Build Vs. Buy: A How-To Guide For Answering The Age-Old Software Question

June 2016 /

One of the most important decisions growing companies have to make is whether they will build a custom software solution or buy one off-the-shelf.

Executives are tasked with choosing a path that reconciles their company’s immediate needs with their strategy for long-term scalability. The unique structure and requirements of each organization means there is little consensus on the correct answer to this dilemma.

The strategy for approaching this quandary centers around understanding and accepting that there is no single correct answer, but there is a right answer for your company’s situation. While the nuance of this can initially create more confusion than clarity, taking the time to critically think through your options will lead to better and more effective long-term technology decisions!

The first step in figuring out a solution to the build versus buy dilemma is to understand, on a high level, the short and long term implications of each choice. There are certain situations when either building or buying are the only logical options, and starting from there can often be the most efficient way to evaluate your options. The following chart breaks down the fundamental pros and cons of each decision:


So what is the right decision for your company? If you don’t clearly fit into one of those four boxes — the most common situation for a growing venture — the following plan of action will you make the smartest decision based on your current requirements.

#1: Identify Your Business Requirements, Not The Features You Want

One of the first mistakes companies make when thinking about software is focusing too much on features, and too little on requirements. This can make it difficult to properly evaluate how both off-the-shelf and custom solutions will fit into your business model.

The distinction between features and requirements is a seemingly small but considerably important one, particularly when it comes to making effective technology decisions. Features are general terms used to describe the particular solutions that a piece of software provides. Requirements are the situation-specific tools that your company and team need in order to incorporate those solutions into your existing business practices.

A simple example of the difference between features and requirements is the way different organizations utilize CRM (customer relationship management) software. A large percentage of companies out there utilize a team of salespeople to push their product and drive revenue. If one of those companies decides it wants to improve its sales process by obtaining a CRM solution, a very common feature request would be “outreach tracking”: the ability to organize and evaluate the emails, phone calls, and meetings that salespeople are having with prospective clients. Nearly every off-the-shelf CRM solution has an outreach tracking feature.

That said, there are many different sales structures that companies utilize depending on their vertical, size, and growth strategy. Some companies assign geographic regions to certain sales representatives, and want to be able to compare outreach success across those various regions and salespeople. Other companies require direct integration into their email platform of choice. Some sales organizations want full transparency across the board on outreach, while others require customizability to match their hierarchical structure.

Identifying not only the features you want, but the requirements that will make them effective based on how your team approaches their work, is a key first step in moving towards the best possible solution. Making this contrast is valuable because it allows you to better understand and lay out the processes that your software solution will have to integrate with.

The most successful method for putting together a list of business requirements is working backwards. Work within your organization to understand the high-level features that this software needs to have in order to be considered an improvement upon the current process. From that list of features, you can break each one down into the specific business requirements that your ideal software solution would address.

#2: Learn From Those Around You

As both individuals and the companies that are comprised of them, we have a fundamental tendency to perceive our problems as unique. While this is sometimes true, it is often the case that the problems we are having have been faced many times by both our predecessors and our competitors. It is important to look at both of these groups when considering investing in software. Certain challenges that businesses face have been solved many times, and understanding the kinds of solutions other organizations are utilizing can give you very valuable insight into the ways that you can best address those same issues.

Additionally, it is helpful as an evaluative technique to get a sense for whether there is any precedent for the particular path you are considering. Reaching out to contemporaries in your industry in order to learn where they found success, and difficulty, in solving these problems is a good barometer test of the direction you are considering heading in.

#3: Evaluate Off-The-Shelf Software Based On Your True Business Requirements

If, as described in the above chart, your budget or timeline preclude you from considering a custom solution, it is important that you choose the right software to purchase. One of the fundamental truths of off-the-shelf software is that no purchased solution can solve every problem, but it may be able to solve a large percentage of them. This is why identifying your business requirements is so important before you begin to engage with vendors.

It is likely that most established companies selling software will answer a high percentage of your feature requirements. Capitalizing on the insight into your company’s specific business requirements you gained by working backwards from your feature requirements, though, you can work with competing vendors to determine which piece of software will most seamlessly integrate into your current and future work flows.

It is important to ask any vendor you are considering doing business with: “How does each feature you provide satisfy our company’s business requirements?” Doing so will give you the clearest picture of your options as you move towards making a decision.

#4: Consider True Cost At Scale

Finally, it is incredibly important to consider the implications of both building and buying software in the long term. Thinking about not only the immediate costs, but also the long-term costs of building versus buying is an often overlooked component of the decision making process, and one that can be instrumental in determining whether a decision has a wholly positive or negative effect on a company’s growth.

To do this effectively, it is key to understand both the optimistic and realistic goals for scaling your company. For smaller companies, off the shelf solutions can be an appealing option because of their relatively low upfront cost in comparison to working with a development agency to create a custom solution. However, the costs of many software solutions increase exponentially as the amount of users increases. These costs not only increase; they also continue into perpetuity and can become an enormous cost center.

Taking time to think considerably about how the pricing structure of an off the shelf solution compares to a custom solution when taking into account organizational growth will allow the most effective, responsible, and successful decision making.

There are positives and negative solutions to any technological solution a company chooses. The key to making the right decision between building and buying is to recognize that success comes from optimization, not perfect. Best of luck and please reach out to us with any questions!

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