Buy, build or borrow?
Answer the key questions and consider the advantages and disadvantages of buying, building or borrowing an innovative solution.
Making the decision about whether to buy or build can be challenging for business owners and prospective buyers.
Some business owners are convinced their need is so new or unique that they assume that relevant vendor solutions don’t exist. When business owners face policy barriers or are skeptical that complex business processes could be simplified, building a custom solution can seem like the best or only option.
For ICT leaders, the total cost of ownership, return on investment or business benefits are important considerations. Business owners may not be aware of hidden or ongoing costs or other non-cost factors.
Chief Information Officers (CIOs) and ICT strategists make carefully considered technology investment decisions that maximise utilisation, operational efficiency and life-span of strategic infrastructure. Their goal is to future-proof NSW Government and/or agency capability, reuse state digital assets and control shadow IT. That’s why it’s important for them to understand to what extent existing and planned solutions can be reused to meet emerging business needs.
‘Buying’, ‘building’ or a hybrid approach known as ‘borrowing’ are three distinct approaches to acquiring new technology solutions, once a new business need has been identified.
Buy, build or borrow?
’Buying’ involves purchasing a pre-built solution from a vendor, while ‘building’ entails developing solutions in-house using internal resources. A third option, ‘borrowing’ or buy-to-build, involves a combination of both: initially buying a solution and then adapting it or building upon it internally.
This page provides guidance for navigating the ‘buy, build or borrow’ decision.
Considerations when making this decision
Every buyer has unique technology needs based on their sector, audience and the problem they're trying to solve. Sometimes a custom solution is best, but often buying an existing one is more practical in the long-term.
Ultimately, the goal is to find the best solution to meet the needs of the NSW Government and the community. This means achieving value for money while fostering innovation and collaboration between the government and the private sector.
Expand the boxes below to explore some key questions and considerations for making this decision.
How critical is the solution to NSW Government agency core activities?
If it's central to core activities, building might be more strategic:
- to maintain control
- for the NSW Government to gain a competitive advantage
- if the value the NSW Government can achieve can compete effectively with a bought solution.
Do you have the necessary in-house expertise to develop and support the capability? If not, can you acquire it through hiring or training?
‘Build’ projects should directly contribute to core business.
- Many ICT leaders opt to build non-core technologies to maintain control. However, this often results in inefficiencies and stretched resources, detracting from higher-priority projects that drive real impact.
- Most ICT organisations are understaffed, with long release windows and project lifecycles. Stakeholders have to navigate complicated internal processes to successfully build non-core technologies in-house.
- Non-core projects take bandwidth and resources away from other higher priorities. This makes it hard to drive meaningful impact and showcase the ICT team's value.
- Core projects have greater strategic importance and are more heavily promoted. Being assigned to projects building non-core technologies can create division within the ICT team. This can lead to feelings of devaluation and potentially complicates hiring, promotions and team transitions. This distraction can hinder retention and growth.
- Motivated ICT professionals thrive when working on projects that deliver clear impact and value for the NSW Government, rather than on arbitrary side projects.
Does this technology already exist and is it easy to buy?
- Sometimes the technology you need doesn't exist, making in-house development essential.
- Other times it exists but is offered by only a few niche vendors. This may not be the best option due to lack of competition. If there's a robust market with many competing tools, buying is often the smarter choice.
- If many relevant companies, agencies and jurisdictions are using existing tools successfully, it indicates the advantages of buying. These vendors have had a head start, dedicated resources and industry insights that your in-house team may lack. They benefit from diverse client feedback and can quickly iterate and optimise their products. Few in-house technologies can successfully compete with those advantages. That's why the biggest companies tend to buy instead of build when it comes to solutions that fall outside of their core competencies.
- If the technology already exists in the market, carefully consider whether the problem has already been solved and the capability exists within the NSW Government. Some digital platforms, services or data used by more than one NSW Government agency are endorsed as core or common state digital assets. The NSW State Digital Assets Reuse Policy applies to all NSW Government agencies and requires buyers to determine if current state digital assets provide the capabilities needed before procuring or building something new.
Do you need a best-in-class solution or just something basic?
- While a third-party vendor often builds better technology than you can, not every solution needs to be the best. If you just need a temporary, good-enough solution, building in-house might make sense, even if superior products exist.
- If the standard solution won't meet your needs, you may need to build.
- If you need a best-in-class solution, building something that is more that just functional can be challenging and requires significant dedication and resources.
- Ask yourself: Can you build a better solution than a well-known supplier brand? If not, choosing to build might be taking on more than you can handle.
Do you truly understand the Total Cost of Ownership (TCO)?
- Cost drives many companies to choose ‘build’ over ‘buy’. This perception can overlook the long-term investment required to maintain and improve a custom solution.
- While organisations assess the initial costs of building a solution, they fail to consider the long-term expenses required to remain up to date compared with third-party vendor solutions. Custom solutions demand continuous investment in code changes, knowledge updates and infrastructure costs. These are often underestimated.
- Organisations with in-house solutions often face inefficiencies, especially under rapid user growth. This leads to latency, technical debt and siloed data. Maintenance is ongoing and can compound over time, consuming valuable resources and limiting innovation.
- Technology constantly evolves. Changes cause upgrades and rapidly evolving mobile platforms like iOS or Android need continuous updates.
- Opportunity cost is a hidden issue associated with building non-core technologies in-house. Engineering time is precious. When engineers focus on building non-core solutions, they divert attention away from core products and services.
- Some suppliers invest heavily in Research and Development (R&D), so that they can deliver world-class services. It's worth thinking about how much you're investing in your core focus and the opportunity cost of focusing more resources on a non-core initiative. Non-core projects often lack the specialised knowledge needed to meet specific requirements, resulting in suboptimal tools.
- It takes very few engineers to eat away at funding from in-house vs buy. Two dedicated engineers are more expensive than most Software as a Service (SaaS) contracts, before accounting for the cost of running the tool.
How easily can the organisation adapt to the new solution, whether it's bought or built?
- Any tool, whether built internally or purchased from a third-party vendor has a learning curve for end users. Getting the most out of these tools is challenging if there aren't experts you can consult and processes in place to help new users get up to speed.
- Active stakeholder engagement and open collaboration with other agencies and departments before and during the buy or build process will yield more buy-in and support adoption targets.
Benefits and risks
Each approach has its own set of advantages and disadvantages. The best choice depends on the needs, desired outcomes and circumstances of the buyer. By carefully evaluating these factors, buying teams can make an informed decision about whether to buy, build or borrow ICT capabilities.
Expand the headings below to explore the benefits and risks of each solution acquisition option:
The ‘buy’ approach focuses on acquiring pre-built solutions from external sources. Choose this option when the capability is not core to the business and you need a solution faster than the time it would take to build.
Benefits
- Faster access to established solutions.
- Avoiding distractions and inefficiencies when the solution doesn't align with core competencies or technology priorities.
- Dependant on the commercial model, likely to have lower upfront costs than the higher upfront investment associated with building, although there are ongoing costs like maintenance and licensing to be considered.
Risks to manage
- Limited control over customisation.
- Integration challenges with existing systems.
- Problems scaling in dynamic environments are discovered down the track with costly implications.
- Vendor lock-in with potential for higher long-term costs if the vendor commercial model is costly and the solution could be built as core NSW Government technology.
- An inability to tailor the user experience, resulting in limited adoption.
- An existing solution may only support a percentage of requirements, creating adoption challenges. Buying teams should map their requirements against existing solution capabilities to determine the percentage of business needs they address, then identify all potential impacts.
- Innovative solutions may need additional testing and careful evaluation before committing to a single supplier or a large-scale purchase.
- Buying teams should consider future needs and technology trends as part of their evaluation to future-proof investments in a rapidly evolving market.
The ‘build’ approach focuses on developing internal expertise and infrastructure. Choose this option when the capability is critical for delivering high impact and value services, the NSW Government has the resources and skills required in-house and there is time to develop it internally.
Benefits
- Co-designing with stakeholders to tailor solutions with potential for providing high value services.
- Ability to fully customise to meet unique needs and strengthen NSW Government’s value proposition.
- Greater control over the solution and potentially lower long-term costs if built efficiently.
- Targeted stakeholder problem solving, user acceptance and adoption.
- Development and retention of internal expertise when the solution aligns with more technology competencies.
Risks to manage
- In general, build projects have a high potential for delays and rework that can lead to cost overruns.
- Build projects tend to have long implementation timelines, driving high project resource costs.
- Building is resource-intensive and requires specialist skills for custom development. This means a high investment upfront in both hiring skilled resource, and in the time it takes to conduct pre-build design and rounds of post build testing activities.
- Building requires significant support skill and resourcing.
- Requires significant investment in training and infrastructure.
This approach involves purchasing a base solution or components, then building on it internally. For example, an organisation might buy a pre-built software platform and then customise it or integrate it with other systems they've built.
The ‘borrow’ approach focuses on collaboration with external partners to access expertise or resources. Choose this option when the capability is needed for a specific project or time period and the NSW Government wants to leverage external expertise without a long-term commitment.
Benefits
- Balances the speed of buying with the customisation of building.
- Can leverage the strengths of both buy and build approaches.
- Allows for staged innovation.
Risks to manage
- Requires careful planning to avoid integration issues.
- When building on a commercial platform there is a high risk of further costs and operational impacts from ongoing base solution release updates. Regular software releases will require reconfiguration of base platform and updates to all integrations. Understand the frequency of scheduled releases and the likely level of change and build this into their business case and plan for operational systems management.
- Commercially licensed platforms require specialist engineering skills to build, integrate and scale custom solutions. Buying teams should understand the skills required, level of engineering effort required (e.g. APIs, configuration v customisation and coding), how easily resources can be trained or acquired (e.g. training certification programs), resource market availability and lead times for onboarding.
- Innovative commercial platforms that have not yet been widely adopted may rely on highly specialised skills. This can create a heavy reliance on external partners for resourcing, leading to vendor lock in. Resources from the vendor or those available in open market can be scarce, creating extended delays and challenges in maintaining consistent quality and control. Buying teams should understand the type and availability of skills required to maintain innovative or emerging technology platform solutions.