Build Vs. Buy – A Pragmatic Approach

In a recent executive leadership forum, we had a lively and passionate discussion on the perennial Build vs. Buy challenges and either approach’s pros and cons. We swapped stories of how the decisions had driven value within organizations. We equated this question to an analogy of hosting a dinner party. Cooking for a small set of guests (in your social distanced bubble these days) can be invaluable, intimate, and fulfilling. We possess the skills, manage what to serve, and control our guests’ value through food, drinks, topics, interactions, and company. This approach of delivering value to our guests is analogous to the Build option for technology.

If we scale this event to a large crowd (say 100 guests), the challenges increase. Sure, we could still cook for a large group and aspire to deliver the same value to our guests, but the question is, “Should we?” Is this our high-value activity- where we want to spend all our time, energy, and resources? Is this the right thing to do? Why not hand over these responsibilities to a partner who has pressure-tested processes, optimized methods, and an established service that delivers the extrinsic results that you seek (Buy) and frees you up to focus on the actual value and aspired business outcome — the purpose of why you are hosting the event. Networking, mingling, making your guests comfortable and happy, and being a good host are what you need to focus on as that is your high-value activity. You can abstract the complexity of organizing and catering for a large event to choosing a service provider (Buy), configuring the menu (customization) based on the venue (integration with existing technologies), and working out countermeasures if menu items run out (adapting to customer behavior and traffic).

Many executives treat Build vs. Buy as comparable to the question that Morpheus asks Neo in The Matrix regarding the red pill vs. the blue pill. The situation, however, does not demand a dichotomy. You can have build AND buy, and in many cases, that is usually the right approach. The value is in what you can build and what you can buy.

To evaluate this, as an executive, you will need to understand what is valuable to you and your organization. What is your core competency? Is the technology or product that you are planning to use of high value to you? If the answer is yes, we recommend building the component that will improve your portfolio’s value. If the answer is no, then why waste time, energy, and valuable resources in creating something that will not add intrinsic value to your organization. Due to the global pandemic, organizations that require transformation and application modernization for a contactless, digital world, unfortunately, do not have the luxury of spending precious cycles on reinventing the wheel. Sure, as leaders, we are very proud of our in-house technical talent and are confident that they could build for the problem that you and the organization are trying to solve (there are enough projects in the CNCF landscape to ensure that). But should they? Is that a valuable use of their time and talent? Are you trying to use the incentive of building technology as a retention mechanism so that your smart workforce does not feel that they are working on bleeding or cutting edge technology? Not asking what is valuable to your organization and workforce would encourage anti-patterns such as costly PoCs, technology bikeshedding, or resume-driven development (RDD).

Identify a partner or vendor who has built a battle-hardened and tested version of the competency you seek and buy from that vendor. Ensure that the competency is loosely coupled in your value stream to extend the functionality with your secret sauce or capabilities, or swap it out with newer tech. Or better still, outgrow the technology and decommission it without large technical debt.

Let’s go back to the example of the family event presented at the beginning. Can you buy a service that mingles with your guests and entertains them on your behalf? The answer is no. The same applies in the business world — the differentiators you create cannot be bought. You have to build it by creating new software, integrating, and assembling the software you purchased. The differentiators are the competitive advantages you provide to your target audience. Simultaneously, the build process allows you to experiment, prototype, and A/B test the functional capabilities you offer through products or services.

Differentiators directly link with the engagement of end-users and products or services. That’s where we get to create and build a strong emotional bond between the consumer and provider. In his recent book ‘Ask your Developer’ Jeff Lawson (CEO of Twilio) says, “Build or Die.” Companies that do not build the differentiators cannot survive. They cannot create enough intrinsic value to futureproof the company. History provides empirical proof to his statement through case studies of legendary companies such as Kodak, Blockbuster, and Nokia.

Both approaches have pros and cons. When you buy, you have to adjust your business model to incorporate the software, and when you build, your bespoke software can generate new business models. Build takes time while buy is instant. Picking the correct balance for your organization by assessing your initiative’s business, functional and technical aspects is crucial. That’s where the Build and Buy strategy comes in handy — as we described in the graphic, you buy the standard capabilities and build the unique capabilities. The end product or the services offered to the consumers contains a combination of the software you bought and built. A powerful platform is required to connect the build and buy from a business and technical perspective. That platform allows you to integrate and assemble as well as create new products and services. Composable enterprise, digital platform, lean enterprise, and platform as a service are few definitions in the industry for such platforms.

As a final remark, we would like to emphasize two things — Build and Buy, connect the two methods using a platform and modernize your organization.

Dr. Gautham Pallapa

Dr. Gautham Pallapa is a Senior Executive Advisor for VMware. He works with C-Suite and executives at Global 2000 enterprise customers in transforming their strategy, processes, technologies, culture, and people to achieve their objectives and business outcomes. His mantra is "Transform with Empathy" and has successfully led several business transformations and cloud modernization efforts in various industry verticals. Gautham is an agile coach, a Lean Six Sigma Black Belt, a SAFe Agilist, and an Ambassador for the DevOps Institute. He writes/talks/works on transformation, elevating humans, helping underprivileged people, and giving back to the community. Gautham was awarded the 2018 Tech leader of the year by AIM for his contributions. He has an upcoming book called "Leading with Empathy" which explores these topics in detail.