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How to Make a Buy vs. Build Decision

An entrepreneurial company or project that is trying to accomplish something with software has to constantly make so-called buy vs. build decisions. This turn of phrase is unfortunate in two ways: it seems to ignore open-source and free software which is not necessarily bought. Even more importantly, it should perhaps be called an obtain and integrate vs. build here and integrate decision because the cost of integration must be considered. This requires a great combination of business, management, and engineering savvy.

  • How well do your needs match those for which it was designed?
  • What portion of what you buy will you need?
  • What is the cost of evaluating the integration?
  • What is the cost of integration?
  • Will buying increase or decrease long term maintenance costs?
  • Will building it put you in a business position you don't want to be in?

You should think twice before building something that is big enough to serve as the basis for an entire other business. Such ideas are often proposed by bright and optimistic people that will have a lot to contribute to your team. If their idea is compelling, you may wish to change your business plan; but do not invest in a solution bigger than your own business without conscious thought.

After considering these questions, you should perhaps prepare two draft project plans, one for building and one for buying. This will force you to consider the integration costs. You should also consider the long term maintenance costs of both solutions. To estimate the integration costs, you will have to do a thorough evaluation of the software before you buy it. If you can't evaluate it, you will assume an unreasonable risk in buying it and you should decide against buying that particular product. If there are several buy decisions under consideration, some energy will have to be spent evaluating each.

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