Buy or Build: Where does the money go when choosing to build?

Managers choosing the build option often take a very short term view of software costs.  It is not unusual for most to believe that initial design and programming make up the majority of those costs.   

In Perspectives on Software Engineering, Marvin Zelkowitz from the Institute for Computer Sciences and Technology, National Bureau of Standards, Washington, D.C reports on extensive research findings on the costs associated with custom development.  He identifies several categories of cost.  Only 5 % of the costs are in the initial design, and only 7 % in the initial program coding.  On the other hand, 15 % of the overall cost is spent on testing, and a significant 67 % of the costs occur after the testing cycle is completed.

Mark Lutchen, former CIO of PricewaterhouseCoopers, makes this point as well.  He indicates that when evaluating whether to buy or build, it’s critical to thoroughly understand total costs during the software lifecycle.  This step is important, says Lutchen, because 70 percent of software costs occur after implementation. (InfoWorld, February, 2007).

Most managers are inclined to believe that once a software application has been built and delivered they can begin seeing a return on their investment and costs should go down.  In fact, less than one third of the time spent and costs incurred have been completed on the day the application has finished the testing cycle. 

Unfortunately, this means that outside consultants or internal IT departments can sometimes provide software delivery at what appears to be a low cost, while it is virtually certain the majority of costs in time and money will just be starting. 

For anyone considering building a case management system, or modifying an existing system that was built from scratch, we strongly recommend you read the article in detail and review the references provided.