Build vs. Buy Calculator
Compare the total cost of ownership for building software internally versus purchasing commercial solutions. Factor in development costs, maintenance, and long-term benefits.
Cost Comparison
Detailed Breakdown
Decision Factors
Build Advantages: Customization, control
Buy Advantages: Faster deployment, support
Risk Factor: N/A
Note: Consider strategic factors
Understanding Build vs. Buy Decisions
The build vs. buy decision is a critical strategic choice for businesses considering technology investments. It involves weighing the costs and benefits of developing software internally versus purchasing commercial solutions.
Total Cost of Ownership (TCO)
TCO includes all costs associated with acquiring, implementing, and maintaining a solution over its useful life.
- Acquisition Costs: Purchase price or development expenses
- Implementation Costs: Installation, configuration, integration
- Operating Costs: Maintenance, support, upgrades
- Training Costs: User training and documentation
- Opportunity Costs: Alternative uses of resources
- Risk Costs: Potential project failures or delays
When to Build
- Core Competency: Software is central to your business advantage
- Unique Requirements: Commercial solutions don't meet specific needs
- Cost Effectiveness: Long-term ownership is cheaper
- Control and Customization: Need full control over features and roadmap
- Integration Requirements: Must integrate deeply with existing systems
- Intellectual Property: Want to own the technology and IP
When to Buy
- Commodity Functionality: Standard features available commercially
- Time to Market: Need solution deployed quickly
- Limited Resources: Don't have internal development capacity
- Risk Mitigation: Prefer predictable costs and timelines
- Support and Maintenance: Want vendor-provided support
- Scalability: Need solution that scales with business growth
Hidden Costs to Consider
| Cost Category | Build Costs | Buy Costs |
|---|---|---|
| Development Time | High (6-24 months) | Low (1-3 months) |
| Customization | Full control | Limited |
| Maintenance | Internal resources | Vendor support |
| Scalability | Depends on architecture | Often built-in |
| Risk | Project failure risk | Vendor dependency risk |
Strategic Considerations
- Core vs. Context: Focus internal resources on core business activities
- Competitive Advantage: Build only what differentiates your business
- Technology Roadmap: Consider future technology evolution
- Team Capabilities: Assess internal development expertise
- Market Maturity: Evaluate availability of commercial solutions
- Regulatory Requirements: Consider compliance and security needs
Break-even Analysis
Break-even analysis helps determine when the cumulative costs of building equal the costs of buying.
- Initial Investment: Compare upfront costs
- Ongoing Costs: Compare maintenance and support expenses
- Time Value: Consider present value of future costs
- Risk Adjustment: Factor in project risk and uncertainty
Risk Assessment
- Build Risks: Project delays, cost overruns, technical challenges
- Buy Risks: Vendor lock-in, feature limitations, support issues
- Mitigation Strategies: Pilot projects, phased implementation, contingency planning
- Risk Tolerance: Consider organization's risk appetite
Tip: The build vs. buy decision should consider both financial and strategic factors. While cost is important, also evaluate factors like time-to-market, competitive advantage, and long-term business objectives. Consider conducting a pilot or proof-of-concept before making a final decision.