The Build versus Buy Decision
Part 1 of a 3 part series

The build versus buy decision is often a hard one since software vendors routinely over-hype their products. Buying point products that are “best of breed” and simple enough to be piloted in your environment with your data is the only way to get past the hype. Buying suite products that attempt to automate everything imaginable, always entails a high upfront cost and a high risk of project failure. Some vendors have gotten this message and are starting to modularize their products.

In today’s competitive business environment, all companies need to focus their precious IT resources on activities that support their core competencies. They can’t afford to be distracted from their mission by reinventing the wheel. This inevitably leads to the ongoing issue: Should technology be built or bought? In determining the right answer, there are four questions to consider:

• How much?
• How long?
• How risky?
• How strategic?

How much?
Obtain a quote from a software vendor; estimate your internal cost to rollout the software; and estimate the integration cost as well as any configuration or customization costs. This estimate should be reasonably accurate. Compare it to the cost estimates of internally developed software. Keep in mind your specific requirements — many of which you may not fully understand until you’ve gone through demos of the vendors’ products.

How accurate have your IT department’s estimates been in the past? If you have an employee project time-tracking system that is focused on tracking specific project costs, and you routinely compare actual time spent against those estimates, then you will have an educated answer to that question. Compare the two numbers; that is one data point.

In addition to initial rollout costs, find out what your costs would be for ongoing support and maintenance of the new technology; for both a purchased and an internally-developed system.

How long?
Is the system something you can create and roll out faster than a vendor could implement it? Rapid deployment is critical if you want to realize benefits immediately. Sometimes, homegrown solutions become obsolete before they’re even completed, while purchased solutions can sometimes be up and running in less than a month.

How risky?
How solid is the vendor? What does Dun and Bradstreet say about them? How many customers do they have and how happy are they? Talk to some customers who are using the product in the same way as you expect to. Companies that claim to have thousands of customers should have one in your city you can visit. Call their bluff and visit one of their customers.

Conduct the same level of diligence on the build-it-yourself option. Building an in-house solution requires staff for maintenance and upgrades; and these costs can be difficult to estimate. Keeping pace with technology advancements is time-consuming and challenging, and takes staff away from your core business. Often you’ll end up with one person who “owns” the system and is the only one who really understands it. What happens if this person quits? In a few years, the system may need enhancements that will be absolutely critical at that time. Who will do the work? If you’re contemplating writing your own timesheet collection system, ask yourself if you really want to become an expert in this kind of technology. These systems can be much more complicated than you might think.

How strategic?
What will your IT shop learn from building this application in-house? Is this knowledge consistent with your company’s core business strategy? Will the education your team gains from this exercise lead to improved capability for your company’s business? Or will it detract from more appropriate knowledge? These are hard questions to answer, but necessary if your goal is long-term success.

The general rule for IT organizations when making a build or buy decision must be centered around quick and inexpensive “hits,” as well as projects that just cannot be purchased at any price.

[Editor’s note: In part 2, the author will address how to obtain accurate project costs; how to improve estimates with them; and how to dramatically increase a company’s effectiveness by knowing the costs.]

About the Author
Curt Finch is the CEO of Journyx (http://pr.journyx.com), a provider of Web-based software located in Austin, Texas, that automates billing, payroll & project management by tracking time, expenses and mileage. Curt can be reached at curt@journyx.com.