Make or Buy
The Make-or-Buy decision is one of the most consequential turning points in IT strategy. It determines cost structure (TCO), innovation velocity, and dependency on external partners for years to come.
We buy standard software for generic processes (Commodity) and build custom software for differentiating core processes (Core) that generate a real competitive advantage.
Anti-Patterns: Wrong Decisions and Their Consequences
- Standard software for core processes: You force unique business models into rigid standard templates and lose your ability to differentiate.
- Custom build for Commodity: You waste valuable developer resources building your own CRM or HR system that would be available on the market more cheaply and with better quality.
- Underestimated TCO for "Make": You calculate only the initial development costs and forget the lifetime costs for maintenance, security patches, and updates.
The Wardley Map Logic
- Genesis / Custom Build (Make): Novel, highly specialised solutions for problems where nothing yet exists on the market. This is where innovation lives.
- Product / Rental (Buy / SaaS): Established products for known problems. Focus on integration and configuration instead of code.
- Commodity (Utility): Standard services (like electricity or cloud infrastructure) that are simply consumed.
Decision Criteria
- Competitive advantage: Is the process proprietary or unique? → Make
- Market availability: Are there at least three good vendors? → Buy
- Internal capability: Do we have the team to maintain the solution for 10 years? → Make (only if yes)
- Time-to-Market: Do you need to go live in 4 weeks? → Buy
FAQ
Shouldn't we buy everything so we can focus on our business?
If you buy everything your competitors also buy, you cannot be better than the competition. Software development is today a core component of almost every business model.
Can't we just customise standard software heavily enough to make it a perfect fit?
That is the most dangerous path (Customised Standard). You lose the update capability of the standard and still carry the high maintenance costs of custom code.
Reference Guide
- Wardley Maps: Simon Wardley's framework for strategic evolution. wardleymaps.com
- TCO Calculator (Gartner): Methods for calculating total costs over the lifecycle. gartner.com
- The Lean Startup: Eric Ries on validating ideas before large investments. leanstartup.com