As companies scale, especially in this SaaS-dominated economy, management teams will sooner or later be confronted with a build vs buy decision. All companies large or small, tend towards wanting to control everything they can. Compounding this natural inclination, if something is painful but “working,” they push making hard choices down the road. It's difficult to uncover what an organization is best suited to own fully, and what is worthy to hand off to external partners.
Trying to take on too much at any stage of your growth means you are burdened with maintenance costs and frankly ending up with a substandard portion of your offering.
Build vs buy 2x2 framework
Here is a simple 2x2 decision framework chart we use to make choices on what we’re going to build or buy at Ordway. It is useful for both the product development and business development sides of our house. Hopefully it will help you as you think about decisions for your business.
Important definitions on using the the 2x2 decision matrix
- Build it - use your talented team to design, build, test, and maintain it.
- Decision time - do some rough (or precise) total cost of ownership analysis and think hard about whether this provides you a platform for differentiated value in your market
- Find vendor - find a rock-solid, but arms-length vendor. Optimize for cost/performance
- Find partner - find someone with aligned incentives if possible and be willing to pay a premium. You get what you pay for, right?
It just happened that one of our customers, Everhire, was going through a similar debate as they started to scale their tech platform which is designed to help growing companies recruit top talent.
Watch a two-minute video about how Everhire decided whether to try to build billing, contract, and revenue management into their platform. Read their full case study to learn more about what they chose to do.
Build vs Buy still remains important in 2020
The global pandemic is effecting all parts of the economy, and investment decisions within your business are no different. We recently came across some research on the 2020 Business Owner Mindset. In this survey of 524 business owners, 77% said they believed they would grow through the current downturn in the economy. This entrepreneurial optimism is at the heart of building world-class teams and businesses.
In the same research, only 20% of the respondents believed they had the tools to achieve their growth goals.
Our belief is companies should build a team around what they do best, and buy software platforms and tools (including the Ordway billing and revenue automation platform) to enable them to scale the parts of their business that are adjacent to their core. Companies like Dispatch, CompStak, and Botkeeper recently made the buy decision, and they haven't looked back. Hopefully, in next year's report, they will find that 20% number dramatically higher so business owners can focus on what they do best.