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The build vs. buy software guide

The complete guide for enterprises building custom products, buying software, or customizing off-the-shelf application software

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Keep pace with digital transformation

Technology is advancing at light speed. The evolution of technology, new hardware capabilities, and emerging artificial intelligence constructs are introducing opportunities for new revenue channels and lowering operating costs through software-enabled automation. The marketplace is saturated with countless off-the-shelf offerings. Tech firms are popping up to customize products and build new tech. Given the many options and the rapid pace of today’s digital world, deciding whether to build or buy enterprise applications is especially challenging. In software development, failure, iteration, and evolution are part of the process.

Successful enterprises need to remain nimble and react quickly to market conditions. When a $9B+ digital product giant like Zoom explodes on the scene and differentiates itself from other video conferencing software by using a cloud-first strategy, executive leadership should take note. To keep pace, they should evaluate their enterprise system’s health and extensibility consistently.

In 2014, Satya Nadella became Microsoft’s CEO. He shifted the organization’s focus on traditional software to cloud-based solutions. The company focused on forming strategic partnerships with other software and technology vendors. As a result, Microsoft’s stock went from $38/share in 2014 to $139/share in 2019. That same year, Microsoft became the third company to join the prestigious $1 trillion market valuation club.

Don’t be the next Sears or TiVo.

Introducing a transformative piece of software at the enterprise level impacts both the business and the sponsor. A new tool may deliver a true differentiator, giving an organization a new competitive advantage. In contrast, a new tool may cause detrimental friction, igniting new operational challenges. While the intent is to improve some aspect of the organization, a new product potentially heralds some level of the disruption. Whether the software drives a net positive or negative outcome depends on many factors like technical implementation soundness, change management strategy, and use of correct business metrics and behavior data.

“C-suite executives say technical debt—the cost to rework IT to ensure the business thrives—severely limits their IT function’s ability to be innovative (70 percent), greatly limits their ability to migrate to new technologies (72 percent), and makes their IT function much less responsive to changes in the market (69 percent).”

- Accenture

Often, the approach to funding a product initiative is shortsighted. Many plan for the initial implementation and ignore the costs of keeping the experience evergreen. Others fail to allocate dollars for actively managing technical debt or the future roadmap.

When investing in enterprise software, it’s critical to understand the pros and cons of a new product, the best practices for framing objectives, and metrics used to measure success. In this white paper, we present the criteria for evaluating and determining when to build custom, buy off-the-shelf, or customize an application. We offer a workflow to help enterprise leaders understand the inputs and common risks associated with each path.

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