Many sales organizations must answer the same question when looking for a new IT solution – Do we build it ourselves or do we buy an off-the-shelf solution?
There is no right or wrong answer! Everything depends on an organization’s specific requirements and preferences. Over the last years we have seen many companies struggling with the build or buy puzzle and have identified 5 main drivers in coming to a decision.
Having control over an application and its functionalities is probably the main driver of why companies decide to develop an IT solution in-house. The project team (often composed of business and IT resources) is 100% in the driving seat when developing the application. However, this also means having full responsibility on all decisions, ranging from important strategic functionalities, up to the color of the home button. Choosing for an off-the-shelf solution transfers part of this responsibility to the 3rd party provider, but you will have to accept that control of the solution roadmap remains also largely with this provider. This can be a real showstopper for some organizations, but nowadays abundance of available tools can fulfill most needs for the majority of organizations.
Next to control, cost is a big motivator for buying a solution instead of building it. Building a custom solution equals full responsibility for development & maintenance cost. We have encountered cases where expenditures go up to nine figures just for a minimum viable product. However, depending on the importance of other criteria this can be worth the investment for specific organizations.
When opting for a third-party solution, the solution provider bears all costs of building, maintaining, and upgrading the solution. Since they can benefit from scale efficiencies through their customer base, they are able to charge you relatively low prices.
Some companies try to find middle ground by buying a third-party solution and customizing it to their needs. Although this seems like an interesting solution, our experience shows that costs can ramp up exponentially, which can even result in similar expenses as building an own application.
3. Maintenance & support
When building solution in-house, the organization remains independent of third-party maintenance and support. This can have the advantage of having total control over timing and prioritization of new features & updates of the tool and high speed of providing support for end users. For this to effectively work, it however requires (considerable) resources, in many cases resulting into one or more dedicated FTEs. On top, it takes time & effort for the internal IT support team to build similar know-how as dedicated teams of solution providers, who have years of experience and can focus on a single application. On the flip side, it is often seen as an opportunity for capability building within the organization. Lastly, companies often forget that maintenance goes far beyond fixing bugs and adding new features. Keep in mind that overseeing a successful launch of the tool, training employees, managing data compliance, guaranteeing security, are all crucial elements for a successful roll-out of your solution.
In our experience, adding a large IT development project on top of day-to-day business is often not possible with the people at hand. The workload increases drastically and/or the know-how to develop an IT solution may simply not be present within the organization. Additionally, diverting focus of your profitable core business to side projects can lead to significant opportunity costs on top of development costs. Acquiring a third-party solution seems to be the beneficial choice when it comes to keeping focus, except for (mostly) large companies that have dedicated teams in place to take care of the development, roll-out and maintenance.
5. Speed to value
The final driver to make the optimal build vs. buy decision is speed to value. How long does it take until your company reaps the benefits of your solution? The road to value creation is way shorter when choosing for an off-the-shelf solution, as it is readily available for your organization and benefits will be created short after the start. Building a tool from scratch on the other hand takes time. The creation of an operational minimum viable product or prototype will easily take from 6 months up to 3 years. The value in an in-house tool may be higher for some companies, but you will need the patience of Job!
As stated in the beginning, the right choice depends on an organization’s specific requirements. As for our Revenue Optimization Platform Rootit, we have combined the best of both worlds by working with reusable and configurable building blocks across the different layers of our application:
· Integrate: to make sure we can connect within the existing architecture
· Enrich: our analytical engine where the magic happens
· Interact: define what the end user sees and how Rootit will be used
Interested to learn more on how Rootit can generate immediate impact on your organization? Contact us via the following link.
About the authors
Roel Vermeulen is co-founder & Partner at Rootit. He implemented true profitability models for B2B and B2C companies all over the world. He supported multiple commercial organizations to realize higher profitable growth while increasing customer satisfaction levels.
Abel Vanacker is a business analyst at Rootit.