Build vs. Buy. Why Eventually Everyone Buys

You have been running your function, department, region, or company efficiently. However, as the company grows, so do the operational challenges. The increasing demands of your business are making day-to-day operations more challenging, and the existing tools — like emails, spreadsheets, and Zapier workflows — that worked well last year are no longer sufficient. The business has expanded significantly, and relying on these limited, independent tools is no longer viable. As a result, you decide it’s time to invest in dedicated software designed to address these challenges. Once the decision is made, most tech companies face the critical question: should they build or buy the software needed to solve the problem at hand?

While there are numerous articles and frameworks online about making the crucial decision between building or buying software, this article focuses on a different aspect. Here, I aim to present the reasons why our customers chose to buy our software. With over a decade of experience in B2B SaaS sales and adoption, I have gathered insights into why customers ultimately opted for the buy decision. Through years of working with large tech companies and assisting them in adopting SaaS platforms, I have gathered the following factors that led these companies to the wise decision of purchasing a B2B SaaS solution instead of building one in-house.

In some cases, investing in external software is an obvious choice. For example, few people debate whether to build or buy a CRM or ERP system. The dilemma often arises when the problem seems manageable internally, either by adding more hands to a manual process or developing an in-house system. A classic example of this dilemma is deciding whether to purchase a ticketing system or manage it using email, automation, and a team of Outlook experts.

Here, I present the reasons why one should opt for purchasing a commercial software product instead of attempting to solve it in-house. The following reasons were key deciding factors for several of our customers, who are cutting-edge, new-age tech companies. Despite having the capital and talent to develop these solutions internally, these companies chose to invest in an external tool eventually.

1. Friendly Pet Turned into a Hungry Monster: In-house solutions often begin as simple, manageable projects — perhaps a weekend task — that initially meet the company’s needs. However, over time, these solutions can grow into full-blown products that become deeply integrated with the core business systems, often lacking sufficient abstraction and encapsulation. As the integrations and dependencies become heavily intertwined, what started as a harmless tool for solving internal problems can begin to slow down the development and release of customer-facing features. This situation can be detrimental with real revenue and growth impact, putting the company at serious competitive risk. Moreover, as the in-house solution grows, it requires increasingly more attention for updates and modifications, eventually necessitating a dedicated team with specialized domain and operational knowledge to maintain and support the product. This again takes away precious time of highly skilled developers.
2. Lack of Operational Insights/Business Intelligence: In-house systems, whether built internally or outsourced, often fail to reach the maturity level of established SaaS platforms in providing business intelligence and operational insights. These insights include daily/monthly reports, SLA and KPI reports, efficiency reports, and more. Typically, in-house projects are funded just enough to address the immediate pain points, without extending to the development of comprehensive tools for key operational insights. Consequently, these systems often deliver just enough to solve the primary issues, but features like reports, analytics, and logs are often underdeveloped and neglected. As a result, business intelligence in these systems rarely achieves the maturity, flexibility, and self-service capabilities that commercial products offer. Customers who switch to SaaS products with robust built-in business intelligence are often excited about the new capabilities. They can now clearly demonstrate efficiency, utilization, and cost savings with concrete and accessible data.
3. Compliance nightmares: If the tool or product being developed falls under a regulated category or integrates with one, it presents significant challenges in building compliant software and obtaining necessary certifications, such as HIPAA, SOC, or PCI-DSS. While creating a compliant solution may initially seem feasible and not a primary reason to invest in software, the complexities often emerge deeper into the development process. Even after achieving compliance, maintaining it becomes an ongoing challenge, especially as regulatory requirements frequently change. Staying up-to-date and keeping the software compliant can become burdensome, particularly when there are other critical business issues to address. Additionally, there is the constant concern of facing penalties, legal complications, and potential reputational and revenue damage.
4. Funding and revenue growth: Many companies decide to purchase a solution after securing a substantial budget or when they are experiencing strong revenue growth or have recently received funding. We’ve observed that several customers opt for SaaS solutions even when they initially knew that building an in-house system wouldn’t be the best use of their time. However, they struggled to secure the necessary budget to buy the right solution. These companies often manage with inefficient systems and tools, and in many cases, they lack the technical capabilities to build anything substantial, resulting in reliance on loosely connected tools and processes. The moment they can afford a good solution they make the smart decision to buy a proper solution externally.
5. Strategic changes: Companies often opt to purchase an external tool when they shift their business strategy or when market conditions necessitate a change in strategy. Typically, these changes require abandoning existing efforts, tools, and in-house systems. The realignment of strategies demands rapid development for market validation, and building in-house systems for operational needs in such scenarios impedes quick development and release. In these cases, the best option is to buy and implement a mature external system to become market-ready as quickly as possible. Therefore, if you’re an organizational, functional, or regional leader anticipating a change in your company’s strategy or focus areas, it’s wise not to invest in-house resources in developing something that might soon become irrelevant. Instead, consider purchasing cost-effective software to address the immediate needs until your company’s strategy and direction are clearly defined.

Deciding whether to buy or build a tool that enhances your efficiency is a crucial decision that can have long-term implications for your business. The benefits or drawbacks of this choice can compound over time, influencing not only operational efficiency but also cost management, scalability, and competitive positioning.

I hope that the experiences and insights shared in this article have provided valuable guidance in making this critical decision. Whether you choose to build or buy, the key is to ensure that the chosen solution drives efficiency, supports your growth, and ultimately, contributes to your company’s success.

Let me know your thoughts in the comment.