To Innovate or To Integrate: That IT Question
Too many businesses struggle with technology. Many struggle with it so much that it erodes profits.
In a previous blog post I noted how many small and medium firms actually underspend on technology, which leads to several important implications across almost every part of the business.
Now, in this blog post I explored how to optimize IT and the common pitfalls why businesses don’t.
On to the topic at hand…
When it comes to making some changes in IT, one key question that will come up is ‘do we build or do we buy’?
Many SMEs default to ‘buy’ but it may not be the best answer - in fact it could be incredibly costly in the medium and long term.
The decision to build vs. buy can be a crucial determinant of success. Each approach has its pros and cons, which are explored below.
The Build Approach: Going Custom
Pros:
Tailored Fit: Building a custom technology solution allows you to design something that precisely matches your firm's processes and requirements. This level of customization can often give you a competitive edge.
Unique Features: You have the freedom to integrate unique features that aren't readily available in off-the-shelf solutions. This can lead to innovation and differentiation in your service offerings.
Pay-For-What-You-Need: often off-the-shelf packages come with various features your business does not need or want, and can have some desired ones missing. Build-your-own focuses on your needs and therefore you are only paying for what you need.
Long-Term Scalability: Custom solutions can be built with scalability in mind, accommodating your firm's growth trajectory without major overhauls, re-training your entire team, and undergoing frustrating conversions.
Cons:
Time and Resources: Developing a custom solution can be time-consuming and resource-intensive. This might divert your attention from core business activities.
Costs: Building a technology solution from scratch can come with high upfront costs, including development, testing, and ongoing maintenance.
Expertise Required: You need a skilled development team or external partners to bring your vision to life. Managing technical aspects might not be your firm's core competency. If they are external to your business, it’s critical for them to understand your operations which can be difficult and time consuming.
Long-term Support: It’s critical to ensure that you either have in-house expertise to provide ongoing support for your application or that your external partner has the capability and longevity to support. Otherwise you risk having a costly orphaned application and a significant business risk on your hands.
The Buy Approach: Off-The-Shelf
Pros:
Speed: Purchasing a pre-existing technology solution can get your firm up and running reasonably quickly, enabling you to focus on your core business activities.
Cost-Effectiveness: Buying a ready-made solution can be more cost-effective in the short term, as you avoid the high upfront expenses associated with development.
Proven Track Record: Established solutions come with a track record of success and are likely to have been tested extensively, minimizing potential bugs and issues.
Hiring and training: Using established software, especially if there is an industry-dominant one, makes it much easier to hire and train new employees, improving their ability to hit the ground running.
Cons:
Limited Customization: Off-the-shelf solutions might not perfectly align with your firm's unique processes, potentially requiring you to adapt your workflows. Some features just may not be possible.
Dependency: You're reliant on the solution provider for updates, support, and any necessary modifications. Lack of control is a major concern and one I constantly see frustrating my clients while suffering inefficient and often bizarre processes to compensate.
Scalability Challenges: While some solutions are designed to scale, others might become less efficient as your firm grows.
Making the Right Choice for Your Firm
The decision between building and buying technology should be based on a thorough assessment of your firm's needs, capabilities, and long-term vision. Consider the following steps:
Needs Assessment: Clearly define your firm's technological needs and objectives. Identify any unique requirements that might necessitate a custom solution. This is where most businesses shortchange the process and consequently make critical errors in the following steps.
Resource Evaluation: Evaluate your firm's internal technical expertise and resources. Assess whether building a solution aligns with your team's capabilities. Challenge your team to think creatively and do some research before concluding; often SME’s don’t have large teams, but they are resourceful and talented, especially if supplemented by external experts.
Cost Analysis: Compare the total cost of ownership for both options, including development costs, maintenance, and potential future upgrades. Consider the cost savings as well as dollars up front as often having exactly what your business needs can save time, people-power, and unnecessary workarounds - all of which cost real dollars.
Scalability: Consider your firm's growth plans. Will the chosen solution accommodate your expansion? Or will you need to undergo conversions at every major growth stage?
Time-to-Market: Determine how urgently you need the solution. If time is of the essence, a pre-built solution might be more suitable.
Vendor Research: If opting for an existing solution, research vendors thoroughly. Choose reputable providers with a strong track record. This point cannot be emphasized enough. Be aware that sales is not operations is not support; and often they do not talk to one another. Request to meet who will be working with you to implement the solution, thoroughly understand the support model and mind your contracts. I see far too many clients who experience down time, inefficiencies and errors due to inadequate support models only to be provided with useless vendor internal finger-pointing.
The decision to build or buy technology solutions for small and medium professional services firms is a critical one that must align with your firm's goals, resources, and growth plans.
Customization and control come with the build approach, while speed and cost-effectiveness are often associated with the buy approach.
By carefully evaluating your firm's unique circumstances, you can make a well-informed choice that positions your business for success. For more information or support with your upcoming technology decisions, contact us.