Faced with a specific software need, should you invest in a solution from a qualified vendor or ask your IT staff to build your own? There's no single answer–and the decision process may lead you to an unexpected conclusion.

August 5, 2008

By Fawn Fitter, CIO Custom Solution Group

It's a question every CIO faces eventually: license an enterprise application that does most of what you need well enough, or build your own solution for a perfect fit? The standard answer–"buy to standardize, build for competitive advantage"–has the venerable ring of truth that any adage acquires when it's repeated often enough. But real life isn't that simple, and the answers are rarely one–size–fits–all. Three IT pros with experience juggling all the variables share their thoughts on the pros and cons of both approaches.

Homegrown Solutions

Conventional wisdom says building a system in–house guarantees a tight fit with your business needs and your enterprise architecture, with no need to write a check to anyone outside the company. In some cases, that's just what you need, says Debra Massey, CTO and principal of Crystal Equation Corp., a Northbrook, Ill.–based IT staffing, consulting, and development firm. "If you have a mission–critical application that needs immediate attention, you may want to have the expertise in–house," she says. "That's also ideal for open–source software, because it tends not to be platform-dependent, and you can find developers sharing information in all areas so your people don't have to invent it themselves."

But what happens when the people who build the system move on, leaving little documentation behind? And when you upgrade your network, will you be able to retrofit your old solution to work with new technology? People often underestimate the cost and commitment needed to build and maintain a homegrown solution, says longtime IT consultant Michael Clarke, currently CEO and CTO of Qtility, a Calgary, Alberta firm that specializes in enterprise application integration. By focusing on getting a precise fit for their needs today, they lose sight of their long–term strategy, which can generate higher costs over time.

That's the problem facing Wellman Inc., a South Carolina–based manufacturer of raw plastic and polyester materials. "We have a lot of legacy systems in our plant because 20 years ago, you had to build everything," says IT director Ron Scott. "They're cheap to operate because we own them, but the guy who wrote the code retired 10 years ago, so it's hard to change business processes. And I have to run a billion–dollar company with a 32–person IT staff." As a result, Scott is gradually replacing all of Wellman's proprietary systems with commercial products.

Vendor Solutions

Massey always starts a project by asking her internal developers to bid on needed tools, cost, necessary team size and expertise, and the time needed to develop, test and deploy the results. She adds 20 hours of support each month for any solution with more than 20 users. Then she asks vendors for comparable bids, including bug fixes and ongoing enhancements. While in-house solutions may cost less upfront, she says, buying from a vendor almost always has a lower total cost of ownership.

"If you outsource, there are a lot of problems that you can simply hand off to the vendor," she says. "As long as I can get a strong enough solution from a vendor at a comparable price, I'll buy instead of build."

Clarke, too, leans strongly toward buying instead of building. "Why create your own document management or CRM system when there are literally hundreds on the market at different price points and with different capabilities?" he asks. "You can get 80 or 90 percent of what you need out of the box if the best of breed fits your business model."

Still, he cautions, companies rarely consider the cost of adapting purchased solutions to achieve the remaining 10 or 20 percent. Clarke estimates that customizing, implementing, supporting and maintaining enterprise software can be as much as three or four times the cost of the license–and a CIO needs to build that into the budget from the start.

"It's fine to build for competitive advantage if you have the IT resources and you need to build," Scott says. "But in the end, very few business processes are all that unique. There are so many good vendor solutions these days that it's rare to need to build your own."