Build it, Buy it, Outsource it, Offshore it – or a Mix of them all?

June 14, 2020

A quick guide on how to prioritise and plan your software delivery.

No matter if you are coming up with a great business idea or already have an established solution in market that needs further development, it is always helpful to (re) assess your options. Right now, under the shadow of the Covid-19 this is perhaps more critical than ever before.

With next steps in mind, it is exploring these four key questions:

  • Have I got the right team?
  • What are my delivery priorities?
  • What is the best delivery approach?
  • The pro's and con's of ‘Build it, Buy it, Outsource/Offshore it - or a Mix'?
  • Considering Outsourcing and Offshoring?
  • Will this partner have the right credentials?


Having the right Team

Good software outcomes are consequence of many factors, but the main driver is good development capability, whether this is developed internally or in association with external partners. External partners may include a mix of product/licensing providers, outsourcing and/or offshoring partners.

It is normal to have a mix of all these options over time. Whether your team is internal - or externally based, they key is to have the right mix applied coherently to your needs over time.

If partnering is an option. A few questions to consider in your evaluation:

  • Are they a recognised, credible and trusted provider?
  • Do they have the right mix of innovation focus, domain insight and industry expertise that will bring additional value?
  • Can they match my technical requirements, do they have the right team and can they scale according to my needs over time?
  • Will I risk getting ‘locked-in’ and the risk of a loss of independence that potentially represents significant cost and/or lost opportunity?

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Delivery Priorities

Evaluating the options. What is the best delivery mix between building quickly, at low cost or towards high quality?

Choosing the best path for self-developed software has always included an element of trade-off against competing priorities. While using ‘out of the box’, SAAS or PAAS products can have strong appeal, there will certainly be times when bespoke building your own solution has more merit and will create additional value.

Prioritising the outcomes you want to achieve will help define your needs, delivery pathway - and indeed your partner(s).

The diagram shown here may help determine which mix is best for you.
It is only practically possible to have two combined options:

Example: Building a solution at low cost while wanting this done quickly will invariably lead to low quality leading to a trade-off of priorities.

The Pro’s and Con's

Below is a quick overview of core issues to consider between the mixed options of  ‘Build it, Buy it, Outsource it, Off shore it'

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Build it

Internally owned, self-developed software and resourcing:

Pro's‍

  • Ownership: Helps build domain insight, expertise and internal capability.
  • Finance: Is sometimes a cheaper 'direct-cost' option than outsourcing.
  • Helps bring further development efficiencies in to future outsourcing and/or offshoring engagements.

Con's

  • Limited to internal team experience and/or skills.
  • Employee risk; Loss of key roles, loss of IP, bad decisions or lost opportunity cost.
  • The combined ‘hard’ and ‘soft’ costs of owning and managing a workforce.

Buy it

Purchasing licensing, SAAS, PAAS and Cloud platforms

Pro’s

  • Speed to market; Purchasing ‘out-of-the-box' solutions can accelerate initial get- to-market solution delivery.
  • Op-Ex over Cap-ex. A licensing and fees model can have short-term appeal over the time and/or cost of bespoke building your own software.
  • Provide market proven feature/function benefit and scale.

Con’s

  • Market fit. Limited to the providers feature/function and may not match needs.
  • Risk of being ‘locked in’ to the product/provider.
  • Not creating any additional IP value.

Outsourcing

Pro’s

  • Leverage domain knowledge and efficiencies.
  • Allow the off-loading of projects/resourcing to focus on what matters to your business.
  • No soft cost: Every hour of labour is 100% fully utilised.
  • Access new skills, greater capability and scale-up or scale-down resources as required.

Con’s

  • Finance: The hourly rate is usually higher than the equivalent total employee costs when developed in NZ. However, when off-shoring is considered, then this is comparable to $NZ hourly rate when using the right provider.

Offshoring

Pro’s

  • Nearly always cheaper than $NZ equivalent rate.
  • Access to additional talent and technical skills.
  • Some benefit when scaling operations.

Con’s

  • The overheads of managing remote people and teams e.g. the tyranny of language, distance and management.
  •  ‘Lost-in-Translation’ issues can risk projects going astray and being delayed.
  • Continuity of supply; talent, people and quality.
  •  Can not be R&D co-funded unless the provider is a registered NZ company.

In a nutshell, you get what you pay for!

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Your Outsourcing and Offshoring check list

The key to success is making sure your partner has all the right attributes to not only improve outcome - but de-risk potentially expensive mistakes.

In summary

Building innovative software does need a careful evaluation of your approach, of your partner(s) and always matching the right delivery solution to your priorities as they evolve over time.

All options of build it, buy it, outsource and off shore it have their merits. If this blog reasonates with you and you would like to know more, have a chat to one of our Strategy and Innovation team here

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Augen offers a number of solution options from the packaged Augen Accelerator for early stage proof of concept solution delivery, right up to major software development, integration and team resourcing.

Our 50+ team deliver with pride out of our New Zealand and Vietnam country offices.

For more information on us – see www.augensoftwaregroup.com

Author. Jason Roberts, Strategy and Innovation Lead for Augen and Chair, InsurTechNZ