"Buy when you can, build when you must."
Introduction
As a CTO, you understand that the decision to buy or build can significantly impact your team's productivity, the success of your product, and the overall performance of your company. It's a decision that requires careful consideration of factors such as intellectual property, specific business needs, control, customization, opportunity costs, and talent resourcing.
This chapter explores the pros and cons of building versus buying solutions. It introduces the compose and customize approach, which empowers you to create technology stacks tailored to your unique business requirements. By leveraging reusable components and best-of-breed tools, you can enhance your products' quality, flexibility, and time-to-market, ultimately gaining a competitive edge in your industry.
Build or Buy
As CTO, one of the most strategic decisions you will make is the infamous buy-versus-build decision regarding technology. It's a decision that can significantly impact your team's productivity, your product's success, and your company's bottom line.
Building your platform means investing time, money, and effort to develop the software in-house. On the other hand, buying off-the-shelf platforms from vendors means you can focus on customizing pre-existing software.
The decision to buy or build depends on the needs and goals of the company. A software platform is an investment that must support the business in the long run. As a CTO, you want a platform that meets your business needs, is easy to deploy and maintain, and is scalable. The decision is challenging, and there are some critical factors to consider before making your final choice.
Decision Factors
Cost: Your budget is the first factor to consider when deciding between building or buying a tech platform. Developing a custom software platform in-house can be more expensive upfront. It requires investment in hiring a development team, purchasing expensive hardware, and other development tools. Conversely, buying an off-the-shelf platform can be more cost-effective, especially if you don't have the resources to build your own.
Building a technology platform can be expensive in terms of time and money. It requires significant talent, resources, and research and development investments. However, buying a technology platform can also be costly, especially if it requires substantial customization and integration. Consider the financial implications of both options before making a decision.
Requirements: The second factor to consider is whether or not the software platform meets your business requirements. Build a platform if your company has particular requirements that it can only satisfy. But, if most of your needs can be completed by pre-existing software, buying it can save you time and money.
Time-to-market: Building your platform in-house takes time, so if time-to-market is critical for your business, going with an off-the-shelf solution is the better choice. Buying an existing software platform can save you time since the development is already done, and you can customize the software to meet your specific business needs. In-house development can provide better agility in responding to changing marketing conditions.
Competition: Another consideration is whether the platform can create a competitive advantage for the business. With a customized platform, you can build unique features that provide a significant advantage.
On the other hand, buying a platform can provide access to unique features that would otherwise be challenging to develop. Consider what functionality is essential to your business, its value to users, and how it aligns with its overall strategy.
Support: Developing a custom software platform requires investment in hardware and software and building a team of experts to maintain it. On the other hand, buying a software platform comes with the vendor's and their team's support.
When purchasing a platform, however, you can leverage the vendor's technical support team. When choosing between buying and building, consider whether you have the internal resources to maintain the platform and the impact it will have on the company's bottom line.
Risk: When building a platform, there is always the risk that development will take longer than expected, ultimately impacting the company's bottom line. With a purchased platform, there is a risk that the vendor will go out of business or stop supporting the product, leading to costly migration and replacement efforts. Be sure to assess the risk of each option and weigh it against the cost, time-to-market, and competitive advantage.
Build and Buy
Building a solution has its challenges. Planning, designing, and implementing the answer requires significant time and resources, especially senior software development expertise on your site. Additionally, in-house support can be challenging, especially if your team needs more technology to build the solution.
Building a solution does not mean you must make everything from scratch. By integrating commodity components and third-party services, you can leverage existing technology to streamline the development process and reduce the time and resources required to build a solution.
This decision can have far-reaching consequences beyond the engineering department and even challenge the board level. However, the truth lies between the two extremes of building and buying. Finding the right place to innovate and build while using off-the-shelf tools and services or open-source libraries to create genuinely flexible solutions is essential.
Property: Determine where your intellectual property rights or secret sauce need to be. This part of the enterprise is unique and sets you apart from the competition. It could be the code you develop or how you integrate components to form a more extensive solution. Anything outside of this is a distraction: solving problems already solved. Owning the complete intellectual property rights to the answer can be a significant advantage in the long run.
Problem: Second, ask yourself: what problem am I trying to solve? If the problem has already been solved, buying an off-the-shelf solution could be the way to go. There are many great SaaS tools out there that can save you time and money. However, building something custom may be the best option if the problem is unique to your company.
Customization: Building a software solution from scratch can be daunting, but it also offers control and customization that cannot be achieved through buying pre-made solutions. By dedicating development resources to building a custom solution, your company can have complete control over the product's feature set and the environment in which it operates.
Opportunity Cost: Opportunity cost is another crucial factor to consider. If it will take two months to build something custom, what won't you be able to make in that time? It would be best to weigh the benefits of creating something custom against the cost of not doing other vital projects.
Talent: The availability of talent and its long-term implications are also important factors to consider. Building something custom requires specific expertise, which may be limited to your team. Buying a SaaS tool may require ongoing subscription fees, or you may risk losing access to the device if the vendor goes out of business.
Compose & Customize
The traditional "Buy vs. Build" approach has given way to a more flexible and efficient strategy known as "Compose & Customize." This trend has gained momentum as organizations seek to create customized technology stacks that align with their unique business needs.
Traditionally, organizations faced the decision of building a solution from scratch or purchasing a monolithic off-the-shelf product that may not perfectly fit their requirements. With the rise of modular architectures and the availability of best-of-breed tools, the paradigm has shifted towards "Compose and customize."
Composing and customizing a technology stack involves carefully selecting specialized solutions that excel in their respective domains and assembling them to create a tailored architecture. This approach allows organizations to leverage reusable components, improving quality, flexibility, and time to market their products.
More on this in the chapter on __microservice vs. monolithic platform architecture](/Users/andre/Book/Imagery/Visuals/Mono-%20vs%20Microservices%20ac7d3e61852d4ccaa35d6e861013a060.md).
Summary
The buy-versus-build decision is a strategic one that can significantly impact a team's productivity, product success, and a company's bottom line. It's a decision that requires careful consideration of cost, requirements, time-to-market, competitive advantage, intellectual property, control, customization, opportunity cost, and talent resourcing.
Building a technology platform can be expensive in terms of time and money. However, buying a technology platform can also be costly, especially if it requires significant customization and integration. Determining where your intellectual property rights must be and what problem you're trying to solve is crucial. If the problem has already been solved, buying an off-the-shelf solution could be the way to go.
When deciding to buy or build, consider the financial implications of both options and the opportunity cost of not doing other vital projects. Creating a software solution from scratch provides control and customization that are not possible when purchasing pre-made solutions. Compose & Customize allows organizations to create customized technology stacks that align with their unique business needs.
Reflections
As a CTO ask yourself the following:
How can we strike the right balance between building and buying to maximize productivity and product success?
What steps can we take to ensure our technology platform meets our unique business requirements while minimizing costs?
How can we leverage the Compose & Customize approach to create customized technology stacks that give us a competitive advantage in the market?
Takeaways
Your takeaways from this chapter:
The buy-versus-build decision is a strategic decision that can significantly impact productivity, product success, and the company's bottom line.
Strive to balance building and buying to maximize productivity and product success.
Consider cost, requirements, time-to-market, competitive advantage, intellectual property, control, customization, opportunity cost, and talent resourcing.
Determine where your intellectual property rights need to be and what problem you're trying to solve.
Consider the financial implications of both options and the opportunity cost of not pursuing other vital projects.
Building a software solution from scratch offers control and customization that cannot be achieved through buying pre-made solutions.
Leverage the Compose & Customize approach to create customized technology stacks that align with unique business needs.
Create tailored architectures by carefully selecting specialized solutions and assembling them to improve quality, flexibility, and time to market.
Regularly reflect on how to strike the right balance between building and buying to maximize productivity and product success.
Continuously assess and adapt the technology platform to meet unique business requirements while minimizing costs.
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