Digital transformation has driven organizations into the era of experience, where tailor-made content and communication is no longer just a good-to-have but a must-have. The preferred approach to delivering this experience is to either invest in third party application that serves the purpose and returns favourable outcomes to the business, or develop a custom solution in-house from scratch, using internal teams and controlling costs.
While internal IT teams are perfectly capable and poised to build and develop applications, it often becomes too expensive and labour driven unknowingly as the time, taking resources away from more meaningful and critical tasks.
CIOs struggle with this dilemma of whether to build software in-house or buy it from a vendor — a decision that carries a different answer for each organization basis their industry, processes, and technology landscape.
In this blog, we outline the considerations and consequences of build vs. buy.
Total Cost of Ownership
Whether you build or buy an application, the common denominator to factor in would be the cost. Buying an application would incur OEM license cost, implementation and integration costs, support costs, etc., whereas building an application in-house requires investment in terms of cost of skilled talent for conceptualization, design, development, and maintenance. The TCO for build & buy could be as follows:
- Software Size: The higher the number of user interfaces, customer journeys, and workflows, the higher the cost.
- Complexity: Higher the complexity of the project, higher the cost to develop.
- Talent: Cost of skilled resources, project managers, designers, system architects needed for the project.
- API & other integrations: If integration with other systems is needed, the development and integration cost may factor in.
- Upfront Licencing Cost: One-time or recurring cost to use and maintain a copy of the application.
- Subscription: The monthly, bi-annual, or yearly subscription that is paid to use the software (if any). Some SaaS providers set the pricing on a pay-per-user basis which scales with increased usage.
- Customization: The cost to tailor the software to address the specific business needs.
- Data Migration: The cost of migrating the data from the old application to the new one.
- Training: The cost of training in-house resources, business users on how to use and manage the software.
When organizations plan to build a custom software, they usually ensure that it will provide a competitive advantage to the business. For instance, for an e-commerce business, if they decide to build a custom e-commerce platform in-house with a lot of investment on design and development, they will exhaust most of their time and budget on development of the website and less on marketing. The website might look the best with latest features but would not be worth it if it does not attract the desired traffic, or if is not launched on time.
Rather, if they work on a SaaS based application such as Shopify, it would be faster and cheaper to create, giving them more time and money to market themselves and get good traffic. Hence, organizations must ask themselves if the application gives them a competitive advantage over their competitors, and if building it makes more sense than buying.
Security can be one of the biggest reasons to buy third-party OEM solutions as it offers the best-in-class security that is consistent across enterprises. In the era of cloud computing, many businesses have moved their workloads to the cloud, some even being born in the cloud. Organizations and IT leaders tend to move away from on-premises systems to cloud providers due to security concerns for their application and its data. Additionally, the management and ownership of security and disaster recovery lies with the cloud vendor, enabling the organization to focus on business imperatives.
In the case of in-house development, you can integrate and implement your own security systems that suit your business and data needs. Firewall, threat protection, data loss prevention, identity and access management can all be customized basis organization’s needs. This will help in controlling costs by choosing a security OEM that suits the budget.
Any application either developed or bought should have the ability to scale with the organization. If a third-party application checks all the boxes but is not scalable, it will give short-term benefits but will not last long as the organization grows. Similarly, while building an application, it is important to ensure that it is built to be scalable whenever needed.
It does not matter whether you choose to buy a third-party solution or build a platform from scratch; your customer engagement and experience really depends on how you implement it.
We, at Clover Infotech, have consulted leading organizations around the world on building or buying applications based on their needs and business strategy. We offer in-house expertise on conceptualization, design, and development of customer-specific applications, as well as consulting them in their application selection and implementation journey by partnering with their preferred OEMs.