The "build or buy" decision is a trade-off that organizations face when deciding whether to develop a certain capability internally or to purchase it from an external provider. There are many factors to consider when making this decision, including the cost of development, the time required to develop the capability, the risks associated with each option, and the organization's overall strategic objectives.
There are pros and cons to both options. Building internally allows organizations to have more control over the development process and the final product. It also allows organizations to tailor the product to their specific needs. However, building internally can be more expensive and time-consuming than buying from an external provider.
Buying from an external provider can be faster and less expensive than building internally, but it can also be less flexible and less tailored to the organization's specific needs. Organizations need to carefully consider all of these factors when making the "build or buy" decision.
What does build vs buy mean?
In the context of software development, "build vs buy" refers to the decision of whether to develop a piece of software in-house or to purchase it from a third-party vendor.
There are a few key factors to consider when making this decision:
1. The cost of development. If the cost of developing the software in-house is significantly higher than the cost of purchasing it from a vendor, then it may make more sense to buy the software.
2. The time to market. If the software is needed urgently and developing it in-house would take too long, then it may be better to buy it from a vendor.
3. The core competency of the company. If the company's core competency is not software development, then it may make more sense to purchase the software from a vendor.
4. The risks involved. If there is a high risk of the project failing or the software not meeting the company's needs, then it may make more sense to buy it from a vendor.
5. The flexibility of the software. If the company needs a lot of customization or specific features, then it may make more sense to develop the software in-house.
6. The quality of the software. If the company needs a high-quality piece of software, then it may make more sense to develop it in-house so that it can be better controlled.
What are the 4 primary factors to evaluate in make-or-buy decisions?
1. The first factor to evaluate in make-or-buy decisions is whether the company has the necessary resources to develop the software internally. This includes factors such as the availability of qualified staff, the necessary hardware and software, and the time required to develop the software.
2. The second factor to evaluate is the cost of developing the software internally. This includes the direct costs of development, such as salaries, benefits, and overhead, as well as the indirect costs, such as opportunity costs.
3. The third factor to evaluate is the risk involved in developing the software internally. This includes the risks of cost overruns, delays, and technical problems.
4. The fourth factor to evaluate is the company's strategic objectives. This includes factors such as the company's competitive position, the need for flexibility, and the company's overall business strategy.
How companies decide whether to make or buy their resources?
The primary factor that companies consider when deciding whether to make or buy their resources is cost. Other factors that may be considered include quality, availability, and expertise.
Companies usually decide to make resources if they believe that doing so will be less expensive than buying them from another company. They may also choose to make resources if they believe that they can produce a higher quality product than what is available on the market. Additionally, companies may choose to make resources if they believe that they have the expertise necessary to produce them successfully.