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Build vs Buy - When to Invest in Bespoke Solutions

By Ferdinand Steenkamp

To Build or to Buy, this is one of the most contentious debates in the engineering industry. For those who are not familiar with the concept; the idea stems from the need for organisations to solve complex problems. The complex problem in question could be anything from a laptop manufacturer requiring a computer chip, to managing your retail supply chain using an ERP (Enterprise Resource Planning) software suite. When an organisation faces a complex problem, their options are:

  1. build a solution in-house
  2. buy a third party, off-the-shelf solution.

In this article we start by discussing the Complex Problem in greater detail. We then proceed to discuss tradeoffs between building and buying solutions. Finally, we take a brief look at a decision framework that you can apply to your own Complex Problem.

The Complex Problem #

The problem with problems is that they are rarely what they seem to be. If a problem is simple, you can solve it - which makes it more of a task than a problem. However, when we talk about a Complex Problem, we are referring to problem that is layered. Or, in other words, a problem which contains meta-problems. “Meta” means self-referential. A meta-problem, therefore, is a problem related to your problem. These meta-problems require deep context to solve. Deep context can come in the form of lawyers, doctors, engineers, or any other technical field. Self diagnosing outside your field of expertise can be fatal to your business. Apple, for example, puts a chip into every computer they sell. You could say the chip is deeply ingrained into the business. The chip is a critical business function.

Consider the scenario above of the retailer requiring an ERP system. Resource planning is a problem that needs solving. A retailer cannot ignore it. The meta-problems around building an ERP system goes deep:

(feel free to skim over the list, the details are not relevant)

  • Database
    • Querying skills
    • Data paradigm knowledge
    • Provisioning & hosting skills
      • Monitoring
      • Alerting
      • Backup
      • Recovery strategies
  • Server
    • Infrastructure provisioning
      • Networking
      • Operating system administration
      • Monitoring
    • Software installation
    • Security Practises
  • User Interface
    • Native application development skills
    • Web development skills
      • CSS
      • HTML
      • Javascript
    • Security knowledge
      • CORS
      • XSS attacks
      • SQL Injection attacks
      • SSL Certificates
      • CSRF

To be clear, this list is far from exhaustive. I chose random points to dig into as I felt like it. With all this in mind, non-technical executives are not able to make the “build” decision since they likely have no idea what any of this means. Understanding all these topics requires deep context. This is why a retailer, whose main business is not software, will always choose to buy.

The reality is that business leaders are not in a great position to make all their crucial decisions. It is impossible for a business expert to be an engineering expert at every level. Yet, in a world that is dominated by data, it is almost a requirement.

At Rockup, we do not lean in any specific direction. We believe that certain problems call for buying off-the-shelf, and others require building in-house. Where we differ from what the industry might tell you, is how big a build you should be willing to take on. We also try to shine light on the meta-problems of buying, which we feel are rarely discussed.

When the Solution is Your Business #

One of the most famous switches from buying to building that comes to mind is Apple switching from Intel chips to Apple Silicon. This was a huge decision that took years to execute. And yet, the products are better, the customers are happier and the business has less friction. Apple booting Intel might be an extreme example, but it starts to shine light on our framework for thinking about building vs buying. The first indicator that we look out for is how deeply integrated a solution will be in your business.

Going back to the retailer example, we could ask: “should the retailer be building accounting software?“ To us, this would be a big no. The retailer does not provide an accounting service to their customers. Should the retailer build an ERP software solution? To us, this would be a yes. The service that the retailer provides to its customers is, in essence, distribution of goods. This means that an ERP system would infiltrate every part of the business. Without an ERP, there is no business. At least not at the scale that modern retailers operate on.

What we are suggesting here is no exact science. Instead, we propose a guiding principle. The reality is that a bespoke ERP system isn’t a complicated piece of software to develop (I reiterate, bespoke). A general-purpose ERP system, on the other hand, is a whole other monster. A software suite that does one thing can do it well. A software suite that does everything can do nothing well. General-purpose solutions, as a rule, fall somewhere on the spectrum between those two options.

Is General-Purpose Going to Cut It? #

When dealing with a Complex Problem, the question becomes one of serving your customers. Will this general purpose [insert off-the-shelf solution] allow me to change and pivot quickly when my entire organisation is integrated with it? Will they add features or fix bugs when it is costing me customers by the day? Will they allow me to be flexible and turn the solution into anything I need it to be? Will they force me to change my processes and data to fit into their models?

When your business’ ceiling for growth is an off-the-shelf solution, that solution is your business.

Off-The-Shelf is not Risk Free #

One of the infamous business events in South Africa in 2023 was a failed SAP rollout for one of the country’s biggest retailers. One could argue who is at fault, but the reality is that general purpose solutions are not a solved problem. Or as we like to say at Rockup: early abstraction is the root of all evil. To claim that you have created a general purpose software that solves everyone’s problems is bold.

Integrating your business’ critical functions is risky. Do not make the mistake of believing that it is a solved problem. Even if the whole world is telling you that it is. Our experience with general purpose solutions is that they require large amounts of (fickle) configuration with too little outcome.

The Magic Word is Bespoke #

We are not claiming that all organisations should be able to create bespoke software in-house. A retailer that is new will struggle to find capital, they are fighting for market share and they have many business processes to map out. But there comes a point where businesses outgrow general purpose. A company that is scaling is anything but general. They are scaling because they are doing things differently. Take charge of your data, and do it in-house. Otherwise you will outgrow your general purpose solution, and that will become your ceiling.

No Free Lunches Solutions #

Building in-house comes with its own set of risks. The most glaring one being the risk of not being experts in a field. That is why strategic partnerships are important. They are an added brain. They provide deep context to your Complex Problems. You, the scaling business, have a unique way of doing things. You should work with software and data experts to encode those processes as software.

Our point of view is that any organisation that wants a strategic advantage over the competition, must take charge of their critical business functions. For retailers, this could be:

  • ERP systems
  • Customer Data Platforms (CDPs)
  • Supply Chain Management systems
  • POS Systems
  • Inventory Management
  • etc.

In-housing your critical business functions creates a strong foundation where you are in control - end to end. This makes it simpler to outsource non-critical business functions such as data analytics or CRM systems.

A Framework for Thinking on Complex Problems #

At Rockup, we realise that Complex Problems are daunting. That is why we developed a framework for guiding our customers through these decisions. The framework consists of multiple high-level questions that sets the context, such as:

  • Is the problem your business?
  • What are your pressing concerns at the moment?
  • What is your 5 year growth strategy?
  • What are the biggest risks you are facing?
  • What is your in-house technical expertise?

While the answers to these questions are not exact and measurable, we can place your business on a quadrant indicating whether you are primed for building in-house. If the answers are not clear at this point, we do cost and risk analysis. This requires a more in-depth review of the organisation.

One low-risk route that we suggest taking is building a Proof of Concept. A working software solution that covers 80% of the value for 20% of the work. The outcome of a POC can be the deciding factor to push a company in one way or another. It can also highlight many concerns that the company had not considered before. For example, if the POC is struggling to win adoption within the organisation, you might consider that you are on the wrong path, and that neither building or buying is the right option.

Conclusion #

A final word of caution, if you don’t know whether you should be building or buying, you likely don’t have the expertise to make the decision. We see executives at this point jump straight into buying - and this can instantly create a ceiling for growth. We would urge any business persons who feel forced into buying a software solution that they do not understand to take a step back, and work with experts to understand the implications of their decision.

For many, buying is the correct decision. In that case we urge you to search for niche solutions. Instead of purchasing a Customer Data Platform solution, purchase a Customer Data Platform solution for pet stores. Instead of purchasing an ERP system, purchase an ERP system for restaurants. Your business is not general purpose.

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