Flevy Management Insights Q&A

How should companies evaluate the scalability of Build vs. Buy options in their IT strategy?

     Joseph Robinson    |    Build vs. Buy


This article provides a detailed response to: How should companies evaluate the scalability of Build vs. Buy options in their IT strategy? For a comprehensive understanding of Build vs. Buy, we also include relevant case studies for further reading and links to Build vs. Buy best practice resources.

TLDR Companies should evaluate Build vs. Buy options in IT strategy by analyzing strategic implications, cost, resource needs, and scalability to align with business objectives and technological requirements.

Reading time: 5 minutes

Before we begin, let's review some important management concepts, as they related to this question.

What does Scalability mean?
What does Total Cost of Ownership mean?
What does Strategic Alignment mean?


Evaluating the scalability of Build vs. Buy options in an organization's IT strategy is a critical decision that can significantly impact its operational efficiency, innovation capabilities, and competitive edge. This decision-making process involves analyzing various factors such as cost, time to market, customization needs, and long-term strategic goals. By carefully considering these elements, organizations can make informed choices that align with their business objectives and technological requirements.

Understanding the Strategic Implications

When considering Build vs. Buy, organizations must first understand the strategic implications of each option. Building custom solutions allows for tailored features and functionalities that precisely meet specific business needs. It offers greater control over the development process, potentially leading to a competitive advantage if the solution significantly enhances operational efficiency or customer experience. However, this approach requires significant investment in terms of time, resources, and expertise. According to Gartner, custom-built solutions can lead to higher long-term maintenance costs and may pose scalability challenges as the organization grows and its needs evolve.

On the other hand, buying off-the-shelf software can be more cost-effective and allows for quicker implementation. Vendors often provide continuous updates and support, reducing the burden on internal IT staff. However, organizations may face limitations in terms of customization and dependency on the vendor for critical updates and feature enhancements. A study by McKinsey highlighted that companies prioritizing speed and efficiency in their digital transformation efforts often favor buying solutions to leverage existing technologies and accelerate time to value.

Strategic Planning plays a crucial role in this decision-making process. Organizations must align their IT strategy with their overall business strategy, considering how the Build or Buy decision will support their long-term goals. For instance, a company focusing on innovation and market differentiation might lean towards building custom solutions, while a company aiming for quick market entry and operational efficiency might prefer buying.

Are you familiar with Flevy? We are you shortcut to immediate value.
Flevy provides business best practices—the same as those produced by top-tier consulting firms and used by Fortune 100 companies. Our best practice business frameworks, financial models, and templates are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience.

Trusted by over 10,000+ Client Organizations
Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.
AT&T GE Cisco Intel IBM Coke Dell Toyota HP Nike Samsung Microsoft Astrazeneca JP Morgan KPMG Walgreens Walmart 3M Kaiser Oracle SAP Google E&Y Volvo Bosch Merck Fedex Shell Amgen Eli Lilly Roche AIG Abbott Amazon PwC T-Mobile Broadcom Bayer Pearson Titleist ConEd Pfizer NTT Data Schwab

Assessing Cost and Resource Implications

Cost is a pivotal factor in the Build vs. Buy decision. Building custom IT solutions often requires upfront investment in development, which includes hiring skilled developers, investing in technology infrastructure, and allocating resources for ongoing maintenance and support. According to Deloitte, the total cost of ownership for custom-built software must include not only initial development costs but also long-term expenses related to upgrades, security, compliance, and scalability. These costs can be significant, especially for complex projects or those requiring cutting-edge technology expertise.

Conversely, buying software typically involves licensing fees, subscription costs, and potentially, costs for additional customization or integration services. While the initial expenditure may be lower compared to building, organizations need to consider the total cost of ownership over the software's lifecycle, including upgrade and support costs. PwC reports that organizations often underestimate the long-term costs associated with bought solutions, particularly when they require extensive customization to fit the company's needs.

Resource implications also play a critical role. Organizations must assess their internal capabilities and determine whether they have the necessary skills and expertise to develop and maintain a custom solution. If not, the costs and time required to build these capabilities or hire external talent must be factored into the decision. For bought solutions, the focus shifts to evaluating the vendor's ability to provide reliable support and continuous innovation to meet the organization's evolving needs.

Evaluating Scalability and Flexibility

Scalability is a key consideration in the Build vs. Buy debate. Organizations need solutions that can grow and adapt as their business evolves. Custom-built solutions offer the benefit of being designed with specific scalability requirements in mind. However, achieving this requires foresight and a deep understanding of future needs, which can be challenging to predict accurately. Accenture's research indicates that scalable custom solutions necessitate a modular architecture that allows for easy adaptation and integration with new technologies, a task that requires significant architectural expertise.

Buying software, while potentially less flexible in terms of customization, often provides scalability through vendor-managed updates and cloud-based solutions. Vendors typically invest heavily in ensuring their products can scale to meet the demands of a broad customer base, which can benefit organizations without the need to invest directly in scalability features. According to Forrester, leveraging cloud-based SaaS solutions can significantly reduce scalability concerns, as these platforms are designed to handle varying levels of demand and can be easily adjusted to meet changing business requirements.

Ultimately, the decision to build or buy should be based on a comprehensive analysis of the organization's current and future needs, strategic goals, cost considerations, and internal capabilities. Real-world examples, such as Netflix's decision to build its content delivery network (CDN) to ensure optimal streaming performance worldwide, illustrate the benefits of custom solutions for specific strategic needs. Conversely, small to medium-sized enterprises (SMEs) often find value in buying SaaS solutions to manage their CRM or ERP needs, benefiting from the scalability and efficiency these solutions offer without the need for significant upfront investment in development.

Best Practices in Build vs. Buy

Here are best practices relevant to Build vs. Buy from the Flevy Marketplace. View all our Build vs. Buy materials here.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Explore all of our best practices in: Build vs. Buy

Build vs. Buy Case Studies

For a practical understanding of Build vs. Buy, take a look at these case studies.

Defense Procurement Strategy for Aerospace Components

Scenario: The organization is a major player in the aerospace defense sector, grappling with the decision to make or buy critical components.

Read Full Case Study

Telecom Infrastructure Outsourcing Strategy

Scenario: The organization is a regional telecom operator facing increased pressure to modernize its infrastructure while managing costs.

Read Full Case Study

Build vs. Buy Decision Framework for Semiconductor Manufacturer

Scenario: A semiconductor firm in the highly competitive technology sector is grappling with the strategic decision of building in-house capabilities versus buying or licensing from external sources.

Read Full Case Study

Luxury Brand E-commerce Platform Decision

Scenario: A luxury fashion house is grappling with the decision to develop an in-house e-commerce platform or to leverage an existing third-party solution.

Read Full Case Study

Make or Buy Decision Analysis for a Global Electronics Manufacturer

Scenario: A global electronics manufacturer is grappling with escalating operational costs and supply chain complexities.

Read Full Case Study

Global Supply Chain Optimization Strategy for Industrial Metals Distributor

Scenario: An established industrial metals distributor is facing a critical "make or buy" decision to improve its global supply chain efficiency.

Read Full Case Study


Explore all Flevy Management Case Studies

Related Questions

Here are our additional questions you may be interested in.

How should companies approach the make-or-buy decision in highly regulated industries differently?
In highly regulated industries, companies must adopt a comprehensive approach to the make-or-buy decision, considering Regulatory Compliance, Risk Management, Strategic Alignment, and long-term implications for sustainable success. [Read full explanation]
What is a make or buy analysis?
A make or buy analysis is a strategic framework for deciding whether to produce a product in-house or purchase it from an external supplier, considering cost, quality, and risk. [Read full explanation]
What are the key indicators that suggest a company should pivot from a "Buy" to a "Build" strategy, or vice versa, in response to market changes?
Discover when to pivot from a Buy to a Build strategy (or vice versa) by evaluating Cost, Time to Market, Core Competencies, and Strategic Fit for competitive advantage. [Read full explanation]
What role does corporate social responsibility (CSR) play in the Build vs. Buy decision-making process?
Integrating Corporate Social Responsibility (CSR) into Strategic Planning and Operational Excellence influences the Build vs. Buy decision, enhancing brand reputation, sustainability, and market competitiveness. [Read full explanation]
What impact do global supply chain disruptions have on the make-or-buy decision-making process?
Global supply chain disruptions significantly impact the make-or-buy decision-making process, emphasizing Risk Management, Strategic Alignment, Operational Excellence, and the need for agility, resilience, and innovation in sourcing strategies. [Read full explanation]
In what ways can the make-or-buy decision impact a company's sustainability goals and practices?
The make-or-buy decision significantly impacts an organization's sustainability by influencing environmental stewardship, social responsibility, and economic viability through direct control or supply chain influence. [Read full explanation]

 
Joseph Robinson, New York

Operational Excellence, Management Consulting

This Q&A article was reviewed by Joseph Robinson. Joseph is the VP of Strategy at Flevy with expertise in Corporate Strategy and Operational Excellence. Prior to Flevy, Joseph worked at the Boston Consulting Group. He also has an MBA from MIT Sloan.

To cite this article, please use:

Source: "How should companies evaluate the scalability of Build vs. Buy options in their IT strategy?," Flevy Management Insights, Joseph Robinson, 2025




Flevy is the world's largest knowledge base of best practices.


Leverage the Experience of Experts.

Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.

Download Immediately and Use.

Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.

Save Time, Effort, and Money.

Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.




Read Customer Testimonials

 
"I am extremely grateful for the proactiveness and eagerness to help and I would gladly recommend the Flevy team if you are looking for data and toolkits to help you work through business solutions."

– Trevor Booth, Partner, Fast Forward Consulting
 
"The wide selection of frameworks is very useful to me as an independent consultant. In fact, it rivals what I had at my disposal at Big 4 Consulting firms in terms of efficacy and organization."

– Julia T., Consulting Firm Owner (Former Manager at Deloitte and Capgemini)
 
"If you are looking for great resources to save time with your business presentations, Flevy is truly a value-added resource. Flevy has done all the work for you and we will continue to utilize Flevy as a source to extract up-to-date information and data for our virtual and onsite presentations!"

– Debbi Saffo, President at The NiKhar Group
 
"As an Independent Management Consultant, I find Flevy to add great value as a source of best practices, templates and information on new trends. Flevy has matured and the quality and quantity of the library is excellent. Lastly the price charged is reasonable, creating a win-win value for "

– Jim Schoen, Principal at FRC Group
 
"[Flevy] produces some great work that has been/continues to be of immense help not only to myself, but as I seek to provide professional services to my clients, it gives me a large "tool box" of resources that are critical to provide them with the quality of service and outcomes they are expecting."

– Royston Knowles, Executive with 50+ Years of Board Level Experience
 
"My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me "

– Bill Branson, Founder at Strategic Business Architects
 
"FlevyPro provides business frameworks from many of the global giants in management consulting that allow you to provide best in class solutions for your clients."

– David Harris, Managing Director at Futures Strategy
 
"FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The "

– Roderick Cameron, Founding Partner at SGFE Ltd



Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.