Both options have limitations and advantages, but how do you understand whether to build or buy before considerable investments are made?
The “build vs buy software” dilemma is a pressing challenge in businesses relying heavily on tech. Given the advancements in cloud services, you can find an off-the-shelf solution for almost any business problem. But do you always need to buy? When does it make sense to build your own software?
“Buy or build” is a slang term used to describe the struggle businesses face when they need a new tech solution. They choose between buying a tool from a vendor and building it using internal resources:
Essentially, “build or buy software” is more than a dilemma; it’s a choice between various options.
In the “buy” group:
In the “build” group:
There are additional combinations to consider, like:
The main advantages of using pre-built software are:
In the meantime, here are the core disadvantages of purchasing software from vendors:
And yet, some vendors are more flexible than others!
Our Alloy Software award-winning support team will help you integrate and implement our solution, whatever your requirements. We’re not afraid to promise this because it’s the truth. Moreover, our flexible ITSM workflow can accommodate the changing processes of your growing business. Connect to our sales team if you want to learn more.
Getting back to the disadvantages of buying software from vendors:
Check out our other articles on the alternative ways of managing IT services in your organization and the differences between cloud and on-premises deployments.
As for building a custom software solution on your own, here are some considerations regarding its advantages.
The key advantage is that you can customize this solution precisely for your requirements. Here are just a few things that become much easier when you own the product development and support:
Having built the needed solution in-house, you have complete control over the areas that matter most to you. Also, many believe that you shouldn’t outsource a solution that creates your competitive advantage.
Here are some drawbacks of building software from scratch:
At first glance, it’s tempting to assume that building software gives more control than buying it. However, there’s also the risk of employees changing their plans and departing for another company. And many other risks. Ultimately, whether you’re building an in-house solution or outsourcing, both involve developing relationships with people, whether they’re vendors or full-time employees. It’s not necessarily easier one way or the other.
Given all that we mentioned above, choosing between building or buying boils down to two steps:
Pretty simple, huh?
Say it to everyone whose projects failed because of unreliable contractors, poorly defined contract scope, and inadequate coordination.
There’s much more to choosing between buying or building software than only evaluating your business needs. There are plenty of pitfalls on this road.
How can one evaluate a vendor’s reliability when their website is full of promises? How can one account for all expenses in advance, considering that people tend to underestimate the scope of work? How can one predict whether new hires will fit into the team?
We will now describe a possible process for assessing the two options and address potential obstacles at each step:
Step 1: Feature analysis
Step 2: Total cost of ownership analysis
Step 3: Assessing less obvious aspects
Step 4: Gather and make a call
Thoroughly describe your specific software needs.
Interview the “business clients,” i.e., the employees who requested the new software solution in the first place.
Evaluating the demand for a new IT solution within a business involves asking the following questions:
The business clients bear the most valuable insights as to what the desired solution must be like.
Potential pitfalls at this stage include difficulties determining the real business client and the change resistance that the employees might show against the innovation.
Seek guidance for the evaluation process from popular IT management frameworks, such as ITIL, Agile, and Lean Startup.
After evaluating what the desired solution should be like, research and evaluate the features of the off-the-shelf software solutions that claim to meet your needs. Here are some sources of information you could take advantage of at this stage:
As you know, in 2024, there’s no such thing as a lack of information about somebody or something. But if you fear information overload, we suggest prioritizing your needs before speaking to vendors. If you understand which features are critical, it’ll be easier for you and the vendor to see if you’re matching.
Potential pitfalls here include situations when vendors promise features that don’t exist or will not be shipped soon. When product and sales teams are async, sales teams might give customers wrong information about available features.
Once you have information on what’s needed and what the market offers, conduct a gap analysis. Compare the features provided by existing tools with your organization’s specific requirements.
Try to answer the following question: What part of my expectations does vendor X cover? It’s likely not 100%. But is it 80% or 60%?
In Step 1, we’re only speaking about assessing the vendor’s potential in terms of its product features.
Once you’ve understood the feature side of the question, let’s proceed to the costs side.
Perform a thorough cost-benefit analysis to compare the total cost of ownership (TCO) of building custom software versus purchasing and implementing a tool from a vendor. Consider initial development costs, licensing fees, maintenance, support, and potential scalability. The following table gives an overview of the costs that the company will (+) or will not (-) bear with each of the options:
This step might be the most challenging part. Consider the hidden costs and limitations of each of the options.
Here are some factors to consider when opting for a custom solution:
For buying software, these less obvious factors include:
As you see, it’s not just a cost-versus-benefits analysis. It is, but on a more complex level.
Finally, present the results of your analysis to a gathering of stakeholders. By accurately considering all the collected evidence, you can make the right decision!
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The key advantages of purchasing an off-the-shelf solution are low upfront costs, reliable maintenance and support, and the short time needed to start using it.
Building software might be beneficial in the following cases:
Remember that there’s no simple rule for choosing between the two options. Factors such as the company size, software’s purpose, budget, available human resources, and urgency all play a huge role and must be considered when making a choice.
When making the “buy vs build” decision, factors to consider include:
