Choosing where to get what you need - whether that’s software, hardware, or people - is called strategic sourcing. It’s about minimizing the total cost of ownership, including the costs associated with using, not using, or maintaining the thing you need.
The problem is particularly tricky for software developers. They’re paid to build, after all, and they know or want to know how to build. So why should they buy a solution when they can make it themselves?
Before you build, make sure you understand the real costs to succeed over the long term, and only embark on those code-writing efforts you’re sure your business is capable of. - Robert Sher, HBR
Answering this question requires having clear requirements, understanding the extent to which suppliers can meet these requirements, and understanding the total costs associated with each alternative.
But there’s a rule of thumb that covers many situations. If:
- you can buy what you need,
- from a reasonably mature competitive market,
- that benefits from economies of scale,
then you should buy and not build.
Why? You’re unlikely to beat a competitive market with economies of scale, so buy if you can.
There are exceptions to this, such as if this is an area of core capability where you’re trying to compete. But it’s a good rule of thumb for the rest.
Other tips from PipDecks’ Strategy Tactics:
