Some thoughts on Build vs. Buy.
May 30, 2025 4:47 pm
Happy Friday,
This will be a brief update, as I'm currently in the midst of packing for a week-long trip with the family.
I've had a whole bunch of conversations that are in the realm of build vs buy, and I feel that earned a few words in this week's newsletter.
At the bottom, you'll find a whole article on how to use a formal risk assessment formula to inform that decision that is based on a client's experience.
Capability or Commodity?
One of the first and best ways to know if you should build something in-house is to ask yourself if the thing you're considering building in-house is a necessary capability for your business or if it's a commodity.
Consider something like an analytics solution. Analytics are extremely important for any product business, but it does not offer any capability to the product itself or its future business. That puts it into the realm of a commodity and therefore should be something you consider buying off the shelf.
Whenever you build a commodity, you can reframe this as, "Why don't we generate our own electricity?" You absolutely need the electricity, but in no way is it worth the time or investment.
Risk Avoidance
Another reason people consider building in-house instead of buying is that there is a belief that they will have less risk from third parties, outages, theft, or business instability.
The article at the bottom provides more details on this, but you can calculate this exposure to inform your decision.
When people are afraid of loss, data helps temper what might be an otherwise costly and irrational decision.
Cost and Ego
The third reason I see people debate building in-house is what I'll bundle up as cost and ego. I lump these together because the rhetoric is the same. On the cost side, people see the monthly bill from some of these services, and the shock prompts a desire to build in-house and bring the cost down.
The ego side is very similar, but looks more like feeling like you could do better than that entire business or industry with no previous background or experience.
While I'm not taking the position that the cost of your services is irrelevant or always worth it, you absolutely need to look at total cost and not just some keyhole aspect of it.
An example of this is using a fully managed PaaS like Heroku compared to using multiple different services or building your own. Heroku does have a much higher cost than other options on the surface, but that is the keyhole that betrays reality. Fully managed platforms eliminate almost all operational costs, outage recovery, or need for infrastructure at all. If you looked at any one of those things for the cost to do it yourself, it would almost pay the entire PaaS bill on its own. Also, don't forget they've been doing this for a very long time, and you will be doing it for the first time. You will likely never see the stability they provide.
Who Are You?
At the end of the day, your business needs to make a decision about what it is and what it isn't. If you bring your analytics in-house, you're a non-profitable analytics company. If you build and maintain your own PaaS you're a non-profitable PaaS company.
Why aren't you profitable? Because you don't have customers or a business model that justifies the continued investment.
Invest in what your business is about, not what it isn't.
Here's my weekly update for May 30th, 2025...
🗒️ Make Your Next Build vs. Buy Decision Like Fight Club
Build vs buy is a challenging decision, but when we want to build because an incident left a bad taste we need to do a risk assessment.
Thankfully the movie Fight Club teaches this accurately and you can learn too and avoid costly mistakes.
🗒️ Better Communication for Busy Leaders
Miscommunication cripples productivity in groups.
In this article you'll learn the root causes of miscommunication and effective countermeasures to stay productuve.
🗒️ The Ultimate Guide to Effective Horizon Planning
Horizon plans are a lightweight tool to communicate long-term strategic goals.
In this article I will break down how to build, use, and update them so you can communicate more strategically and adapt more quickly.
Enjoy,
Ryan Latta