Considerations for Buy vs Build


When conducting searches for technology or operations solutions, the role Citisoft plays is analogous to that of a matchmaker. The exercise is to understand—in painstaking detail—the needs and requirements of each client to match with the capabilities of vendors in the marketplace. The approach is not to find the best tool in the industry, but rather to find the best fit for our clients. The task would be easy if just a few tools were appropriate for any firm, but that is rarely the case. In fact, the number of market participants continues to grow with new and evolving offerings from entrants and incumbents alike.

During vendor searches for targeted applications, many times the question “should we consider building this capability ourselves?” is introduced. This is generally a worthwhile consideration when changing the environment of a critical function for the next 7-10 years, which is the typical duration of a vendor install. Any technology change will alter the workflows, staffing requirements, and even the culture of a firm. For these reasons, building a customized solution can be exciting and transformative.

A customized build provides a precise solution tailored to meet the unique and differing needs of an organization. This approach affords firms with increased control, specific connectivity to upstream providers and downstream recipients. A targeted solution is often designed to precisely align organizational needs with robust capabilities. Custom-built tools also allow for flexibility to make timely changes instead of waiting in a lengthy queue for updates.

Before any customized build decision can be considered, a firm must take an honest introspective approach and look at their capabilities to build and maintain sophisticated tools and processes. The first questions are typically: has the firm-built tools in their recent past and do they have the appropriate resources to develop and maintain a resource-intensive infrastructure? Is there capacity to design and deliver upgrades? Does the firm have the capacity and specific resources to closely monitor industry best practices, consistent regulatory changes, or compliance practices, and then incorporate those axioms into a complex technological infrastructure? Easier said than done.

The next consideration is how important or necessary is a custom solution. What strategic benefits would be gained with a custom operational solution? Will a custom tool enhance, compliment, or supplement the firm’s core competency? Will client or shareholder value increase with an internally designed solution?

Surprisingly, cost is not typically the biggest factor in this decision as custom solution costs may be comparable to some suitable vendors. The build cost is predominantly labor for the design, development, and implementation. Additional maintenance staff and training resources to ensure personnel are fully proficient with a custom tool as well as the cost of ongoing enhancements and development are the largest hidden costs. Firms will not be able to find user experience in the open market. Therefore, training will be incumbent upon the firm to deliver effectively and develop depth of knowledge.

Lastly, firms must ask the questions: is there a suitable partner with required capabilities in the marketplace? Has a thorough search ruled out the large number of market participants? I am continually surprised at the increasing number of vendor solutions in such a narrow market and I find clients are often shocked at the depth and breadth of vendor offerings as well.

The vendor landscape has become so large and diverse that I now categorize them by the following criteria:

  1. Pure-technology plays: Tools that can be leveraged for multiple functions and across industries
  2. New market entrants: Vendors employing a more current technology which is cheaper to develop and deploy
  3. Well-established solutions providers: Vendors with mature technologies that have brand recognition and ample support resources 

Having a marketplace with many competitors or participants can keep costs down while providing numerous options. Vendor applications also provide the benefit of significant intellectual resources, reinvestment resources, sizable client bases (with knowledgeable and sophisticated users), and a plethora of beta testers to ensure the solution works for the multitude of users. Vendors also have exhaustive resources to ensure compliance with external regulatory requirements, align with industry best-practices, and resources that often act as a sounding board. On the flip side, vendor solutions may be expensive and may not be timely or attentive with change requests.

Ultimately, buy vs build is a firm-specific decision which revolves around organizational requirements and technological resource capacity. For firms with technological resources and a strong development culture, the build route is a viable path and well worth considering. The benefits may be transformative and allow for more cohesion across organizational functions. But for the vast majority of firms, there are numerous choices in the marketplace with a wide range of capabilities offered at varying price points to suitably address most requirements. In either case, find the best-fit and build your future.