Deciding to Build or Buy in Technology: A Strategic Guide
Navigating the Build vs Buy Decision for GenAI Solutions
Summary:
- The rise of GenAI is prompting companies to reconsider the build vs buy decision for technology solutions.
- Historical trends indicate early adopters often abandon self-built tools due to unsatisfactory results, leading to time wastage, resource drain, and missed opportunities.
- Unique technology challenges exist for different industries. For example, the GovCon market requires specific security, accounting, and government data handling capabilities.
- The decision to build in-house is driven by factors such as perceived shortcomings in COTS products, the wish to display in-house tech, and the belief that it’s cheaper and faster.
- The build or buy decision fundamentally hinges on time and money. Companies can often achieve better results by sourcing tech from specialist firms, saving time, money, and keeping pace with AI advancements.
In the world of technology, it feels like some new paradigm shift pops up every few months. Over the past 18 months, GenAI has emerged rapidly, becoming a buzzword in every business conversation and technology marketplace.
The Rise of GenAI and Its Impact on Business Decisions
OpenAI’s partnership with Microsoft has made it easy for any company with an Azure account to use GenAI. Microsoft is betting its future heavily on this investment and is integrating AI into most of their products via CoPilot. Similarly, Google and Facebook are making their own significant investments in GenAI, while dozens of “vertical AI” companies are offering AI-based tools for both businesses and consumers.
Now more than ever, it’s important for businesses to reconsider the fundamental questions: “When do I build?” and “When do I buy?” Let’s explore some key considerations when deciding between building and buying technology solutions.
Insights from Past Technology Shifts
Major technology shifts often face initial skepticism, but truly innovative technologies that have a significant business impact gain momentum and become positively disruptive.
One common trend is that early adopters often build their own tools based on emerging tech, rather than buying purpose-built commercial off-the-shelf (COTS) products from startups. However, within a short time, many of those who chose to build abandon their projects and purchase better versions from the same vendors they initially avoided. One of the main reasons for that is that an emerging technology vendor is entirely focused on solving a specific problem-set, whereas your team will always have competing priorities that make it impossible to stay ahead of developments in the space. This often results in wasted time and resources, as internal projects fail to deliver the desired outcomes, leading to a net-negative business impact due to lost opportunities.
This cycle repeats with every new technology, yet the lessons of the Build vs. Buy paradigm are often overlooked by many decision-makers.
Understanding the Unique Challenges of Different Sectors
Every business faces continuously evolving risks, as well as and opportunities that need to balanced for the organization to thrive. Different industries, such as financial services, healthcare, and government contracting, have unique technology needs from LLM platforms and AI knowledge management solutions. Let’s look at the government contracting (GovCon) market as an example.
A Deeper Look: The Government Contractor (GovCon) Market
The GovCon market has unique challenges, mostly focused on security, accounting, and handling government data. These unique requirements make it difficult for vendors to compete unless they understand the specific needs of the industry. For example, FedRamp authorization or FAR-based procurement rules add another dimension of complexity and make a home-built solution more elusive.
Factors Driving the Build Decision
Why do some organizations decide to build instead of buy a technology?
- Perception that COTS solutions lack necessary security or product features.
- Desire to showcase in-house technology and engineering capabilities.
- Belief that building in-house is cheaper and faster.
- Conviction that building in-house will result in a product that is more aligned to the organization’s needs.
While these points are valid, many significant costs of building instead of buying are not by themselves financial, but significantly impact the bottom line. Important non-quantifiable impacts include:
- Missed market opportunities and competitive advantages.
- Wasted time and resources that could have been used for client differentiation.
- Negative long-term shareholder impact.
The Fundamental Question: Build or Buy?
The decision to build or buy ultimately comes down to time and money. Time is the one commodity you can never get back, and it often equates to a significant monetary value. Building something in-house may seem appealing, but if there’s an emerging market for a product, it indicates that specialized companies are dedicated to solving that problem.
The world of AI is moving very fast and it takes a large investment in technology and technology implementers to keep up.
Even if your development team is world-class, niche companies with a larger sample size will drive features more effectively, quickly, and outperform your team over time. Why not simply use Rohirrim’s affordable, patented, GenAI technology and let us be responsible for ensuring you keep up-to-date. You will save both, time and money, while getting superior service and technology from the experts.
