To Buy or To Build: Costs, Benefits, and Risks

The issue:  Whether it is better to buy an application from an established vendor or to build a "home grown" database system. 

Less than 10 % of software today is custom contracted, and that number is dropping every year according to Forrester Research.  However, there are still a small group of managers that will consider custom developed software.

You can be sure that managers are faced with the buy or build decision every day.  With so many searching for answers, and with a wealth of experience from those who chose to buy or to build, there are two things you can count on in helping you make this decision. 

First, there are well respected experts with no vested interest in either side who have made their evaluation very clear.  Second, there are clear facts based on statistical research that cannot be ignored. 

The expert opinion on whether to buy or build can best be summed up by an article in InfoWorld (February, 2007), a widely respected journal for information systems.  "Most IT execs say they evaluate commercial software first.  The rule of thumb is to buy applications to the maximum extent possible to cut costs," this according to Mark Lutchen, former global CIO of PricewaterhouseCoopers, now head of the firm’s IT Effectiveness practice. 

Clearly, the big 5 accounting firm has a responsibility to find the most cost effective solutions for their clients.  They can make such a blanket statement for very important reasons…it is strongly supported by the evidence on the much higher cost, long delays, and limited capabilities of custom developed software.

The considerable evidence regarding buy vs. build can best be summarized in 3 key areas - Costs, Benefits, and Risks.

For anyone considering building a "home grown" system, we strongly recommend you read the article in detail and review the references provided.