A Difficult Choice
Imagine, if you will, that you sat in the CTO seat of a major retailer, and a genie who was particularly fascinated with the landscape of SaaS technology available in the retail market offered you a choice between two dreamy options. The first choice this genie presents to you is an incredibly robust and populous IT team to design, build and support any technology project you could dream of. The second option the genie presents to you is an unlimited budget to buy any technology product in the market that could possibly move the needle on your company’s performance.
What would you pick? Would you choose the build option, relying on the provided IT infrastructure to generate a reliable flow of new technologies? Or would you instead perform countless RFP for each solution to find out which firm purports to be the best in class at that particular technology or function? In short, is it better to build or to buy when it comes to emerging technology?
This is a question that every technology group, not only in the retail industry but every industry across the globe must answer. They could invest typically limited, stretched thin internal resources to carry out the necessary tasks of requirements gathering, configuration, development, deployment and maintenance to launch a solution, or they could spend limited, stretched thin tech budgets to hire the solution out to a third party that is likely orders of magnitude more expensive than what you would spend to build it internally.
Building
Building a custom technology solution in-house can give an organization greater control over the development process and the resulting product. It can also allow for greater customization and the ability to incorporate unique features and functionality. By tailoring the product to meet your organization’s precise needs and requirements, you don’t have to worry about trying to fit an external solution to your particular use case. Additionally, building in-house can be more cost-effective in the long run if the organization plans to use the solution for an extended period.
However, building a technological solution from scratch requires significant resources, including technical expertise and development time. Say you have decided to finally invest in competitor price tracking technology and you would like to develop a solution in-house; you had better hope that you already have resources familiar with AI and ML technologies necessary to scrape competitor websites that will recognize your bots clinging to their site and attempt to shake them off with suitable vigor. If you don’t have those resources already, you will need to go to the human capital bazaar and attempt to hire for those positions, likely slowing down the already sluggish project kickoff.
During this year’s Shoptalk conference for the retail industry, I snapped the photo below during a technology solutions presentation that discussed the reported success rates of building a custom solution. In 20% of the cases, the home grown solution failed to deliver entirely, and nearly 70% of the organization’s interviewed settled for a worse product, opting to reduce scope and scale in an effort to at least get something over the finish line.
If a retailer’s IT organization doesn’t have experience in developing similar solutions or lacks the necessary resources, there is a very tangible risk of not completing the project. For example, if the project runs into technical difficulties or spills outside of budget constraints, it may never be completed. The cost of investing in an internal project that fails to go live after months or years of effort likely exceeds the cost of buying that project off the shelf.
Buying
Rather than standing up a solution internally, a retailer could take the option to buy that solution. Since the solution has already been developed and tested by the vendor, buying a pre-built solution can save time and internal development resources, two things that no organization can ever have enough of. Buying a solution can provide access to additional features and functionality that may not be available through an in-house solution, while also taking care of ongoing support and maintenance.
On the other hand, buying a solution from a SaaS company is usually more expensive up front and may require ongoing subscription fees or licensing costs. It’s typically less customizable (sorry custom color scheme) and the organization may have to adjust its processes to fit the solution rather than the other way around.
There are also a plethora of technology providers peddling similar solutions and it can be difficult to isolate the best one. At the end of the day, an organization isn’t going to win because of which partner they chose, but rather how they use that partner. I’ve often talked to technology executives that struggle to build the muscle in their end users to adopt new technologies and make use of it a standard practice. A new technology, whether it’s home grown or purchased, is useless if the relevant people in the organization don’t adopt it.
What’s Best for You?
So should you accept the Genie’s offer of a cutting edge IT team or take the money to buy solutions off the shelf? From the conversations I’ve had with retail leaders, it seems most important to develop internally if the solution brushes against customer data. Having access to each facet of customer data accelerates marketing and repeat customer programs, so you want any solution around customer data to be owned outright.
Conversely, if the solution you desire isn’t customer related, then it might be better to purchase a solution that you are able to turn off in the future should the organization’s needs change. To the reader – what are your company’s principles around build vs buy? What goes into the decision to spin up internal resources or shop around for the best fitting solution? Email me your thoughts at cschneider@ql2.com, I would love to start a conversation!
Connor Schneider
Helping product/merchandising teams identify pricing gaps to maximize sales and profitability.