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10 Reasons A Company May Want to Build A Solution Versus Licensing One (And Reasons Not To)

Recently, I wrote an article advising companies not to host their videos on their infrastructure. There was some pushback from some techies who understood the ins and outs of video hosting. They had some excellent points, but video requires an audience, and many video hosting platforms provide a solution AND the audience. In fact, YouTube is the second most searched site on the planet… only second to Google. It’s also the second largest social network, next to Facebook.

When computing power was costly, bandwidth was costly, and development had to be done from scratch, it would have been nothing short of suicide for a company to attempt to build its marketing solution. Software as a Service (SaaS) invested billions to develop their platforms – so why would a company make that investment? There was no return on investment (ROI) for it, and you’d be lucky if you ever got it off the ground.

Reasons Why A Company May Build Its Own Platform

That doesn’t mean I believe companies should never consider building their own solution. It’s simply a matter of weighing the benefits of building versus buying a solution. Along with plentiful bandwidth and processing power, here are 10 other reasons that may entice a company to build versus buy:

  1. No-Code & Low-Code Solutions: The rise of no-code and low-code development platforms allows businesses to create custom sales and marketing solutions without extensive coding expertise. Companies can reduce development costs and accelerate time-to-market by using no-code tools to build tailored solutions that match their unique needs.
  2. Plentiful APIs and SDKs: The availability of numerous APIs (Application Programming Interfaces) and software developer kits (SDKs) allow for seamless integration between different software components. Building a custom platform enables companies to leverage APIs to connect various systems, streamline data flow, and create a unified sales and marketing ecosystem.
  3. Low Cost of Bandwidth and Processing Power: The decreasing cost of bandwidth and the availability of cloud computing resources have made data storage and processing more affordable. Companies can build and scale their platforms in the cloud, reducing infrastructure costs and achieving cost efficiencies as they grow.
  4. Regulations & Compliance: Evolving regulations like GDPR, HIPAA, and PCI DSS have made data privacy and compliance more critical than ever. Building in-house platforms allows companies to have full control over data handling and compliance, reducing the risk of costly regulatory penalties.
  5. Security: Cybersecurity threats have become increasingly sophisticated, making data protection a top priority. Developing a custom platform lets companies implement robust security measures tailored to their specific needs, protecting sensitive customer data and intellectual property.
  6. Customization: Building allows for complete customization to align with a company’s sales and marketing strategies, providing a competitive edge that off-the-shelf solutions may not offer.
  7. Scalability: Custom platforms can be designed to scale seamlessly as the company grows, ensuring they can handle increased volumes without the limitations of third-party software.
  8. Integration: Companies can tightly integrate their in-house platform with existing tools and databases, improving efficiency and providing a unified view of customer data.
  9. Cost Control: Over time, building a custom platform can result in cost savings compared to recurring annual license fees, especially as the company grows and the volume of data and users increases.
  10. Investment: Developing a proprietary solution can contribute to the company’s long-term value. A custom-built platform becomes valuable, potentially increasing the company’s overall worth. This proprietary solution can also be a unique selling point, attracting investors, partners, or potential buyers who see the value in the company’s technology assets.

Reasons Why A Company Should Not Build Its Own Platform

My good friend, Adam Small, built an incredible real estate marketing platform that’s both affordable and feature-rich. One of his larger clients decided they could build their own platform internally and offer it free to their agents. Years later, millions of dollars were spent, and the platform still doesn’t provide the basic functionality required for real estate agents… and those who left for the cost savings have now returned.

Don’t underestimate the effort to build a solution. There are valid reasons why a company might choose not to build its own solution and opt for existing, licensed solutions instead. Here are some common reasons:

  • Cost and Resource Constraints: Building a custom solution can be expensive and resource-intensive. It may require hiring specialized developers, designers, and ongoing maintenance staff. Licensed solutions often have predictable subscription costs.
  • Time to Market: Developing a custom solution can take significant time. Businesses that need to launch quickly may find it more practical to use pre-built solutions that are readily available.
  • Lack of Expertise: If the company lacks in-house software development and technology expertise, building a custom solution may lead to challenges in effectively maintaining and evolving the system.
  • Complexity and Risk: Building a custom platform comes with technical challenges and risks, such as unexpected development delays, bugs, and compatibility issues. These can impact operations and revenue.
  • Bugs and Vulnerabilities: Developing custom code introduces the risk of coding errors and vulnerabilities that malicious actors can exploit. These issues may not be discovered until after deployment.
  • Data Protection: Ensuring the security of sensitive data, such as customer information or financial records, can be complex. Mishandling or inadequate protection of data can result in data breaches.
  • Compliance: When building a custom solution, meeting industry-specific regulations and compliance requirements can be challenging. Non-compliance can result in legal and financial consequences.
  • Focus: Companies may prefer concentrating on their core business activities rather than diverting resources and attention to software development. Using existing solutions allows them to focus on what they do best.
  • Innovation: Many licensed software solutions offer and continue to add a wide range of features and integrations that can meet the needs of businesses without the need for custom development.
  • Upgrades and Maintenance: Maintaining and upgrading a custom solution can be time-consuming and costly. Licensed software solutions often come with support, updates, and maintenance services.
  • Market Tested and Proven: Established software solutions have a track record of being used successfully by numerous businesses, reducing the uncertainty associated with custom development.
  • Scalability: Some licensed solutions are designed to scale with a company’s growth, making it easier to adapt to changing needs without the burden of extensive development work.
  • Vendor Support: Licensed software often includes vendor support, which can be valuable for troubleshooting issues and getting assistance.
  • Total Cost of Ownership (TCO): While building a custom solution may seem cost-effective initially, over time, the TCO can be higher due to development, maintenance, and support costs.

In summary, not building your own solution may be a sensible choice if the company faces resource constraints, time-to-market pressures, lacks technical expertise, or if existing solutions align with its requirements. Careful consideration of the trade-offs between building and buying is essential to make an informed decision that best suits the company’s goals and circumstances.

Douglas Karr

Douglas Karr is the founder of the Martech Zone and CEO of DK New Media. Douglas has helped dozens of successful MarTech startups, has assisted in the due diligence of over $5 bil in Martech acquisitions and investments, and continues to assist companies in implementing and automating their sales and marketing strategies. Douglas is an internationally recognized digital transformation and MarTech expert and speaker. Douglas is also a published author of a Dummie's guide and a business leadership book.

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