Justin Francis Self-Portrait

Saturday, July 21, 2007

Build vs Buy For Core Business Tools

Before entering the fray, I need to mention that the argument I put forth here is tailored to a very specific question that happens to have been evaluated a number of times at the company I work for. It relates to the question of whether to buy or build a solution to automate business processes of the company. Moreover, it assumes a competent development team that is currently available. Finally, I am discussing a build vs buy decision in a small company (a hundred or so employees). While this post was motivated by a specific build vs buy decision, I only lay out arguments that are generally applicable here.

Probably the biggest reason management likes the idea of buying software is that it is a quick fix that is available today; they do not have to wait for the solution to be built in-house. This is, however, not entirely correct. The last time we tried to adopt a pre-built solution, it was six months after the purchase date that the first user began to use the software. This is because even though the software is available right away, it takes time for people (including IT) to learn the new system, adapt processes to accommodate the new system (more on this later) and most importantly to trust the system so they abandon their old process.

Time to adoption may be long, and if it is also the case (as it often is) that only a small subsection of the built software is really needed by the business (like a ticketing system), it may be possible and easier on the company to have an agile team release the software slowly to allow the business to adapt instead of switching all at once to a pre-made solution. It may even turn out that the time to build with concurrent adoption is equal to the time to adopt the 3rd-party system.

This leads directly to the question of how much development work will be required in both cases. There is no way anyone can tell me that a pre-built solution will not have to be customized once it is purchased. In fact, a significant amount of customization has been done on every solution we have purchased. Because this software is foreign, this may mean buying customization from the vendor (with all the lack of control that entails) or if you are lucky, customization by your own development team. In the latter case, this customization is not as cheap as customization or general development of the same complexity on an in-house solution because the developers did not infuse the foreign software with their philosophy and quality requirements. And again, the customization cost of the new software may not be significantly different to the development cost of the subsection of functionality that is really required by the business in an in-house solution.

A major reason I am a proponent of agile methodologies is that the business I work for changes requirements almost weekly, depending on the department. This can cause major problems with a pre-built solution. It could even mean constant customization of someone else's product. The flexibility of pre-built solutions is definitely questionable. This means that more often than not, the business ends up adapting to the software, and not the other way around. This leads to the long adoption time I mentioned above. This is even more of an issue if the software relates to the core of the business because the usually over-generalised software is telling the company how they should do business (how to handle support calls, how to have new customers apply, how to pay sales agents, how to sell, etc).

There is also the cost of maintenance to consider. At between 10%-20% of the cost of the software per year, this is not insignificant. The same argument about customization given above applies to maintenance as well. Developers will be more efficient maintaining their own system than someone else's, if that is even a possibility. Sometimes, you are dependent on the vendor. Even assuming they are reliable, they may not be very responsive.

Finally, and perhaps most importantly, you may lose your development team by purchasing software. The best developers do not want to do maintenance; they want to do development. If they are maintaining a purchased solution, you better hope it is high quality and built well, in a modern language (did I just cut out 85% of off-the-shelf software?), because if not, you will have a hard time attracting good developers.

For us, it seemed a no-brainer. We would end up customizing the thing anyway, it would still take 6 months before it would be in use and maintenance would still be a problem. Considering that it may take about two months to rebuild the functionality required into our already-built enterprise management system, I cannot understand why anyone would consider buying an off-the-shelf solution. Yet if we had not reminded the executives of these considerations, I may have been working on a filthy perl application, and probably looking for a new job.

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vinman said...

Your post has discussed an important topic. DEveloping an inbuilt team will be advantageous for the business development in the long run. The company can develop any software in a quick time with low cost if it has a well nurtured home team. But in the initial period the cost will look on the higher side when compared to buying a readymade software.
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