As enterprises embark on the journey of digital transformation, they often encounter a critical decision: Whether to buy an existing digital solution or build a custom one internally? This resolution often comes down to resource allocation and scalability.
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In modern business, digital transformation is no longer a luxury but a necessity for enterprises seeking to maintain a competitive edge. This transformation involves leveraging technology to streamline operations, enhance customer experiences, and unlock new revenue streams. In researching modern solutions for outdated processes, businesses are often faced with the choice of creating a custom-built system or buying an out-of-the-box solution. This “buy vs. build” dilemma is a pivotal choice that can significantly impact a company’s efficiency, scalability, and overall success.
This decision comes up for a wide variety of digital solutions, from something as simple as transitioning away from paper forms like timesheets, safety checklists, or inventory logs, to something as complex as Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM) systems. Any time your enterprise business is looking for ways to transition away from manual processes and expand into integrated technological solutions, there’s always the question of what serves your team better: Buying an existing platform or building your own?
On one hand, buying a digital solution offers the advantage of speed, access to specialized expertise, and a proven track record of performance. Commercial solutions are often backed by dedicated teams who continuously update and support their products, ensuring businesses stay ahead of technological advancements. On the other hand, building a solution in-house allows for complete customization and alignment with specific business needs. However, it also requires substantial investment in time, talent, and resources, which can divert focus from core business activities.
Here we’ll explore both options, weighing the pros and cons to help decision-makers navigate this complex choice. While there are merits to both approaches, a thoughtful consideration of the organization’s unique needs, capabilities, and long-term goals is essential in determining the best path forward. Ultimately, the goal is to find a solution that not only meets immediate requirements but also positions the business for sustained growth and innovation.
The “buy” option involves acquiring a ready-made digital solution from a vendor. These solutions are typically well-tested, come with built-in features, and are supported by the vendor’s expertise and software updates. In contrast, the “build” option entails developing a custom solution internally, tailored to the specific needs and requirements of the business. This approach allows for maximum customization but requires significant investment in development, testing, and maintenance.
Key factors influencing this decision include budget constraints, organization size, change management capabilities, and the strategic importance of the solution to the business. Enterprises must weigh these considerations carefully to determine the most beneficial path forward. It may be tempting to only look at the purchase price versus the price to build, but all of the following should be considered for a thorough cost/benefit analysis.
One of the most critical factors in the buy vs. build decision is the time to value. Essentially, this measures how long between the initial investment and the point where your team sees a return on that investment.
Purchasing an off-the-shelf solution often leads to faster deployment and immediate access to essential features. Best-in-class vendors will provide implementation support and training, enabling businesses to quickly start benefiting from the new technology. In contrast, building a solution in-house involves longer development cycles, potential delays, and the need for extensive testing. The key evaluation here comes down to the timeline when your team needs an implemented solution, but here are several guiding questions to ask of your key stakeholders and any potential vendors:
• Are there any existing support or training materials?
• Are additional training options available for purchase, and at what price?
• Will anyone within your IT department be responsible for implementation?
• How long will it take from the initial purchase to company-wide implementation?
• How long will scope analysis, build, and testing take to get a minimum viable product, and is this possible with existing staffing and current workloads?
• Who within your organization will be responsible for creating manuals/training guides, and what is their timeline for creation?
• How long will it take from the initial build to company-wide implementation?
Security is a paramount concern in digital transformation. Off-the-shelf solutions typically come with robust security protocols, regular updates, and compliance certifications, offering a level of assurance to enterprises. Vendors invest heavily in their security measures to protect their products and customers, often exceeding the capabilities of many internal IT teams. Conversely, building a solution in-house requires dedicated security expertise, a thorough understanding of compliance requirements, and vigilance against potential vulnerabilities. The complexity of maintaining security can be a significant challenge, especially for smaller organizations with limited resources.
While there are large concerns your IT team, or any IT contractors your team may need to hire to handle the additional scope of work, will keep in mind (such as password protection, proprietary organization information, and client data) there may be additional security your team hasn’t yet considered. This can look like data encryption while your data is either at rest within storage or your employees' devices, or in transfer between any systems your company uses. It can look like detailed compliance notes for regulatory agencies, especially for legally binding situations like contracts that require electronic signatures. It can also look like the regulations associated with the data being captured, such as Protected Health Information (PHI) under the umbrella of HIPAA guidance, or payment processing using credit card numbers.
• What security protocols are available for encrypted data?
• Which regulatory agencies, if any, must your organization comply with?
• What types of data will be collected within this digital solution?
• In the case of a security breach, what is the protocol for communicating with affected parties and preventing escalation?
• What fail-safes are in place in the case of a software failure, such as data backups or multiple server locations?
While reliability may have multiple interpretations, in this case, it refers to the general average “up-time” of your digital SaaS or Cloud platform or the likelihood of crashes or service interruptions in your one-time installation package. This information is usually available either on a status page of the provider’s site or upon request. Unfortunately, when building your own software solution, this can be more difficult to measure without historical data to reference, but there are still comparable aspects of your own systems you can look to for a clearer estimation.
The reliability of digital solutions directly impacts business operations and customer trust. Purchased solutions often boast a proven track record, supported by performance metrics and user testimonials. These products undergo rigorous testing and continuous improvement, reducing the likelihood of bugs and issues, with well-established processes for mitigating service interruptions. In-house solutions, however, may face reliability challenges due to limited testing phases and the potential for unforeseen problems. This can lead to disruptions in business processes and damage to brand reputation. Here are several examples for your key stakeholders to consider:
• What is the general response time for service tickets, bugs, etc.?
• What platform(s) is this system built upon, and what are their uptime statistics?
• Are there additional fail-safes in place in the case of a server outage or natural disaster?
• How often are there product releases with updates and bug fixes?
• Does your current IT team have the bandwidth to support additional service tickets for bugs, updates, new feature testing, etc., or will that require additional staffing?
• Historically, what is your IT team’s response time for managing concerns with existing solutions?
• Who will be responsible for communicating important updates regarding new features, bug fixes, etc.?
• Will your IT department be prepared to keep pace with the operating system requirements demanded of your solution?
Support structures differ significantly between purchased and built solutions. Vendors provide comprehensive support services, including training materials maintenance contracts, and access to user communities. This support infrastructure helps businesses quickly resolve issues and stay updated with the latest features and security patches. In-house solutions, however, require the development of internal support teams, ongoing maintenance, and change management processes. The lack of vendor support can place a significant burden on internal resources and limit the organization's ability to respond to issues promptly.
For organizations with a robust development and IT team in-house, many of the typical concerns of availability, bandwidth, and expertise can be mitigated with existing protocols. For enterprises with a team already at maximum capacity, or smaller organizations, these concerns can pose greater risk to the functionality of your custom-built solution. The following are several important questions to fully consider before making a decision to buy or build, as the success of implementation can depend on the answers.
• Is your existing IT team well-versed in this system to ensure that there is always somebody available to troubleshoot bugs, issues, or concerns that arise?
• What are the alternative options that will be used if the system goes down? In many cases, pre-built platforms have redundancy solutions to address outages, but if your organization doesn’t, will the return to paper be an issue for your employees?
• What support solutions are in place if there is an outage or issue during a time when most of the IT team isn’t available?
Quality assurance is a critical aspect of any digital solution. Purchased solutions benefit from established quality control processes, user feedback, and continuous improvement efforts. Vendors are incentivized to maintain high-quality standards to retain customers and expand their market share. Additionally, vendors have entire teams dedicated to exploring new features and functionality, streamlined user experiences, and intuitively designed interfaces. In contrast, quality management in building solutions internally depends heavily on the internal team’s expertise and resources. This can result in inconsistent quality, especially in smaller organizations with limited QA capabilities.
Conversely, solutions built in-house offer an unparalleled ability to customize feature sets and functionality to match the exact needs of the business, without paying for any additional bells and whistles. In many cases, this customization will come down to one of the major trade-offs of buying a solution. While many solutions can be customized to fit your business’s needs, they are unlikely to be built specifically for it. However, in building the solution itself, vendors have had to ensure their platform is stable, easy to use, and allows for some level of customization so that it can fit the needs of unique enterprises.
While the above are key pillars in making an informed decision about the future of your organization’s software development and implementation, they are far from the only things worth considering. Detailed and exploratory conversations about this decision should have some mention of the following considerations as well.
For many enterprises, the key motivator for building an in-house solution is the idea of saving money long-term versus paying for an annual subscription. At first glance, depending on the structure of your organization, the initial investment for building a solution may be a substantial savings, however, there are often additional costs and long-term costs associated with building a solution that aren’t accounted for. This can be additional staff to craft the software initially, as well as for maintenance and product upgrades, but can also include costs associated with server storage space, user interface (UI) or user experience (UX) designers to manage the usability of the software, technical writers for support documentation, and change management or training staff to facilitate communication about the system to your team.
Staffing needs vary significantly between purchased and built solutions. Purchased solutions typically require minimal additional staffing, with a focus on training and collaboration with the vendor. In-house solutions, on the other hand, demand hiring skilled developers, ongoing training, and efforts to retain talent. The complexity of managing an internal development team can lead to higher staffing costs and challenges in maintaining expertise over time.
Deliverability is another key consideration. Pre-built solutions offer the advantage of pre-existing features, faster integration, and a lower risk of project failure. Vendors typically have established processes for deploying their products, minimizing the chances of delays or unexpected complications. In contrast, developing an in-house solution involves navigating development uncertainties, resource allocation issues, and the potential for scope creep. These challenges can extend project timelines and increase costs, complicating the overall deliverability of the solution.
Legal implications play a crucial role in the buy vs. build conversation. Purchasing a solution involves navigating licensing agreements, compliance requirements, and intellectual property issues. Vendors often provide expertise and guidance to help businesses meet regulatory compliance standards. In-house solutions, however, require careful consideration of custom compliance, data security, and intellectual property protection. The lack of external guidance can increase the risk of legal complications and non-compliance.
Managing digital solutions involves different challenges depending on whether the solution is bought or built. Purchased solutions require effective vendor management, adherence to SLA agreements, and performance monitoring to ensure that the solution meets business needs. In-house solutions necessitate comprehensive project management, resource management, and ongoing oversight to maintain functionality and performance. The complexity of managing an in-house solution can divert focus from core business activities and strain internal resources.
The decision to buy or build a digital solution involves a careful assessment of various factors. While both options have their merits, purchasing a solution often provides significant advantages, particularly in terms of speed, security, reliability, and support. Enterprises should consider their unique needs, capabilities, and strategic goals when making this decision. Ultimately, buying a solution can offer a more efficient, cost-effective, and secure path to digital transformation, allowing businesses to focus on their core competencies and drive growth, but only a thorough conversation with all stakeholders in your enterprise can make that decision.
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