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Make or Buy IT Decision

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Make versus Buy, a business strategy for Enterprise Architect in IT Management

Published in: Technology
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Make or Buy IT Decision

  1. 1. MAKE / BUY Decision Making for Information Technology
  2. 2. INFLUENCER Capability Criticality Adaptability Top three influencer for decision making Umesh Bajaj 2
  3. 3. CAPABILITY  Expertise  Technical  Functional/Domain knowledge  Time to acquire or produce  Availability of supplier and product Umesh Bajaj 3
  4. 4. CRITICALITY  Business Criticality  Customer Experience  Quality Control  Proprietary Knowledge Umesh Bajaj 4
  5. 5. ADAPTABILITY  Political Environment  Marriage of convenience  Silence is golden  Integration with existing product/component  Cost to integrate with existing product line  Internal support to maintain buy product  Business change Umesh Bajaj 5
  6. 6. ANATOMY OF DECISION Make  Requires proprietary know-how  High quality standard  Critical product or component  Idle capacity  Less expensive to buy Buy  Lack of in-house domain knowledge  Technical  Functional  Time to produce  Supplier availability  Less expensive to make  Political Environment  Cross – Functional cooperation requirement Umesh Bajaj 6
  7. 7. NUMBERS  Cost to Manufacture = Fixed Cost + (Variable Cost * Volume)  Cost to Buy = Variable Cost * Volume  Pitfall Cost  Cost to adapt / integrate the product to make it usable for required purpose  Royalty or license fee for maintenance of supply line  Training cost for after buy support In manufacturing, cost to buy and cost to manufacture is good for decision making. But in IT, other numbers also play important role to determine cost to buy. Umesh Bajaj 7

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