Make or Buy? Designing Your Technological Capabilities

To tackle new projects or technological challenges, organizations must ensure they have certain key digital capabilities. In these cases, executives face a significant dilemma: make or buy?

The debate about whether to make or buy is a business dilemma faced by many organizations today, leading to various views, theories, and trends. In this context, it is important to analyze the advantages and disadvantages of this decision from a business perspective.

First, it is crucial to understand that the choice between making or buying involves a strategic decision that directly affects the organization’s design and performance, potentially even influencing its competitive advantages. Therefore, it is a decision that should be made by the company’s executives.

This article will analyze the factors to consider when choosing between developing software internally or hiring an external company to do so. It is worth noting that, as with many business decisions, there is no single answer, so the choice will depend on various factors. What is important is to analyze each option adequately and consider the risks associated with each alternative.

Make

The “make” option involves conducting and executing software development activities using internal resources, requiring the organization to hire and train the team. The main advantage of this alternative is that the company has complete control over the process, ensuring that the software meets the company’s specific requirements and is customized for its needs. Additionally, the company has the ability to continuously modify and improve the software, allowing it to stay up-to-date with market changes.

However, building software internally also has its disadvantages: it can be costly and require a significant amount of time and resources. The company must also ensure that it has the necessary technical knowledge to develop the software and keep it updated. If the company lacks experience in software development, the building process may become complex and unprofitable. This aspect is crucial in the software industry, which is constantly evolving and requires professionals to engage in continuous learning.

Buy

When a company opts to buy software, it acquires development capabilities from an external provider. This model can come in different operational schemes, ranging from staff augmentation services (where the company manages the team), custom development contracts, or turnkey project purchases. The advantages vary depending on the mechanism but typically include cost savings and superior performance from the contracted teams compared to internal teams. Additionally, hiring technological capabilities (people, development hours, or complete packages) allows the company to buy experience and generally quality.

However, buying software (or technological talents) also has its disadvantages. Business knowledge might be challenging for external actors to acquire, potentially leading to products that do not fully meet the organization’s needs. Additionally, the organization may not achieve 100% control over the process, leading to dependencies on providers that can pose future risks.

Which Option is Right for Your Company?

When deciding between making or buying software, it is important to consider the advantages and disadvantages of each alternative, prioritizing based on the particular needs of each company and its ability to face challenges using internal resources or the risks of doing so through an external provider.

At GeneXus Consulting, we have been supporting organizations in their digital transformation processes for years, providing them with the digital capabilities they require assistance with. We work not only on delivering robust digital solutions but also on building trust-based relationships, prioritizing long-term relationships under a win-win approach.