How do Companies decide between Building or Buying a Tool?
So far in Technical Skills, we have covered major use cases for Growth Stack and the specific tools addressing them. We have also discussed how those tools get integrated to a website/app, how the data from those integration flows, and where the data from those tools can be stored.
However, Internet businesses often face a critical decision when it comes to their technology stack: should they build a custom tool in-house or buy an existing solution, for any given use case?
This decision hinges on factors like cost, time, resources, and specific business needs. Let's cover those factors.
Heuristics for Making Build vs. Buy Decisions:
- ☞ Cost Analysis: Comparing the total cost of building a tool in-house (including development, maintenance, and updates) versus the cost of purchasing and customizing an off-the-shelf solution.
- ☞ Time to Market: Considering how quickly the tool needs to be deployed. Buying often allows for faster deployment compared to building.
- ☞ Customization Needs: Assessing whether the unique requirements of the business can be met by existing solutions or if a custom-built tool is necessary.
- ☞ Resource Availability: Evaluating if the company has the necessary skills and resources to develop and maintain the tool in-house.
- ☞ Long-Term Scalability: Considering if the chosen solution will be able to grow and adapt with the business over time.
Common Build vs. Buy Decisions:
- ☞ CRM Systems: Deciding between using off-the-shelf solutions like Salesforce or building a custom CRM to cater to specific business processes.
- ☞ Analytics Tools: Choosing between purchasing established analytics platforms like Google Analytics or developing a bespoke analytics system for specialized needs.
- ☞ Content Management Systems (CMS): Opting for popular CMS platforms like WordPress or creating a tailor-made CMS for unique website functionalities.
Impact on Business Strategy:
The build vs. buy decision is pivotal in shaping a company's technology strategy.
It affects not only the immediate operational capabilities but also long-term business agility and growth potential.
Making the right decision involves a careful evaluation of the trade-offs and alignment with the company's overall objectives and resources.