Make or Buy: A Strategic Decision for Digitalization

Digital transformation is a significant step towards increasing efficiency and competitiveness for many companies. A crucial point in this process is the choice between developing custom software or acquiring and adapting existing solutions. In this article, we aim to present a guideline for companies from our perspective and based on our experiences. This is intended for those facing the important decision of “Make or Buy”, considering both in-house development with external partners and the selection and customization of existing software.

1. Analysis of Business Requirements 

Before making a decision, companies should conduct a thorough analysis of their specific business requirements. Clarify which functions and processes are essential and what specific requirements your industry entails. The individuality of the business model plays a crucial role here. The more individual the requirements of existing business models and markets, the less likely it is that an existing product will meet most of their requirements.

2. Cost-Benefit Analysis 

Perform a comprehensive cost-benefit analysis for both options. Consider not only development costs but also maintenance, support, and potential future expansions. Especially with purchased solutions, the cost of customization due to the dynamic change of processes over time can quickly add up. Therefore, we recommend taking a close look and considering future scenarios.

3. Timeframe 

Evaluate the timeframe your company has for implementing and deploying the software. In-house development may take more time, while purchasing an existing solution may be ready for use more quickly. Again, this depends on the availability of existing solutions that provide broad coverage of your requirements. With in-house developments and a suitable partner, a good pace can be achieved through efficient communication of requirements.

4. Technological Complexity 

Analyze the technological complexity of your requirements. If your needs require a high degree of customization, in-house development with external partners might be the better choice.

5. Expertise and Resources 

Review the existing skills and resources within your company. If you have the required expertise and capacity, in-house development can be a viable option. It’s important to understand that in-house expertise doesn’t necessarily have to be technical; rather, having a dedicated product owner who understands the business requirements and can communicate them to the external development team is crucial. A technical project manager can be a valuable additional in-house resource for technical oversight, but in many cases, it may not be necessary, as these skills are often provided by the external partner.

6. Risk Assessment 

Assess the risks associated with both options. Delays, cost overruns, and technical challenges may arise during in-house development, while purchased software may require non-trivial adjustments. The risks of in-house development can be minimized through thoughtful decisions regarding the setup. Additionally, a clear description of requirements as much as possible helps. At Prime Workforce, for example, we hold weekly requirements calls between the development team and the customer team to ensure everyone is on the same page and the requirements for the features are really clear.

7. Scalability and Flexibility 

Consider the future scalability and flexibility of your solution. In-house development could be better tailored to your specific needs, while purchased software may be more flexible for different company sizes.

8. Quality Assurance and Support 

Evaluate the quality assurance and support associated with both options. Check the references and reputation of potential external partners or software providers. Reference projects in a similar environment of the development partner can be helpful for efficiency and potentially even reusing already built features.

9. Integration with Existing Systems 

Ensure that the chosen option can be seamlessly integrated into your existing IT infrastructure to ensure smooth operations. Here too, the potential development partner can be asked about existing APIs to the existing surrounding systems. An input/output plan including the interactions with the surrounding systems can be very helpful for an initial assessment.

10. Future Developments

Consider the future development of your company. The decision should not only  consider short-term goals but also long-term perspectives. 

The “Make or Buy” decision is complex and should be well thought out. Close collaboration with experienced IT experts and consultants can help you find the optimal solution for digitizing your company.

Are you currently facing this decision? 

We are happy to assist you and provide our perspective.