meet your specific needs. As a result, building a custom solution or having one built for you may not take significantly longer than implementing a COTS solution.
With in-house software development, it can be challenging to achieve the same level of quality as with commercial software. This is so because experienced professionals who have access to better tools and resources typically develop a commercial software. It might be preferable to purchase software from a reputable vendor if quality is your main concern. However, you can build your own software if you have strong internal teams.
Although third-party solutions can occasionally be found that fully satisfy an organization’s needs, in-house software can be tailored to a company’s unique requirements.
Because there is no assurance that the finished product will satisfy every requirement of the organization, developing software internally can be a risky endeavor. On the other hand, the risks associated with purchasing software from a third party include vendor dependence and the potential of being locked into a particular platform or solution.
6. Project Goals
When choosing whether to build or purchase the software, the project’s scope should be taken into account. Buying an existing solution might make more sense if the project isn’t very large. However, a custom solution might be preferable if the project is large-scale or complicated. In other words, the organization’s needs must ultimately determine whether to build or purchase software on a case-by-case basis.
7. Outsourcing Custom Solution Development
Another thing to consider is if whether your organization should buy something, or hire a vendor to build the custom solution for you. The US government does this all the time. They send proposals to companies with COTS solutions and also to consultants who specialize in building custom solutions to determine the most effective solution, by sending the same requirements out to solution vendors, solution builders, and internally to your own IT team to determine what’s most cost-effective. Ultimately, whether you decide to build a custom solution in-house or outsource the development to a vendor, it’s essential to consider all relevant factors and make a decision that aligns with your organization’s goals, budget, and capabilities.
A Comprehensive Comparison – Analyze Each Option to Make the Right Decision, Backed by your Business Needs
With the key considerations established, the next step is to contextualize these points in relation to your business needs. This is accomplished by identifying what in your organization currently functions well and what requires improvement, including the current hardware/software system. To avoid spending money on an ineffective solution, it is crucial to lay out a clear, data-driven vision of your goals.
You must also consider all of your possibilities while keeping your end goal in mind. Do not assume that a solution is appropriate for your organization just because it is effective for a competitor. Spend the time to carefully research the requirements for purchasing or developing software, including any crucial features or integrations that might be necessary to complete the service. Examine your TCO to determine which option best fits your spending plan, compare the tools you currently have to what you need, and consult with your staff to learn how they feel about the possible change. Let Olive help you make the right decision, backed by our robust data. With Olive’s platform, you can:
Olive software eliminates the manual and time-consuming tasks from the RFP / Solution Evaluation processes, offering a Build vs. Buy evaluation. Enterprises can use Olive cross-functionally to evaluate business needs collaboratively and understand whether there is more value in building a software solution or choosing something off the shelf.
Olive Automates the calculation and provides you with a downloadable report that you can share with executive management.
Using the “user-defined responses’ feature, Olive customers will be able to provide potential response options that will help them make buy vs. build decisions. When this decision is made, you can then continue the project to select the right service providers or solutions. Olive features, such as standard requirement response options, automatically calculate the overall match for a solution/service provider based on the response selected.
Perform a Build vs. Buy Evaluation In Olive, and Get Robust Data to Back up Your Decision
Make informed decisions about your technology solutions by performing a thorough internal Build Vs. Buy Evaluation. Olive is a next-generation collaborative technology evaluation platform that can help. Collaborate with key stakeholders in your organization to crowdsource internal data and evaluate whether to build or buy specific solutions like CRM systems or cybersecurity tools. By involving the right stakeholders from the beginning, you’ll ensure that you’re aligned on mission-critical priorities and have high-quality data to make the best decision. Olive’s project templates and vendor comparison matrix reports provide robust data to share with your team, so you can confidently make the right choice. Some key features of Olive’s Technology Evaluation Platform include:
Vendor selection is difficult, both internally with your own team – gathering requirements and aligning internally – and externally with vendors. Typically, organizations rely on spreadsheets, word docs, email, and endless meetings to manage innovation. With Olive, you collaborate on these tasks in the platform.
With a typical RFI, you send out a spreadsheet or document to a few vendors and hope for responses. With Olive, you can invite as many vendors as you want directly into the project. As they respond to your requirements and answer questions, you see the results and how well they score against your requirements and needs in real time.
Automate the tedious aspects of your internal evaluation process with repeatable project templates. Easily create & reuse project templates. Preload with initial discovery questions, functional requirements, non-functional requirements, and surveys. Vendor details and responses will be saved in your data for future projects, saving time and resources. Olive ensures that any work you do and all the information you collect from stakeholders and vendors is reusable.
To Build or Buy?
Ultimately, the decision to build or buy software depends on the unique needs of each organization, thus a thorough evaluation is necessary. By carefully analyzing factors such as cost, time, quality, and flexibility, and contextualizing these points in relation to your business needs, you can make the right decision backed by data. Whether you choose to build software in-house or buy it from a vendor, remember that the end goal is to improve your business processes and achieve your objectives.