The Build vs. Buy Dilemma : Navigating the Key Decision for Successful Digital Transformation and Modernization

"The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency." ~ Bill Gates

This quote from Bill Gates speaks to the idea that technology, including automation, is a tool that amplifies the existing state of a business process.

Can we Build ? Can we Buy ? or Both ? Do we have budget to do both ? what's the time we look into for a transformation ? Are we thinking of later vendor lock in problems? Are we going to lag behind on tech innovation if we don't adapt or buy ? Do we have enough capabilities inhouse to build and maintain further? How can we us stay ahead of the competitions edge ? What's the best for modernization and growth? Which one is good strategic choice of path to scalability & sustainability ?How sooner we make our transformation successful ? These are the underlying questions come up while we do any transformation or modernization activities.

Studies shows that the 84% digital transformation initiatives fail to meet their original objectives, diluted the purpose down the time . The one of the reason behind this to fall under Build Vs Buy dilemma.

The "Build vs Buy" decision is a critical consideration for any organizations during transformation and modernization efforts. This decision determines whether a company should build a solution in-house or buy a pre-built solution from a third-party vendor.

How and where Organization's modernization failed due to Build vs Buy dilemma ?

• Lack of clear strategy : Organizations sometimes choose an option based on short-term convenience without aligning it with long-term transformation goals.
• Misjudgment on Integration complexity : Underestimating the complexity of building in-house solutions, especially in areas where off-the-shelf products could suffice. Failure to plan for how a mix of custom and pre-built solutions will integrate, leading to data silos and inefficiencies.
• Over Customization & Over Engineering : Organizations often overestimate their need for custom-built solutions, resulting in longer development cycles, increased costs, and delays.
• Ignoring long term compounding costs : Focusing too much on initial cost savings when buying, without considering long-term maintenance, integration challenges, and vendor lock-in.
• Natural Confusion : While build offers the best long-term scalability and sustainability when custom solutions are required to grow with the business buy can scale quickly but may encounter limitations based on the vendor’s pricing tiers or product capabilities.

How to create the balance between Build vs Buy, where we can innovate, adapt and make faster transformation ?

Understanding the current state is really important. If we can control present state, we have option to create a better future transformation.

“If I had asked people what they wanted, they would have said faster horses.” ~ Henry Ford

This famous quote from the Great Henry Ford underscores the idea that true innovation often requires thinking beyond the conventional wisdom or immediate demands of the market. When Ford introduced the automobile, people were primarily accustomed to horse-drawn transportation and could only envision marginal improvements, like faster or stronger horses; because they had no concept of a radically new solution.

So, while we think beyond standard solution the alignment with "Build" or "Buy" or both , which address deeper business through innovation matters. For business we must recognize its necessary to achieve true innovation and break free from the limitations of conventional, off-the-shelf options. It’s about leading the market rather than just responding to it. Just be ahead of the competitors through innovations technology advancement by continuously tap and challenge current digital footprints.

Can we do build in-house ?

Preferable to the organizations with unique business process, looking for complete control and confidence of product lifecycle and innovation. Who prefer to be competitiveness as priority create innovation, product thought process in the organization.

Driven factor "Why cant we ? "

Pros :

• We have full control and tailored customization to our solution as we believe we know our consumers very well than anyone.
• We have a competitive advantages as inhouse and give the opportunity for revenue generation or cost effectiveness.

Cons:

• Technology advancement risk with rapid technology revolution, in-house solution may become outdated quickly before realization.
• Developing custom solution can take considerable time which delay times to market
• Post launch of product or platform organization has to bear the maintenance overhead like updates, fix, cost & security.

Can we buy ?

Preferable to the organization that need a solution quickly to meet time-to-market on customer demands.

Driven factor "We just need this. Can you do for us effectively and timely ? "

pros :

• Vender expertise especially in new and complex technology like AI, Data, Cloud and cybersecurity.
• Predictable cost through subscription based pricing models(SaaS) provide predictable budgeting and lower ongoing costs for maintenance.
• Fast time to market with ready made solutions which can be deployed quickly and allows organizations to meet immediate business or customer demands.

Cons :

• Vendor Lock-in as we depend the on the vendor for updates, security, and innovation can result in a lack of control, especially if the vendor's product direction doesn’t align with business needs.
• Integration challenges as off-the-shelf solutions may not integrate seamlessly with existing systems, causing operational or data silos.
• Cyber securities basically from Data Security/ compliances where organization relies on vendor security practices, which may pose risks in sensitive industries.

Can we have both Build & Buy? Can we strategically balance between Buy and build in-house ?

Preferable to the organization who needs both immediate solution and custom innovation, who do business with unique needs in certain areas, but also leveraging industry-standard technology for non-core processes.

Driven factor " We need you to fast track our innovation at our transformation , at the same time we also want to be in the technology and innovation space. We are good at our business as you are , lets combine and have benefits at both hand"

When an organization combines building custom solutions and buying off-the-shelf products; offers a balanced strategy that can be highly effective during transformation and modernization efforts.

This approach allows organization leverage the strengths of both options to meet business objectives in a more flexible and strategic way.

So, the hybrid approach offers the best of both worlds by balancing the need for speed and innovation.

Organizations can quickly adopt standardized solutions to meet immediate business demands while focusing their custom development efforts on areas where they need a competitive edge, scalability, or deeper control.

• Speed: Buy where time-to-market is critical.
• Control and Customization: Build for areas that drive competitive differentiation.
• Cost Efficiency: Buy to save costs in routine processes; build for long-term ROI in critical areas.
• Scalability: Build custom components for future scalability, but buy to scale non-core systems rapidly.

Overall, the hybrid approach allows organizations to stay agile, minimize risks, and accelerate their transformation and modernization efforts while ensuring that their core business objectives and long-term goals are met.

In conclusion, the efficiency of technology; whether built or bought, depends on the quality of the underlying processes. If processes are inefficient, technology will likely magnify those inefficiencies, causing greater problems. Before deciding to build or buy a solution, it’s crucial for an organization to first analyze and optimize its processes. Automation should enhance well-designed workflows rather than cover up or speed up poor ones.

For organizations aiming to scale through digital transformation, the long-term success of both build or buy decisions relies heavily on having efficient and effective processes in place. Automating chaos leads to greater chaos, whereas automating well-functioning systems leads to sustainable growth.