Build vs. Buy vs. Outsource: Tips to Help You Make a Decision

The decision to build, buy, or outsource product development is crucial, directly impacting cost reduction and revenue generation. Beyond these financial targets, other factors significantly influence the best approach for your business.

Consider the role your product will play:

• Will it be fundamental to your core business activities and value proposition?

• Will it serve a supporting function, like invoicing?

In this article, we'll explore each approach and its ideal application.

Why Building Is Better for Core Business Products   

For products at your core business activity - those that define your primary value to your customers, differentiate you, and could be proprietary - building in-house is usually best. This approach strengthens your defensibility and competitive advantage, which is often a key consideration for investors during business appraisals. Relying on third-party products or outsourced development for core functions can sometimes be seen as a weakness by potential investors.

Build a Core Business Product Yourself or Outsource?

Deciding whether to build internally or outsource a core product involves several considerations. If speed is critical or you lack an in-house technical team, outsourcing might be the best option. There's no universal answer; the right solution aligns with your specific business needs.

NPC recommends asking these questions to guide your decision:

• What is the budget for the initial investment?

• What is the budget for running the product long-term?

• Do you have the necessary technical expertise within your business?

• When is the product needed?

Why Buying Could Be the Best Option   

While building or outsourcing suits core products, a Commercial Off-The-Shelf (COTS) solution can be superior in specific cases. If you're quickly validating a new offering's commercial viability, COTS components offer a faster, more cost-effective way to test the market. This approach can also help establish initial defensibility or a "moat" – terms investors often use – before committing to a custom-built solution.

COTS products are also often a faster and more cost-effective solution for supporting functions. When considering COTS for these functions, NPC recommends asking:

• How unique is the process, task, or operation the product needs to enable?

• How much does it contribute to your brand identity or differentiation (e.g., exceptional customer service, speed of service)?

• Are you prepared to adjust existing business processes to adopt a new solution?

• How long will the product be needed?

• How sensitive or critical is the information the product will handle?

• Is there a mature market of third-party systems offering solutions for these activities?

If there's a mature market for solutions to a particular business function, it's often a commoditised activity. In such cases, buying a product can offer the best return on investment, allowing your business to focus resources on more strategic outcomes.

These questions are among those NPC has developed through extensive experience in successfully launching products across diverse industries. If you need a new solution and require assistance in making a decision that ensures the best return on investment, get in touch.