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In any particular industry, there will come a time when an organisation will require some software that they do not currently have and they have two options to fill that need – to build it themselves or to buy it from a third party. Your initial feeling may be similar to “if you want something done right, do it yourself”, but before progressing down either path, the pros and cons of each need to be considered thoroughly as both are valid approaches.

Below we recommend the questions you should answer first, before discussing the advantages and disadvantages of building versus buying, and lastly examining the potential costs of building it yourself.

The Important Questions to Answer

What is the core business of the organisation? If it is not usually software development, is this an area they would like to build expertise in?

Does the organisation already have the expertise and resources to analyse, design, build, test, support, and continually maintain the software if built internally?

Can the organisation wait for several months while they wait to organise the appropriate resources to elicit requirements, design, and build the solution?

What past experience does the organisation have with previous software development projects? What was the outcome and what lessons were learned from these projects?

What problem is trying to be solved? Is it simple?

Is your organisation the only one with this unique problem?

Is this to be a one-off interim solution to fill a need or will needs change as the organisation grows?

Build Advantages

  • Customised software that meets every requirement across the business
  • Ownership of the IP (which could also then be leased to third parties – assuming you are not the only ones with this problem)
  • Lessons learned internally
  • May give a competitive advantage

Build Disadvantages

  • Maintain IT department budget and retain top talent for a long time (5+ years) to ensure the capital investment and ROI is worthwhile
  • Time to develop can be months or years to get something usable (especially if experience in the industry is lacking by the developers)
  • Budget for re-work and multiple iterations to get the software “just right”
  • Ongoing support for bug-fixing, feature requests, urgent vulnerabilities, training, and building an internal help desk needs to be factored in
  • How to retain the tacit knowledge built up internally when key personnel leave
  • If built using a specific version of underlying software which changes (e.g. Operating System/database versions) could require large rewrites of the application or huge data migration projects
  • As business needs change, large chunks of the software built by the organisation may be rendered obsolete
  • “Re-inventing the wheel” for a solution that already exists
  • Both day-to-day operational and technical staff will be required
  • Likely to be too bespoke for the organisation’s requirements to be generic enough to be sold to meet other external parties requirements

Buy Advantages

  • Commercial off the shelf (COTS), ready-made solution
  • Deployment is usually in weeks or even days
  • Expert in software development, support and training
  • Built on requirements from multiple customers
  • More robust solution due to testing and use from multiple customers
  • Lessons learned from other customers inside your industry
  • Best practices included from outside your industry
  • Cost-effective over the long term

Buy Disadvantages

  • Potentially only certain requirements across the business may be met
  • Ownership of the IP is retained by the vendor
  • Reliant on the vendor for support

 

Examination of Costs

Lets now take an example to examine the potential costs of building the software within your organisation. Let’s say you hire:

2 Junior Developers @$50k

1 Senior Developer @$80k

1 Intermediate Business Analyst @$70k

1 Project Manager @$100k

2 Business Support @$60k

Total per year is $470k

Let’s say that over the course of two years you manage to get everything developed and working just right so complete costs are $940k for creation and ownership of the product. Now the employees above may not be needed full time on this project as they could be utilised on other projects so let’s say they only work 2 days out of 5 on this project. That brings the costs to $376k.

Now imagine you purchased an all-inclusive ready-made SaaS solution for $15k per month or $180k for one year. Over the course of two years, the complete costs would be $360k.

Immediately you can see from this rough calculation that building it yourself is more expensive and the above doesn’t include the cost of the servers, firewalls, load balancers, databases, operating systems, licences and other parts needed to provide a fully working solution, not to mention the IT team behind it to support the different environments. There is also the aspect of opportunity cost which should be factored in while you wait for your team to build the solution (based at 2 days a week from the above), you could be missing out on valuable learning time, potential customers and market share.

We would encourage you to think holistically if you do decide to build your own solution as the total cost of everything needs to be included to appropriately compare it to buying a solution readily available. If you are considering a Meter Data Management system for your organisation, contact us to see how we can provide a fluid solution that can seamlessly integrate into your environment.

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