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Buying Software Technology vs. Building Internal Platforms

DialogTech

It’s in the DNA of many companies to want to build things themselves. The “our team can build this” mentality shows ambition, but it can also bring down the overall success of an organization if the system they are trying to build is outside of the company’s core competency. In this post I will discuss two scenarios that describe the pros and cons of building vs. buying technology software – in Scenario One, a company decides to internally build a technology software needed by their organization. In Scenario Two, a company decides to buy that same technology software from a third-party vendor.

Scenario One: Building an Internal Technology Platform

The first step in both scenarios is identifying the technology need that is not being met within your organization. Perhaps this is a help desk system, an e-commerce platform, or a way to improve the tracking of customers’ online and offline interactions with your business. Once the need for a software solution is identified, managers across departments will need to come together to scope out the project. Determining project scope could be a series of meetings amongst managers and the development teams. Once the scope has been identified, a roadmap will need to be designed, and then the project needs to be sent off to a team of designated employees who can code, develop, and QA the entire platform. This entire process, depending on the project, could take anywhere from a few weeks to several months. Keep in mind here that all of the work the development team normally would be completing may have been put on hold for the duration of the technology building process.

Once the software platform is built, everyone involved in the project will return to their jobs within the company. Their focus shifts away from the internally built software solution and back to their primary job functions.

But with an internally built system, what happens when market demands change? When new features are needed to keep up with the ever-changing scope of your business and internal processes? If your company cannot dedicate an entire team’s full-time work, salary, and other resources to this internal software platform, it is likely that the platform built will quickly become outdated or will lack functionality needed to keep up with demand.

Choosing to build will take time, resources, money and more, without guaranteeing that the platform you build will be able to meet all of your needs and keep up with market demands and industry best practices.

Scenario Two: Buying Software Technology to Meet Internal Needs

In Scenario Two, your internal team has identified a technology need that is not currently being met (same as Scenario One). Next, a qualified individual on the team will do some research on vendors that can provide a software solution to meet your needs. Once the right vendor is identified, a contract or proposal will be worked out and the project begins. Implementation, depending on the project and scope, can take anywhere from a few hours to a couple of weeks.

All the people who, in scenario one, would have been working on building, coding, developing, and QA’ing the project, in scenario two will get to continue their focus on their core job responsibilities and the company’s core competency. One, maybe two primary people work as point of contacts with the third-party software provider who is providing your solution.

The key advantage in buying over building is that the third-party vendor you work with focuses all of their company efforts on maintaining, innovating and optimizing their software to keep up with market and customer demands. In scenario one you may be left with a platform that only does 75% of the functions you need it to do, whereas in scenario two you can work with a vendor to find a solution that fits your needs like a glove.

Benefits to Buying:

  • Higher quality of service because focus is on you, the customer
  • Innovation comes from the third-party provider, they keep up with market demands and customer needs
  • Access to the leading industry practices and standards if you choose the right vendor
  • Freed up internal resources to focus on your company needs
  • Access to a platform that is updated consistently, functionality, and features are constantly being improved upon
  • Dedicated customer support, assistance

Benefits to Building:

  • May cost less if your system doesn’t need updates, optimizations for internal demand, changes in industry
  • More upfront cost on initial resources, but maintenance costs will be less
  • Might make sense to build for different types of internal systems, perhaps a CRM or reservation system, if the core competency of your company is something you are looking to build upon, it might make sense to build it yourself

Third-party vendors tend to have more resources as well as a more up-to-date platform that can meet all of your needs. Building vs. Buying is a debate that happens in companies across a variety of industries. There are many details to take into consideration when deciding whether to buy or build – but exploring third-party vendors is a good first step regardless of the final decision you make.