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The Buy versus Build Shift - Part 1

When a new IT solution is needed in an enterprise, maybe because the business is changing or maybe because an existing manual process should be automated, the people who are in charge of implementing the solution usually quickly get to the question: should we build the solution or should we buy a package? For a long time the accepted wisdom has been to always buy when possible and only build when no suitable packaged solution exists in the market.

In this article I want to explore the reasons behind the existing preference for buying and, more importantly, I want to challenge the accepted wisdom and explain why I believe that the changes that have occurred in software development over the last decade have shifted the answer to the buy-or-build question away from buy and more towards build. I am not going as far as suggesting that build should be the new default but I think building software should be considered more often and it should be considered even when a suitable package exists.

Image courtesy of the Grand Canyon National Park.

Traditional reasons for buying

In my experience the case for buying software is often not made on the back of arguments that show why buying is a good idea. The usual route seems to be to analyse why building is a bad idea. This in itself says something. It is as if building is the natural answer and only problems with it make it necessary to take a different approach. So, what are these problems that have led people to preferring to buy a package?

The obvious question is whether there really is something inherently risky in software development that has caused so many projects to be unsuccessful. On the one hand software development is a comparatively young discipline, at least when compared to architecture, in the building houses sense, or to industrialised production of goods. Consequently, there is less experience, practices are not as established, and many ideas and concepts have not been turned into repeatable processes. On the other hand, though, software is flexible and infinitely malleable. With the right techniques it should be possible not only to produce exactly what is needed, but it should also be possible to use parts of the software before the whole is finished, and it should be possible to adapt the software to a changing business environment, all of which are would reduce the risk of a large capital expenditure.

From an organisational perspective the real question is even slightly different: whose risk is actually reduced by buying software? In many organisations the department responsible for building or buying software, the IT department, is separate from the department that uses the software, the business. The IT department is often measured more on delivering on time and on budget than on the overall cost or potential realised. So, for the IT department there is little to no incentive to build because buying shifts all the risk in areas that matter to the IT department onto the external software vendor.

For the business, however, the situation is quite different. Not only is it possible that custom software may have been cheaper, therefore providing an earlier return on the investment, but it is also possible, and not uncommon, that the software package does not do exactly what the business needs, leading to decreased productivity and lost opportunities. Of course, these concerns should be addressed in the decision making process. Unfortunately, the process is normally run by the IT department, which is set up to care more about different risks. As a result it is possible that the selection and decision process minimises the risk for the IT department but does not optimise the solution for the organisation as a whole.

A good example of this conflict is the introduction of a CRM solution at Australia's largest telco. A system was bought from one of the market leaders, clearly reducing the risk for the IT department, but as a newspaper reported “[...] dealers at the coalface of the telco's retail chain are still saying the clumsy customer and billing platform at the heart of the company's multi-billion IT transformation is costing them business."  Minimal risk for the IT department clearly did not translate into an optimal solution for the business.

If the business may really be better served by building, is it possible to take the risk out of building for the IT department? To start with, major breakthroughs in development methods over the past decade have resulted in much more predicable software delivery. Processes built around the agile value system deliver working software in small iterations, not only releasing functionality incrementally, but also giving the business a chance to provide feedback and, if necessary, allowing the developers to adapt the software. This greatly reduces the risk that the software does not meet the needs of the business. Software development teams have gained the ability to react to changes and develop software iteratively through techniques and practices as those described by the Extreme Programming and Continuous Delivery methodologies.

More intriguingly, it is possible to reduce the risk by shifting the goal. What if the main goal was no longer to deliver a large number of function points in a pre-determined time and budget? What if the core goal was to deliver the most needed functionality at any given point in time as efficiently and effectively as possible? Again, agile practices would clearly help, but how crazy is this idea? In 1982 Tom DeMarco opened his hugely influential book on Software Engineering with the line “you cant control what you can't measure." Interestingly, in an IEEE paper in 2009 he writes: “For the past 40 years [...] we’ve tortured ourselves over our inability to finish a software project on time and on budget. But as I hinted earlier, this never should have been the supreme goal. The more important goal is transformation, creating software that changes the world or that transforms a company or how it does business.”

I could not have said this any better.

Read the rest of Part One on Erik's blog. The full essay was also recently published in Right Sourcing.

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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