Build or Buy? The Great Debate

The topic of building vs. buying is ever-present in the SaaS world. “Do I build everything in-house, or do I buy and integrate third-party components?”

Sooner or later, any software business will be faced with that question. It’s important to understand this decision can greatly impact your company—from a time standpoint and a financial standpoint. We have seen many instances of companies making the right decision and winning in a big way. 

Or they make the wrong decision, which may cause them to lose years.

Building vs. buying is a multidimensional question, but the answer isn’t so cut and dry as it has several perspectives to consider. Gartner has been talking about “Composable Architecture” for several years now and is expanding their research to focus on “Composable Modularity.” This serves as “the foundational architecture for continuous access to adaptive change.”

The bottom line is that companies need to adapt fast.

TOOL: Try our Build vs Buy ROI Calculator

Here we’ll look at this debate from four perspectives that can help you determine the right path forward for your software business.

You can watch this video or continue reading below:

#1 Complexity of your requirements

Perhaps the biggest reason why companies buy software to integrate is that they can get to market faster while spending less on R&D. The value prop here is being able to focus on your core business and minimize distractions.

Buying makes sense when two conditions are met:

1. your requirements are complex AND 
2. you want to go to market faster

This typically allows companies to focus on core capabilities while integrating third-party software such as self-service analytics. This enables you to retain customers or gain competitive advantages faster. This should also help ensure that you’re not overspending on R&D headcount.

If what you need and what your customers expect is simple enough and the time to build is appropriate, then it makes sense to build. The project should fit into your R&D budget in this case. Then maintaining does not distract you from your core business either.

TIP: The clearer you are upfront, the easier it is to understand the complexity of your situation.

#2 Industry maturity

Let’s take embedded analytics software. This category of software has been around for decades. I should know, I founded one of the earliest entrants into this market. When specific embedded software reaches a higher level of maturity, you will find it easy to see the benefits of buying and integrating. You will be able to harness the power and flexibility without losing control and limiting yourself. 

In contrast, some third-party software may not offer the maturity you can integrate and build upon. When this is the case, you might as well have taken the build path as the extra work to integrate cancels out the benefits of buying.

Since the embedded analytics industry is mature, it means that there are solutions out there that have been battle-tested/time-tested. They have been refined over time based on user feedback and have had the benefit of adapting to trends over time.

Third-party solutions serving newer industries or niches might be available, but they may not have the features and capabilities to grow with your business. So if you buy the solution, you could end up in a scenario where you are stuck in an endless cycle of building customizations and maintenance. You would have been better off building in this case.

TIP: Take a closer look at the maturity of your industry. Are the solutions available now or at a future time? This is a critical consideration as you make your build vs buy decision.

#3 User experience.

When it comes to analytics specifically, customers have higher expectations. People want to interact with their data and create custom experiences that work for them. They ask for intuitive yet rich solutions. Can you keep up with all those feature requests?

On a macro level, the need for speed is as important now as ever. As companies look at their competition, product leaders are constantly asking: 

• What if they get to market faster with new functionality? 
• What if they respond quicker to shifting market needs? 
• Can I keep up and outsmart my competition?

Bear in mind that building is normally slower, and it will take longer to create something on par with the competitors in the market. That leads to a never-ending game of catchup.

If beating your competition and/or stealing market share from your competition is important to you, then speed matters. You need to move faster, and buying a solution will help realize those goals.

TIP: Start with the end user in mind and work backward.

#4 Can you achieve a positive ROI

The ROI calculation should tell you what to do. Looking at the time and resource investment side by side relative to building or buying should make the decision obvious.

I have often seen SaaS companies get trapped in a status quo situation. I get it. It’s usually easier to accept the current state of business and do nothing. And that’s even when you know something needs to change. 

I also acknowledge it’s hard to walk away or shut down a project you have already invested considerable time and resources into. Maybe you built it in-house or tried to buy and integrate it.

But the past is the past and you need to look to the future. Every decision is a chance to look at the ROI of future decisions. Learn from the past, but look to the future to steer your current decisions. 

An ROI analysis can help steer you in the right direction.

Your ROI calculation needs to consider whether a new tool or solution can help you beat the competition faster, open or expand revenue streams, and increase customer satisfaction and retention. Those can be crystallized in your ROI calculation making the decision process much easier.

TIP: A good ROI calculation goes a long way with getting your CFOs approval.

Try our Build vs Buy ROI Calculator

Can I help?

If you’re looking for some ROI examples, or if you’d like to get a second opinion, please reach out. I’m happy to share my lessons learned and insights.

Contact Me Here or on Linkedin