Build vs. Buy Decision Framework

BUILD VS. BUY PHILOSOPHY

Understanding Build vs. Buy Strategically

BUILD VS. BUY FUNDAMENTALS

WHY BUILD VS. BUY DECISIONS MATTER:
☐ Affects speed to market
☐ Impacts long-term cost structure
☐ Determines competitive differentiation
☐ Shapes team composition
☐ Creates strategic dependencies

CEO'S ROLE IN BUILD VS. BUY:
☐ Ensure strategic thinking, not just cost
☐ Consider long-term implications
☐ Balance speed vs. ownership
☐ Avoid both over-building and over-buying
☐ Make decisions, don't defer

THE BUILD VS. BUY REALITY:
"The build vs. buy decision isn't just
about cost. It's about what you want to
own, what's core to your business, and
where speed matters more than control."

CORE VS. CONTEXT FRAMEWORK:
CORE: Activities that differentiate you
→ Generally BUILD these
CONTEXT: Activities required but not differentiating
→ Generally BUY these

BUILD WHEN:
☐ Core to competitive differentiation
☐ Need deep customization
☐ Data ownership is critical
☐ Long-term strategic value
☐ Build capability serves you well

BUY WHEN:
☐ Commodity capability
☐ Speed to market critical
☐ Not core to differentiation
☐ Vendor solution is mature
☐ Team should focus elsewhere

COMMON BUILD VS. BUY MISTAKES:
☐ Building everything (NIH syndrome)
☐ Underestimating build cost/time
☐ Underestimating buy integration cost
☐ Ignoring long-term vendor lock-in
☐ Not considering opportunity cost
☐ Deciding based on cost alone

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COMPREHENSIVE BUILD VS. BUY FRAMEWORK

Build vs. Buy Decision Framework

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BUILD VS. BUY DECISION FRAMEWORK
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CAPABILITY: _______________
Decision Date: _______________
Decision Owner: _______________

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SECTION 1: STRATEGIC ASSESSMENT
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CORE VS. CONTEXT ANALYSIS:
Is this capability...
☐ Core (differentiates us) → Build bias
☐ Context (necessary but not differentiating) → Buy bias
☐ Unclear → Analyze further

STRATEGIC QUESTIONS (Score 1-5 each):

1. Core to differentiation?
   Would owning this give us competitive advantage?
   Score: ___/5

2. Long-term strategic value?
   Will this matter in 5 years?
   Score: ___/5

3. IP/Data ownership importance?
   Is data or IP created here valuable to own?
   Score: ___/5

4. Customer-facing impact?
   Does this directly affect customer experience?
   Score: ___/5

5. Competitive necessity?
   Do competitors build this themselves?
   Score: ___/5

STRATEGIC SCORE: ___/25

INTERPRETATION:
20-25: Strong BUILD signal
15-19: Lean BUILD
10-14: Neutral (consider other factors)
5-9: Lean BUY
0-4: Strong BUY signal

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SECTION 2: BUILD OPTION ANALYSIS
═══════════════════════════════════════

BUILD REQUIREMENTS:
Description: _______________
Core functionality needed:
1. _______________
2. _______________
3. _______________

RESOURCE REQUIREMENTS:
| Resource | Needed | Available | Gap |
|----------|--------|-----------|-----|
| Engineers | ___ | ___ | ___ |
| Design | ___ | ___ | ___ |
| PM | ___ | ___ | ___ |
| Specialized skills | ___ | ___ | ___ |

BUILD TIMELINE:
| Phase | Duration | Resources |
|-------|----------|-----------|
| MVP | ___ weeks | ___ FTEs |
| V1.0 | ___ weeks | ___ FTEs |
| Mature | ___ weeks | ___ FTEs |
| Total | ___ weeks | |

BUILD COSTS:
┌─────────────────────────────────────┐
│ INITIAL BUILD:                      │
│ Engineering labor: $_____ (FTE × mo)│
│ Design/PM: $_____                   │
│ Infrastructure: $_____              │
│ Other (tools, etc.): $_____         │
│ ─────────────────────────────────   │
│ Total Initial: $_____               │
│                                     │
│ ONGOING ANNUAL:                     │
│ Maintenance (20% of build): $_____  │
│ Infrastructure: $_____              │
│ Support/updates: $_____             │
│ ─────────────────────────────────   │
│ Total Annual: $_____                │
└─────────────────────────────────────┘

BUILD RISKS:
| Risk | Likelihood | Impact | Mitigation |
|------|------------|--------|------------|
| Timeline slip | H/M/L | H/M/L | |
| Scope creep | H/M/L | H/M/L | |
| Technical failure | H/M/L | H/M/L | |
| Key person dependency | H/M/L | H/M/L | |

BUILD PROS:
☐ Full control and customization
☐ Own the IP and data
☐ No vendor dependency
☐ Can differentiate
☐ Build internal capability

BUILD CONS:
☐ Takes longer to market
☐ Higher upfront cost
☐ Ongoing maintenance burden
☐ Opportunity cost
☐ Risk of not delivering

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SECTION 3: BUY OPTION ANALYSIS
═══════════════════════════════════════

VENDOR OPTIONS:
| Vendor | Description | Fit |
|--------|-------------|-----|
| | | H/M/L |
| | | H/M/L |
| | | H/M/L |

PREFERRED VENDOR: _______________

BUY COSTS:
┌─────────────────────────────────────┐
│ INITIAL:                            │
│ License/purchase: $_____            │
│ Implementation: $_____              │
│ Integration development: $_____     │
│ Training: $_____                    │
│ ─────────────────────────────────   │
│ Total Initial: $_____               │
│                                     │
│ ONGOING ANNUAL:                     │
│ Subscription/license: $_____        │
│ Support/maintenance: $_____         │
│ Integration maintenance: $_____     │
│ Usage-based costs: $_____           │
│ ─────────────────────────────────   │
│ Total Annual: $_____                │
└─────────────────────────────────────┘

BUY TIMELINE:
Implementation time: _____ weeks
Time to full value: _____ weeks

VENDOR ASSESSMENT:
| Factor | Score 1-5 | Notes |
|--------|-----------|-------|
| Product fit | | |
| Vendor stability | | |
| Support quality | | |
| Pricing fairness | | |
| Integration ease | | |
| Roadmap alignment | | |

BUY RISKS:
| Risk | Likelihood | Impact | Mitigation |
|------|------------|--------|------------|
| Vendor failure | H/M/L | H/M/L | |
| Price increases | H/M/L | H/M/L | |
| Lock-in | H/M/L | H/M/L | |
| Integration issues | H/M/L | H/M/L | |
| Capability gaps | H/M/L | H/M/L | |

BUY PROS:
☐ Faster to market
☐ Lower initial investment
☐ Proven solution
☐ Team focuses on core
☐ Vendor handles updates

BUY CONS:
☐ Less control
☐ Ongoing license cost
☐ Vendor dependency
☐ May not fit perfectly
☐ Data/IP not owned

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SECTION 4: TOTAL COST OF OWNERSHIP
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5-YEAR TCO COMPARISON:
| Year | Build | Buy |
|------|-------|-----|
| Year 0 (Initial) | $_____ | $_____ |
| Year 1 | $_____ | $_____ |
| Year 2 | $_____ | $_____ |
| Year 3 | $_____ | $_____ |
| Year 4 | $_____ | $_____ |
| **5-Year Total** | $_____ | $_____ |

OPPORTUNITY COST ADJUSTMENT:
What else could the team do?
Build option: ___ FTE months × $___/FTE = $_____
Buy option: ___ FTE months × $___/FTE = $_____

Risk-Adjusted TCO:
Build (risk-adjusted): $_____
Buy (risk-adjusted): $_____

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SECTION 5: PARTNER OPTION (THIRD WAY)
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PARTNER APPROACH:
Could we partner instead of pure build or buy?
☐ White-label and customize
☐ Co-develop with partner
☐ Acquire and integrate
☐ API integration + custom layer

Partner Option Details:
Partner: _______________
Arrangement: _______________
Cost: $_____
Pros: _______________
Cons: _______________

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SECTION 6: DECISION
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DECISION SUMMARY:
| Factor | Build | Buy | Partner |
|--------|-------|-----|---------|
| Strategic fit | ☐ Best | ☐ Best | ☐ Best |
| Speed | ☐ Best | ☐ Best | ☐ Best |
| Cost | ☐ Best | ☐ Best | ☐ Best |
| Risk | ☐ Best | ☐ Best | ☐ Best |
| Team fit | ☐ Best | ☐ Best | ☐ Best |

RECOMMENDATION: ☐ BUILD ☐ BUY ☐ PARTNER

RATIONALE:
Primary reason: _______________
Supporting factors:
1. _______________
2. _______________
3. _______________

TRADE-OFFS ACCEPTED:
1. _______________
2. _______________

KEY RISKS AND MITIGATIONS:
| Risk | Mitigation |
|------|------------|
| | |
| | |

DECISION APPROVAL:
Proposed by: _______________
Reviewed by: _______________
Approved by: _______________
Date: _______________

Build vs. Buy Quick Assessment

Criteria	Build	Buy	Weight
Core to differentiation	0-5	0-5	High
Speed to market	0-5	0-5	Varies
5-year TCO	0-5	0-5	Medium
Team capacity	0-5	0-5	Medium
Risk level	0-5	0-5	Medium
Weighted Score	/25	/25

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