The document discusses challenges in making build versus buy decisions for software solutions. It outlines key decision factors to consider like total cost of ownership, features and functionality, maintainability and control, and competitive advantage. It also provides a framework for evaluating these factors, including a TCO calculation scorecard and common mistakes to avoid. The document advocates establishing a standardized process to make informed build versus buy decisions.

1. Consideration of…
Build Versus Buy
Decision-Making
Challenges
September 17, 2009
References:
Corporate Executive Board
Forrester Research
Experture Research
NBC/NYTimes/CNBC

2. Build Versus Buy Decision-Making Challenges
Build Ave vs. Buy Street ?
When faced with the decision of building
When considering a build vs. buy decision,
IT Leaders are faced with solutions, IT Leaders
vs. buying software several common
decision points, each with their own set of
are faced with several decision factors:
consequences.
Sound familiar ?
•Total Cost of Ownership over Lifecycle
•Features & Functionality
•Maintainability & Control
•Competitive Advantage, if any ?

3. Build Versus Buy Decision-Making Challenges
Strategic Considerations
Project Impact vs. Complexity Market Maturity vs. Competitiveness
High High
Decision
based on Most likely
Most likely Ambitious other to buy
to build projects
factors
Strategic Market
Impact of Maturity
Application Decision
Most likely based on
Low impact Most likely
to build other
projects to buy
factors
Low Low
Low High Low High
Application Complexity Market Competitiveness
Application complexity is a factor in the decision, as IT Mature markets are more likely to offer sufficient,
organizations are more unlikely to build highly complex industry-specific functionality than newer
applications. However, several financial services firms less mature markets.
build wealth-management software in-house, few Competitive markets are more likely to offer low software
organizations develop proprietary Enterprise Resource pricing than markets dominated by vendors.
Planning (ERP) Systems.

4. Build Versus Buy Decision-Making Challenges
TCO Calculation Scorecard
A simple method of evaluating the Total Cost of Ownership is to align Lifecycle
Milestones side-by-side.
Where: TCO = Capital Costs (one-time) + Operating Costs (annual)
Build Cost Factors Cost($) Buy Cost Factors Cost($)
Software Development Resources $ - Software Licensing $ -
Software Quality Control & Testing $ - Software Implementation & Integration $ -
Software Configuration & Deployment $ - Application Customization $ -
End-User Training $ - End-User Training $ -
Ongoing Maintenance & Enhancements (RTS) $ - Ongoing Maintenance & Support Fees $ -
Software End of Life $ - Software End of Life $ -

5. Build Versus Buy Decision-Making Challenges
Common Build vs. Buy Decision Making Mistakes
Need for an Eval Process: Ad-hoc processes create inefficiencies and fail to provide scalable data to inform future build versus buy decisions
Project-to-project evaluation processes generate operational inefficiency
Variable Maturity Mature markets may not offer adequate functionality; competitive markets may not offer lower costs than building
Incomplete TCO Inaccurate decision based on incomplete TCO which don’t capture the full costs and benefits / build and buy options
Misinformed Requirements Ad-hoc processes do not adequately inform product negotiations with software vendors or development requirements
i.e. “Do my requirements match your product offering ?”
“I’ve purchased a solution I thought met my requirements, but actually does not “
Process Recommendations
Establish a Team
Software Architect Project Manager Stakeholder
Reuse Buy Build
•Does current in-house •Does packaged software •Are required applications
applications address business address 70% of business features missing from
requirements ? requirements? the packaged software ?
yes •Can developers customize yes •Does packaged software yes •Can internal resources build
existing application to allow customization or or integrate to business
address these requirements ? integration w/ third party requirements ?
services ?
no no
Total Cost of Ownership (TCO) Analysis

6. Build Versus Buy Decision-Making Challenges
= Buy = Build
CNBC Global Data System
The Next Generation Data (GDS) will provide a standardized platform to retrieve, store and disseminate
information, news and market data across all global applications and digital platforms (ex: On-Air Apps
such as Ticker, Charting, Web and Mobile).
Application Middleware
Symbology/
Reference Data
Monitoring Admin
Legacy
History dB System
Caching Layer
Messaging Layer
Feed Handlers

7. Build Versus Buy Decision-Making Challenges
New York Times Video Production and Distribution Systems
The Video Production Systems will redesign workflow to eliminate redundancy in
production, automate approvals and publishing processes and prepare the newsroom
for multiplatform distribution of video content.
Benefits
Bring encoding and transcoding in house to eliminate time
and bandwidth intensive file transfers.
Secure corporate assets ensuring backup and disaster recovery
procedures.
Improve metadata workflow and asset tagging for improved
cataloging.
Support exponential growth in syndication businesses.

8. Creation Collection Distribution Display
o What outside sources o How many distribution o What are the various
o Where are your channels do you have? devices and players you
editors? contribute video?
publish to?
(UGC, syndicated,etc)
o How many codecs and
o What metadata must bitrates do you need? o Do you want instant
they input? o What metadata
streaming or downloads?
format do you ingest?
o How fast should the files
o How fast does the go live? o Do you want/have
network need to connect o How fast does
resources to maintain
to storage? the ingest of content
need to happen? o How do you want to your own player?
integrate your CMS with
o How much do they video playback and o What ad units do you
share projects and o What approval mech-
anisms do you need? play lists? require?
assets?
o What search cap- o Do you have a CDN o How interactive or
o What is your approval preference? passive do you want the
process? abilitites do you need?
user experience?
o Do you need image o Do you need MXML
recognition? feeds? o What display metrics do
you require?
o What are your rules o What are your commerce
for storing collected needs?
assets?
o What reporting/ tracking
do you require?
o Where is your rights data
stored?