Software enterprises often have to decide whether to buy software of the shelf, or use internal resources to build software that fit enterprise needs and requirements. Such decision is usually controlled and guided by plenty of factors that should be considered prior to taking this decision. Those factors include internal resources skills and capabilities, cost and budget allocated, time to market, maintenance and a lot more.
Organizations with limited IS resources and expertise might not have the option to build or develop in-house software, and usually tend to buy ready solutions or contract a development company to build the software based on their needs. However, for software enterprises with available resources and IS expertise it might sound more feasible to build and develop the software in-house rather than buy ready software. However, it is not that easy to take such decision, Starling (Starling, 2003, cited in Langer, 2012) provided key decision categories that would help CIO’s to decide when not to buy software, and build it in-house:
1) Special skills in design and development are required and those are available only inside the organization.
2) Future development is required to help in keeping the application fit for the organization.
3) Software development is critical for the success of the company and its customers.
Basing the decision on the defined criteria, CIO’s should consider build in-house software incase they have the IS expertise to do so, and when other criteria factors are met such as the development of the application in-house would help the organization succeed. In addition to this criterion, it is crucial to consider total cost of ownership, Langer mentioned that 70% of organizations decided to buy rather than build because buy option comes with lower total cost of ownership (Langer, 2012), this is valid taking into consideration implementation costs and ongoing software customization and development. My organization is going through a core banking migration as we selected a new core banking solution to replace the existing one, one of the main criteria in core banking selection was implementation cost and the cost the organization need to pay to keep customizing the current core banking system to fit organization requirements.
There are other factors that need to be taken into consideration when making a buy or build decision, one factor could be engagement of current IS expertise in other software projects, an organization could have all the skills required to develop the software in-house, however they are already engaged in more critical developments and engaging them in new developments might affect the delivery of a more important project. In addition to that, ready or out of the box applications implementation time is less than developing the application in-house, and this factor could force the organization to accept out of the box applications, with less functionalities due to business engagements and the need to launch a new product in a specified time frame.
Build of buy decision is bounded by multiple factors, and even if the software enterprise have the required skillset inhouse, it could be more feasible to buy an application rather than build, this is dependent on the TCO, time limitation, and engagement in other projects.
Reference:
Buchowicz, B.S., (1991), ‘A process model of make-vs.-buy decision making. The case of manufacturing software.’, Engineering Management, IEEE Transactions on, V. 38, I. 1, pp. 24-32, DOI: 10.1109/17.65757, IEEE, [Online]. (Accessed 26 May 2012)
Langer, (2012), ‘Build vs. Buy’, Guide to Software Development, pp. 37-48, DOI: 10.1007/978-1-4471-2300-2_3, Springer, [Online]. Available from:
http://www.springerlink.com.ezproxy.liv.ac.uk/content/m8567774k075642n/fulltext.pdf
(Accessed 26 May 2012)
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