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The question is simple: To build or to buy? But the answer is not.
If you are developing a new application or planning to build one, you must be actively looking for robust development strategies. Deploying the right strategies and developing the best stack is surely a difficult task. To foster business growth, many organizations are investing in enterprise software. Developing enterprise software helps increase employee productivity by simplifying repetitive organizational tasks.
Deciding between ‘build’ and ‘buy’ approach completely depends on the broad definition of them both:
- Building software that caters to the exact functions and requirements of a business.
- Buying an off-the-shelf SaaS software that tackles the most common business problems.
With the evolvement in techn0logy, the build vs buy decision isn’t a simple yes or no anymore. Finding the right fit for higher ROI and faster time-to-market is the main focus for enterprises these days.
Keep reading for the right build vs. buy analysis and make the decision for yourself!
What is Enterprise software?
Enterprise software is used by businesses internally to solve their everyday issues. Enterprise software is built solely for the internal operation of the organization, not for customers or clients.
Here’s a quick enterprise mobile app ROI review for you to understand the growing business needs for enterprise software:
Image Source: The Ultimate List of Enterprise Mobility Statistics - Business 2 Community
What is Commercial Off-the-Shelf Software (COTS)?
Commercially off-the-self software is the one that is readily available and is developed in line with the common business problems. This type of software possesses common mobile app features that are customizable.
Parameters deciding to Build vs. Buy
The decision surrounding build vs buy should not be made blind-sighted with a flip of a coin. The probability of making the right decision here is still around 50 percent, but if your solution is unique the odds can be further increased by making the right choice between build vs. buy.
Here are a few parameters that help you decide between the build vs buy framework:
1. The Problem
The first thing that you should keep in mind is to consider the problem that you are attempting to solve. Is this problem unique or one that is commonly faced by the majority of enterprises?
If the challenge is common such as mobile app store ranking, there are many solutions to choose from, but if the problem is specific to your enterprise, you might have to find a workable solution.
2. The Budget
Budget is a major constraint when it comes to making the final decision between build vs buy. Many organizations do not have a dedicated budget for building enterprise software, and hence is why it can be much easier to justify a monthly recurring payment for a product built for a third party.
Hence, while deciding to build a solution for your problem the budget must include the long-term expense associated with hosting and maintaining the solution in addition to other associated costs.
3. The Timeline
The next consideration while deciding between build vs buy framework is the time horizon. Is your problem the one that needs to be solved on priority or just an annoying bug that needs to be improved? Hence you must consider the adversity of the problem and make your decision.
If the solution is in existence then it is an easy decision. But if it is not, then you need to build a solution and should start working on it as soon as possible.
There are various risks associated with whether you want to build your software or you want to buy it. Below we have explained a checklist that would help you make an informed decision between build vs buy.
7 Point Build vs Buy Checklist
The following are the important parameters that help in making the informed decision between build vs buy:
1. Unique problem vs Common problem
As mentioned earlier, the unique problem requires the organization to build software from scratch due to the absence of third-party software that can help solve the issue.
For instance, for theHere are a few questions that can help you ease your software building journey:
Is the problem exclusive to the organization?
Is the problem prominent and needs a solution on an urgent basis?
How critical the problem is to the business?
When the organization is trying to tackle a commonly occurring problem, it must choose commercially available software. Hence, a common problem requires an already built COTS software.
Question to ask before buying software:
What is the best software option that can help you solve the problem?
Are the COTS software features satisfy your business needs?
Does the COTS software pricing fit your enterprise’s budget?
2. Total Cost of Ownership (TCO)
The total direct and indirect costs associated with the software life cycle are referred to as the total cost of ownership.
Image Source: Understanding TCO: Origins, definition, calculation and advantages (manutan.com)
TCO for Building Software= Development cost + Operation Cost
TCO for Buying Software= Monthly/Annual Cost + Operation Cost
The cost drivers for build/buy include:
- Software size: The higher the number of user interfaces, the higher the cost.
- Team Costs: The cost of an in-house or outsourced team.
- Software complexity: Increase in cost due to increase in software complexities.
- Licensing: To own or to access the software.
- MVP Development: The cost of building a minimum viable product.
- Other factors: UI/UX designs, API capability, Licensing, Maintenance, Cybersecurity, and so on.
3. Opportunity Cost
Opportunity Cost is generally the loss of economic benefits when one alternative is used over another.
The costs associated with building software can be high. A mobile app development team is dedicated solely to building software, which can result in losses in other parts of the organization’s operation.
The cost for buying an already built COTS software is less in comparison to building new software. In this case, the IT team can also focus on other business needs and the money spent on development can be dedicated towards faster code shipping, managing code’s integration, and deployment.
4. Parity vs Advantage for Competitors
A business achieves a competitor’s advantage when they invest in software that allows loping competition. While building software that offers core activities performance is essential.
For Buy: A business achieves competitive parity when they invest in software that offers the same value as that for competitors. To achieve competitive parity investing in COTS solution is essential.
Scalability is defined as the capability of a business to handle growing sales, provided they are given all the resources they need.
Scalability is a feature that no business can ignore while building or buying software. If the COTS solution does not offer scalability, the building can be an option that is better for your business.
6. Agile Methodology vs Traditional Methodology
Agile methodology is the approach to developing software that introduces flexibility and speed. This methodology allows incremental development of the software. More and more people are shifting towards this development method due to the reasons as mentioned below:
Image source: (343) Pinterest
In traditional methodology, we develop the software using a linear methodology. If an organization goes for a traditional methodology while building an app, the costs incurred would be much more due to the complexities involved. In this case, buying software is a better option.
Image Source: The Cascading Costs of Waterfall. The Waterfall model has traditionally… | by Jones + Waddell | Medium
7. Data Security
An industry such as healthcare or banking that store critical data and can’t trust SaaS providers over collecting and storing such sensitive information should go for building their software. Compliance with standards such as GDPR (General Data Protection Regulation) or HIPAA (Health Insurance Portability and Accountability Act) is mandatory for such software.
Buying software is risky. First due to the third-party software which is based on a multi-tenant architecture which causes a noisy-neighbor effect and secondly due to the risk of losing sensitive data to cyber-attacks. In case a business still decides to evaluate these products, here are a few pointers to keep in mind:
- Request a demo and ask queries regarding data privacy regulations.
- Vertical SaaS is aligned with solving industry-specific problems.
- Ensure that the shared SLA includes all the details regarding dealing with customer data.
Making the final decision
Making a final decision between build vs buy is not easy as it may look. When you are not able to decide between choosing one, you can find a middle path of balance between build and buy.
Going for building software:
- If the available COTS solutions can’t solve the existing business problems
- The organization plans to expand the software now or in future
- If the organization want to gain a competitive advantage in future
- Have a brilliant in-house software development team
For buying a software
- If the businesses want to solve commonly existing enterprise issues
- COTS feature match the requirements
- If the business wants to achieve competitive parity
- If the vendors offer API integrations and safe data migrations
Make an informed decision and build scalable and robust mobile apps from Debut Infotech.