Build vs Buy: 3 factors to consider for your software project

With so many startup companies vying for your business, it can be tempting to use Software-as-a-Service to automate large portions of your processes. Done correctly, your organization can operate at a higher level of scale and productivity for very low marginal cost.

However, there’s real risk in signing up for the wrong types of apps. Startup companies can disappear, compromise your data integrity, or be unable or unwilling to adapt to the features your business needs to provide.

Keep the following 3 risk factors in mind when you’re trying to decide between building or buying your business’s next software project.

Liquidation risk

Software development is expensive. Many startup companies are unable to fund their business without outside investors who demand a healthy return on their capital.

If the startup you choose is unable to meet investor demands, they will stop doing business and you may be left with no ability to fulfill the tasks performed by the software product.

If you are planning to deeply integrate software into your business (which is a very good idea) then you will want to be very aware of this risk as it is outside of your control.

Any software that becomes part of your core business workflow, be it scheduling fulfillment of orders or meeting customer requirements is a good candidate for building, despite the higher initial cost.

Your business could be placed at substantial risk if you build your processes around a company that closes doors tomorrow. Even large companies are not a safe bet. (Google notoriously cancels projects without warning.)

Data Integrity Risk

Any system on the internet risks outside intrusion and data compromise, or the less-mentioned risk of cross-customer data integrity.

What does this mean?

If you are a user of a system that supports multiple users, there’s a significant chance that somewhere inside that system your data could leak to other users, including your competitors.

As a software developer, I’ve been hired multiple times by smart firms to perform a pre-purchase audit of software companies. What I’ve learned through my analysis work that I can tell you is that this risk is larger than you realize. Even smart, disciplined software teams are subject to potential cross-tenant issues.

Fortunately, there are steps you can take to avoid data compromise. Using strong passwords, good firewalls and following basic best practices will keep most applications safe from outside hackers. To protect against internal data compromise, however, the entire development team must show vigilance at every step of development; including during long-nights, late weekends and when deadlines are short.

I’ve had the chance to review code that made me weep at its beauty. But it only takes one slip (that can go unnoticed for years) to allow a competitor to siphon your data out of the system. This significant risk is certainly one to consider.

If the data you plan to store in this system includes customer accounts and data that could provide advantage to any competitor of yours, think twice before putting it into the cloud. Building your own system to handle your data would never be available to other users of the system (except your employees.)

Control

Maintaining the composition of your software system by building instead of buying gives you optimum control, arguably the most important factor in making a decision. Unless you own the software, your requests for features and updates hold only as much weight as the next user.

Developing features for your own product can happen quicker and don’t need to be adapted to support multiple users. That means they’re often cheaper to implement as well.

Only by building software you own and control can you know without a doubt that your business needs will be met, and that it won’t be dropped because “it wasn’t a popular feature.”

This is clearly the most straightforward reason to build any software product and one that propels most projects through the green light.

If the software and its function truly is important to your business, you must own it. Smart business owners know that if they don’t build technology into the core of their business, someone else will.


Nick Hance runs a software company that advocates for the ownership of software systems.