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LegalJune 20, 2020

Should you buy or build software? The answer is both.

This item was originally published by Forbes, where Raj Sethuraman is a member of the Forbes Technology Council.

While the buy-versus-build debate is usually presented as a binary choice, the reality is that a hybrid approach tends to be the best option. Precisely what that hybrid path looks like will be dictated by which capabilities are the most crucial to your company’s value proposition.

When deciding whether to build software from the ground up or snag something right off the shelf, the first step is not comparing costs or calculating time to market. Those come later. Instead, the first conversation should encompass mapping out which technological capabilities are core to your business — and which are not.

Let’s dig into this distinction and highlight two other considerations that should be part of determining the right buy-versus-build breakdown for your business.

Don’t cut corners

Core capabilities, in a nutshell, are the ones that will differentiate you in the marketplace and create a durable advantage. They’re the lifeblood of your company and, thus, should be built inside its four walls. When it comes to core capabilities, cutting corners or settling for a less-than-ideal fit can end up being the costliest option. Yes, you can probably cross the need off your to-do list quicker, but you will probably regret doing so further down the line.

Noncore capabilities, on the other hand, are things like hosting and reporting — things that lie outside not just your company’s expertise but that won’t really help its exposure. These are the areas to focus your purchasing power. Whether it’s a one-time purchase or a subscription-based service, buying is the best option for noncore tech.

Think about investments, not expenses

Deciding which components are core to your business is perhaps the easy part. Next, of course, comes actually building them. While buying products off the shelf seems easier and quicker, the build should, in fact, come first. This may seem daunting because building requires tremendous skill and effort. But it’s important to approach the project and frame the business case as an investment being made, not an expense.

Replacing a core part of your business with a quick, low-cost solution may be tempting, but it’s shortsighted and often costlier in the long run. Be sure to explain this to key stakeholders when presenting the suggestion to build a particular component. Addressing it beforehand and being precise about mapping out how much time and money the investment will entail will help get people on board.

On the buy-side, a similar mindset must be had. Don’t hunt in the bargain bin just because it’s a noncore capability. Invest in the product that will complement what you built to the greatest degree. This means investing the time to understand your organization’s detailed needs and doing the due diligence to find the right solutions to actually meet those needs.

Lengthen your time horizon

Of course, there are short-term investments and long-term investments. A true pay-off considers a longer time horizon. On the build side, that means not just thinking about the actual creation of the product but also seeing the big picture, planning the launch, segmenting customers, and so on.

On the buy-side, it means understanding which vendors are willing and ready to offer stable long-term partnerships. There are countless startups out there; will the one you choose be around in six to 10 months? If it goes under, you’ll lack support and coverage.

Similarly, if your interests lie internationally, make sure you choose a vendor that offers global, ongoing support. Business is only going to get more global with time, so ask explicitly about key geographies before you commit.

Remember the bottom line

It’s true that we are living in a technology era; probably half of all capabilities can be bought. But you don’t want to outsource components that are core to your business. While there will be times it makes sense to 100% buy or 100% build something, more often than not, a hybrid approach may be the sweet spot.

With the aforementioned considerations, you can create an extremely compelling business case — not just for whether to build or buy, but what to build and buy and how to do it.

Raj Sethuraman
Chief Technology Officer, Wolters Kluwer's ELM Solutions

As Chief Technology Officer, Raj oversees all product engineering and software development activities of the 225+ global technology team at Wolters Kluwer's ELM Solutions.

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