Technology Dilemma – Build vs Buy

One of the most difficult and tricky situations you come along in tech leadership role is to make a decision whether the particular functional piece should be built in house or you should just buy it and integrate with your tech landscape. Every decision that we take in our professional or personal life is mostly the outcome of certain assumptions and few matrices that we look at and make a call on top of it. Data of previous experience plays a crucial role here too, that’s what gets converted into learning.

Base on my personal experience and learning, would like to highlight a few points that should be strongly reviewed before taking the decision.

1 . Experimental Vs Core Initiative – The first thing that we take in consideration is, whether this functional piece is being done for experimental purposes or organization has a strong grit to run it as a core initiative. If you are in experimental phase of the feature, the first choice should be to consider the buy option that is to in Pay-As-You-Go model. Once the experiment is done and you have got good adoption and engagement, the build option can be considered if the below points make sense to it.

2 . Functional, Technical , Operational and Opportunity Cost – These three are important cost factors if you are going to build this in-house. Operational cost takes a bigger toll of all the above costs if you look it in a real and longer sense. The cost of scaling and maintaining the S/W products are much higher than functional and technical costs. A couple of engineers and PMs can work together and make it functional in few months(Fixed cost), however maintenance cost, server cost, scaling cost, devOps cost will remain and will add to Opex forever until you decide to kill the feature. Last but not the least, the opportunity cost of building something else which makes more sense to the business should not be overlooked.

3 . Business Differentiator – Important questions to ask,

  • Can you really create a business differentiator while building it in-house?
  • Do you really think that this feature is core to the business and has the potential to become a commercially viable product itself going forward?
  • Can you pivot something new from this feature base and spawn into a new startup altogether?

4 . Incumbency, Exit & Extension- Incumbency is the problem that we face if we buy some service and integrate with our business. If this feature is core for your business, your existence may depend on the existence of this service. In the world of startups, acquisitions, business shutdowns, pivoting keeps on happening. Technology integration should consider this factor and should use design patterns and architecture where shifting this to in-house or any other third party should not be a long haul project. Also, extension, plugin framework support should not be ignored as extension might be required for your business any time and you should not be dependent on the provider.

5. Technology Innovations and Engagement Factor – Engineers by nature get excited with the use of new technology and innovations and their motivation peaks to a new level if they are working on something exciting on the technology front. This factor can be used to make a decision to build something in house if it is really exciting for the technology team for innovation and engagement purposes. However, make sure you are not building something which is already a solved problem in the market.

Example –

Buy – Video/Text ChatVideo/Text chat is something that is not our core business, this feature is being used to listen to our customer’s voice and consult them for their problem. We decided to buy this solution as it is a solved problem in the market, cost-wise it makes sense too. Also, while choosing the provider we made sure that they do have a technology ecosystem in place for extension and integration (API/Plugin etc). This will enable us to have add on features on top of the core data that we receive from our customers using this service.

In House – Omni-channel Inventory Management System – Omni-channel is our core value and business differentiator. There are lots of Inventory management platforms available in the market however they mostly work with a traditional business model. Healthkart has many channels for selling health and sport nutrition supplements. Every channel has its own custom model for inventory management. The single consolidated system needs to have in place which can be developed and extended based on the need of each channel in the organization. Also, data consistency and integrity is far more important piece which needs to be catered while doing the inventory management across the multi-channel model. These reasons are strong enough to build this system in-house.

The above content is a result of my experience and learning with given scenarios. The situation might be different from every organization and person, YMMV and hence comments and feedback are heartily welcome.

Photo by Alex wong on Unsplash

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