“Should we build or just buy an off-the-shelf solution?” is the wrong question to ask. It’s a very binary question, and the decision is rarely binary. There are six key rungs on that ladder and most belong on the 3rd one, which no one ever considers since they’re often thinking of just the two binary options.
Each rung is the right answer for somebody. The difficult part is figuring out which one is right for you, and that comes down to five questions in a specific order. Order matters, because most teams start with cost, and cost means nothing unless you know exactly what you’re buying.
This sets the floor for what it is you’re looking to build or buy.
Do the following: write out the desired workflow as literal steps. Take the top SaaS products on the market and see how man of those steps in your workflow are actually feasible. Give a half-point to any that have workarounds, but your desired path is not actually possible.
Write down the rough percentage that is covered by that SaaS product and write down what is not covered.
This should help you visualize pretty quickly if a SaaS product is going to be the right option. The closer to 100% coverage you get, the lower on the rung-ladder you should be (rungs 1-3). The lower that number is, the higher on the ladder and closer to a fully bespoke solution you should be.
It’s important to write all of this out, because often times, the tool you think is 95% of the way there, realistically is only 70% of the way there, and that won’t qualify for a pure SaaS play.
Edge gaps are integrations, reporting, data that needs to be moved between additional systems, etc.
Center gaps mean that the tool’s data model or other core functions do not match your business or workflows. You will forever be fighting the very nature of the application.
If your gaps are more center than edge, then you should start looking higher up on the ladder.
This question is vital to your decision when it comes to new software.
Changing because it is unsettled (new or unknown process, no agreed-upon shape) → move down the ladder if you are in this stage. It’s better to experiment and shape your process with cheap software than to constantly change it building out something custom. If you have a vision for what it should be, you can move back up the ladder.
Changing because your market moves → move up. If your market is constantly evolving and you have a need to stay ahead of the curve, then you should move further up the ladder where you can be more innovative and adapt easier. Standard isn’t ideal for you if your market is moving.
Stable for the last 3 years and likely stable for the next 3 years → Buy. Move down the ladder. If you’re unsure, look at how many times a key step in your workflow has been restructured in the last 18 months.
Regulatory and data residency requirements. Audit trail requirements. Obligations you’re contractually obligated to. Performance and scale ceilings.
Each one of these things can immediately disqualify a SaaS option. However, compliance requirements can often push you further down the latter towards SaaS products that already meet those requirements. Each non-negotiable requirement should be thought out carefully so that you don’t make a big decision and then hit a wall that limits your ability to work down the road.
Maintenance: Who is the exact person or team that will maintain this 14 months from now? How much of their time is going to be required or how much will it cost if it’s a partnership or 3rd party?
Price is always going to be a major factor when it comes to a software investment, whether it’s a SaaS product or a custom build. Keep in mind the long-term maintenance costs of both. Are there monthly/yearly fees? Do you need to allocate resources full or part-time to managing the new system? How much money needs to be budgeted for the upkeep and development of the system?
In some cases, the personal required to maintain a SaaS product that only does 80% of what you need can cost way more than the bespoke solution that would have done the full 100% of what you need.
In other cases, it may not be worth the extra 5-10% of process improvement to go up the ladder further than rungs 1 or 2. Each situation is unique and you need to think through these long-term costs.
Most teams jump right in without thinking through the consequences of what they’re committing to for the next 5+ years. The ladder is something you climb or step down as answers change. The company that right now belongs on rung 2, may belong on rung 3 or 4 here in a few years.
Consider what your needs are right now and where long-term you think you are heading. This is not a one-time decision. It’s a decision that you’re going to continually need to make every few years as your business continues to grow and compete in an ever changing market.
The goal is never really determining just build vs buy. The goal is to spend the least you can on the parts of the business that don’t distinguish you so that you have something left to spend on the parts that do.