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August 11, 2021 - Eduardo Guraieb

To Build or to Buy. The ultimate software dilemma.

Are you considering implementing a new software solution as part of your business? Are you undecided about buying vs. building it in-house? Then hang tight, book a conference room, and bust out the sticky notes.

Full disclaimer: We specialize in developing and selling cutting-edge fraud prevention software. In order to evaluate this dilemma objectively, this entry will not tell you which option—buying or building—is the best for you. Instead, we will guide you through the questions you should be asking yourself as you evaluate this important (and hopefully very interesting) decision.

Important Questions and their Implications

Is your problem unique or is it shared among your industry or beyond?

Why this matters: If you are developing software to solve a problem that nobody else has, then the chances of finding the right fit for your needs out there in the market are reduced. If, on the contrary, your problem is similar to others’, then it is likely that someone offers the right solution for sale and you might not want to take on reinventing the wheel.

Do you have any time-to-value restrictions?

If your problem is not mission-critical and you can afford to delay its solution for a few months (the actual time will depend on how complicated building it is), then maybe building your own software is a good choice. However, if you need a solution that can start delivering value fast, then shop around for the right vendor.

Is scalability an issue in your mind?

If you anticipate that the problem’s size and your needs around it will remain fairly constant in the long term, then perhaps internal development is the way to go because you can create a solution and reap the benefits of the investment over several business cycles. 

If scalability is an issue, then consider speaking to outside providers who have access to the resources to grow with your business.

Does your problem involve personal data or any other regulated element?

If not, then consider building your own solution because your compliance costs will not be affected as much and you will be less likely to expose yourself to a fine or other sanction. 

If you deal with personal data, consider shopping around for a vendor that knows how to handle data protection under different standards like GDPR and who will help you remain compliant as you grow.

How complex are your problem and the solution required to fix it?

Typically, building in-house makes more sense for projects that you fully understand and the variables of which you can control to some extent. If you are not able to fully understand the variables that need to be controlled, then consider shopping around. Think about it from a specialization perspective. Not all companies can do everything – successfully.

Do you have the right human resources and the engineering scale to ensure continuity?

Imagine the worst possible scenario. A company decides to build a software solution and commissions its top 2 engineers to the project. It estimates that it will take 3 years to build it, which is not unrealistic in many industries.

Two and a half years into the project and after having spent the proportional +80% of the project’s budget, one of those engineers decides to leave the team. Perhaps that person changes industries, moves to another area in the same company, or simply decides to stop working. Should the company hire someone else and ramp them up on the project only for .5 years? How hard is it to find qualified engineers in that field? Can the remaining engineer handle all the work? It’s not hard to see that this situation can lead to a disaster.

Is this software component mission-critical?

If this piece of software goes down, would you have to shut down all or a substantial portion of your business? If yes, then give yourself the opportunity to explore building in-house; if not, shop around for the right solution.

The reason is simple: Reputable vendors will go to great lengths to keep you in their customer base. If the service goes down, they have dedicated teams fixing issues right away. A part of your diligence when speaking to vendors is asking them about service level agreements and other provisions that will ensure continuity in their products.

Are there any company or industry-specific considerations you must think about?

Think about financial services companies in need for fraud detection software, for example. The strong and complicated fraud risks add an extra layer of complexity to consider that is tied to many moving parts, including company size. Research shows that smaller banks and credit unions are targets of lending fraud at twice the rate of their larger competitors. For smaller financial institutions, fraud losses amount to 4.5% to 5.8% of annual revenue, compared to just 2.9% for larger ones.

With such a drastically higher impact, the decision to build vs. buy fraud prevention software also becomes a matter of ROI for financial services providers.

Key takeaway: There are many things to consider when faced with this dilemma and decisions must be made on a case-by-case basis. In any instance, it can’t hurt to shop around before deciding and comparing what is out there to building in-house.

Want to learn more? Visit our intelligence center and find more information to guide you in this interesting decision. Want to settle the build vs buy debate? Get a demo and experience proactive AI-powered fraud prevention today.

Photo of Eduardo Guraieb
about Eduardo Guraieb
Eduardo is a Product Marketing Manager at DataVisor with experience working with fintech startups and top-tier international financial institutions. Eduardo is passionate about marketing, financial inclusion, coffee, and bicycles. He holds a law degree from the Technological Institute of Mexico (ITAM) and an MBA from Berkeley Haas.
Photo of Eduardo Guraieb
about Eduardo Guraieb
Eduardo is a Product Marketing Manager at DataVisor with experience working with fintech startups and top-tier international financial institutions. Eduardo is passionate about marketing, financial inclusion, coffee, and bicycles. He holds a law degree from the Technological Institute of Mexico (ITAM) and an MBA from Berkeley Haas.