Build or Buy?
The deliberations of a startup looking to create it’s first product
In 2014, a Forbes article talked about “Build vs. Buy : How to Know When You Should Build Custom Software Over Canned Solutions”. The focus of the article was that companies, especially larger ones, should consider building their own software over canned solutions, the reasons being increased productivity, competitive advantage and faster reaction time. In March 2017, leading technology site inc.com wrote about how to determine whether to build or buy that new feature. What was notably mentioned was the lack of need to reinvent the wheel, and the trade-off between needs and resources while deciding whether or not to build your new software/technology or website.
Both the above mentioned articles have highlighted important factors that need to be considered while choosing where and how to allocate your resources. A simple framework we can use to depict the universe of resources is like this:
Costs, Manpower and Time are universal constraints for every project, including your new technology platform or software. Assuming these start off as the three sides of an equilateral triangle, any reduction in one resource would increase the requirement of the other two resources in order for them to maintain the shape of the triangle and complete the project. Conversely, any increase in one resource would decrease the requirement of the other two resources. This is based on the assumption that project constraints and requirements remain constant for the duration of the project.
Bringing this framework to the decision of build or buy, there are 4 factors to consider:
- Cost or budget
- Manpower talent available
- Time to launch
- Project constraints — short, medium, and long term
Let’s focus on each factor one by one.
1. Cost or Budget
Anything can be done if you have enough money, building or buying. The problem is always that a start-up seldom has enough.
2. Manpower talent available
This may sound like the least important constraint; employers often seem to think that developers are hanging out on the nearest tree waiting to be plucked from their mundane lives. The truth is quite different! Good software and website developers are difficult to find, and even more difficult to retain. You may need someone who know HTML5, CSS, PHP and Javascript along with Wordpress; while these seem like regular languages most developers would know, to find the right combination of talents who will also work at your budget, understand your requirements correctly, and under your time and cost constraints, can be a challenge.
3. Time to Launch
Most of us operate under time constraints, some internal and some external. What is on top of every CXO’s mind is the opportunity cost of delays, particularly cost of business lost. Projects started to build software often end up delayed.
According to a McKinsey survey of IT executives, large IT projects run over budget 45% of the time, while delivering 56% less value than planned. The same study found that 17% of projects go so bad that they “threaten the very existence of the company.” — http://www.centurylinkbrightideas.com/build-vs-buy-know-buy-software-build/
The Hidden Costs of Build vs. Buy
Time taken to customise
Any decision made, build or buy, can be followed by decisions to customise the software to fit your needs better. Paul Graham’s MVP is defined by this main principle,
“Get a version 1 out fast, then improve it based on users’ reactions”.
He goes on to then say that a lot of start-ups die because of releasing something too late, and none have ever died for releasing something too early. A quick and workable version of anything that can significantly impact revenues and traffic should be released as soon as possible. If buying canned or stock options make that happen, that’s the way to go.
Features missed out on buying
Faster website, custom login, responsive AIs… we need this! And we need it now!!
Sounds familiar? This, or <insert seemingly urgent requirement here>, is the anthem of every product owner and team head. Read on to know what to tell your team or even your boss when you hear this!
The next piece of golden advice from Graham is, “If you’re going to start with something that doesn’t do much, you better improve it fast.” Something new — minimal but functional — everyday is a good way to plan these improvements. These give you not only new features to talk about, but also for customers to experience. And even if you don’t have any customers today, a steady improvement over time is something no investor or client would scoff at.
Modification cost for build vs. buy
When we talked project constraints in the previous section, we mentioned short, medium and long term. Planning ahead for this depends entirely on what kind of organisation you run. The larger the organisation, the longer you plan for. The younger a company, the more pressing and relevant are its immediate concerns, for in the long term they’re either dead or sold off.
Large expansion or modification of technology sub-projects in the longer term require significant efforts, both in cost and resources. This becomes cumbersome with software that is bought, since your team will need to understand it thoroughly and then spend time the same to new developers who join. You may be better off investing the same resources in building your own technology in this case, unless there are short term time constraints.
In the short and medium term, buying may be a better option. Most software than can be bought also comes with support ecosystems that will more often than not address your short and medium term concerns, as well as release new features that you need constantly provided you have chosen well.
Conclusion
You can buy what you want and not be happy with it, or you can make what you want and not get it done on time. The question is, what will cost you more? A study by Harvard University found that one out of every six large IT projects are “Black Swans”, or projects with budget overruns of anywhere between 200% to 400%. That said, buying readymade technology may not be the best option if technology is your main differentiator, or anything you buy will require significant changes to serve your requirements. Therefore choose wisely, and good luck!
Sources
http://www.centurylinkbrightideas.com/build-vs-buy-know-buy-software-build/
https://www.kainexus.com/build-vs.-buy
