The debate about buy or make decisions are accompanied by pros and cons when the firm has to buy the materials as well as parts from vendors at the expense of making them internally. A buy or make a decision that applies to Mudra at its point of development might not be relevant in the long term, thus obsolete. Therefore, Mudra has to consider various options. Some of the pros that the firm is likely to face that are associated with the decision are costs, quality, and change. Vendor solutions to Mudra are likely to be cheaper, in case of a widely used software the quality is likely better, and the firm will find it easier to transfer to newer options in the future. On the contrary, there are cons associated with the decision. For instance, the vendor might financially unsound and thus unable to provide the software or provide an immature product. Also, there are additional customizations that are required to meet specific business needs, a process that might be expensive altogether. As a result, the buy or make a decision on the enterprise system package requires the firm to significant changes in the existing business processes among other factors.
Hi Feng Gao, I like how you brought in the perspective of Mudra from the case study. The cost of materials, labor, and other expenses are usually the most important factor for a firm when considering whether to buy or build. Therefore, the option to buy the services of another firm are the best option in this situation. Especially when the scope of the project may be outside the capabilities of his company. Before he buys in, Mudra should look into other projects that the firm has done to see how their track record suits them.
BUY:
Pros: Mudra would not have to handle the maintenance of the system and information security themselves, and they could focus on the core business. At the same time, Mudra also does not need that much IT headcount that they already have, which would be cost saving.
Cons: The ES package they need requires higher customization, and it is expensive because about 65% of the cost of the package as an add-on.
Build:
Pros: It would be a lot cheaper compared with buying in terms of licensing, customization, IT infrastructure, Implementation, annual maintenance. Mudra could have its own system that goes through the process of design and development, which would help the business a lot.
Cons: The previous develop in-house information systems were not communicated to each other, which cause inconvenience in terms of information needed for decision making. Therefore, Mudra’s IT team does not have such experience for development that ES package. At the same time, no agency was able to build its system in-house successfully. It would be difficult to build the system in-house because of the above reasons.
Good points Ding. I appreciate the way how you tied the case study to this question. In this case study, Joseph made a good decision to outsource the ES development to third party initially. However, it failed due to lack of enterprise knowledge as this was still an emerging technology in India at those times. These decisions of whether to outsource or to build the application in-house depends on cost, time, resources, effeciency and quality.
Hi Shuyue, I agree with your pros and cons of a buy vs build ES package. It is very convenient to buy but also very expensive as you said that 65% of the cost is for add-ons that are not really needed. To build the ES package itself, on the other hand, saves money but can take quite some time to implement and test.
Often times, buying or building becomes a challenging decision for any organization especially when considering applications like Enterprise Management System which comprises of important modules for the business units to run. However, both has its own advantages and disadvantages:
Benefits of using Building your own ES package:
> It is easy to customize the software to meet the business needs as the employees and management will have better understanding of the business requirements and domain knowledge. This is one of the key reasons why Joseph had changed from outsourcing model to staffing model after the outsourcing contracts failure.
> One of the primary advantage is – it reduces upfront cost.
> Biggest advantage is that there will be no licensing cost involved.
> It is easily scalable. If the management wants to add-in additional functionality, it could be easily achieved if its built in-house.
Risks of Building your own ES:
> Implementation cost to design, develop, test and train the employees is very expensive.
> Existing resources might not have enterprise software development skills as it is not their core competency.
> Time taken to build the software is lengthier (at least around 5 years depending on complexity of projects). This time could have been invested in meeting business goals.
Advantages of Buying enterprise system:
> Deployment of the application is much faster, saves time to get users on the app
> Smaller amount of internal support is required
> Design, development and testing is done by vendor and necessary services, patches and upgrades would be provided by vendor itself (depending on the service you opt like SAAS)
Disadvantages of buying enterprise software services:
> Buying an off-the-shelf application increases the upfront cost
> Huge amount of licensing and maintenance cost is involved every year.
> Some features and benefits may not be relevant to the organization and this results in waste of investment for that particular module.
Good answer. Ongoing support costs on a monthly or annual basis. Some products will charge you based on a flat monthly or annual fee, while others are will charge you on a per-seat basis, meaning the larger your company, the more you’ll pay to use the software.
Pros of buy:
It is faster and convenience because the company does not spend time on the design and planning phases.
It is less risky because the company does not take the risks of testing failures.
It is easier for a small company or a company that does not have a support team because they do not have to hire adequate employees to execute the maintenance and upgrades.
Cons of buy:
It is a big investment which needs a large amount of money in the starting time.
It usually not fully fit the requirements of the company.
Pros of build:
It meets company requirements. and easily to meet more requirements in the future by updating.
It has less amount of cost in the starting time.
Cons of build:
It usually takes more time to build it.
The company takes risks of failures.
The risks of buy decision are the irreconcilable difference between contractors and user communities, since it may be difficult for the user communities, especially for those operated rather traditionally, to describe its demands exactly. The benefit of a built decision contains the factor that is the feedback can be collected in time for improvement.
Hi Penghui, I agree that it is easier to just buy the ES package since the package is being tested again and again for many times while designing their own software could take a very long time and might not perform as intended. The downside for buying is that it could be very expensive since the company does not need all the features from the ES package they bought.
Benefits of Buy:
No development or maintenance of the system required
Faster time to use
Less risk of system-breaking bugs or functional failure
Risks of Buy:
Significant upfront costs
System may not be adaptable to changing needs
Extraneous features are not ideal
Benefits of Build:
A successful solution would better align with Mudra’s needs
Solution can be adapted for future needs
Ownership of the system gives Mudra better control of the system
Can save money if built properly, no licensing cost
Risks of Build:
IT Project failure/sunk costs (failures are costly)
Longer implementation timeline
Does not currently have expertise for a build
Budgeting is more complicated
Nice call out on the budgeting aspect for building the ES in house. While the case proposes that building would be considerably less expensive than buying, we should note that those numbers are based on the absolute ideal situation where nothing goes wrong during the process.
I like your comment, it’s very clear and concise. And I also learn a couple points from your comment. “Ownership of the system gives Mudra better control of the system” is a good point, the potential future ownership conflicts will be avoided.
Pros and risk of buy:
¬ The benefits of a buy decision include several factors. Firstly, relatively low cost, since the basic incentive that Joseph would prefer outsourcing is closely related to the cost. Secondly, one could pay for a package almost completed and then make customization on the basis of the system purchased, through which one could acquire flexibility during improvement and composition.
¬ The risks of a buy decision are listed below. Primarily, the ability of contractors may not be competent to accomplish the task, which may lead to ineffectiveness of communication and completion (e.g. technical bottlenecks may result in mistakes, confusion, and failure).
Pros and risk of build:
¬ The benefits of a built decision contain the following factors. Firstly, the design, completion and, testing can all be carried on internally, which will satisfy the multiple demands of the user as detailed as possible. Secondly, it saves the opportunity cost of communication.
¬ The risks of a built decision are as mentioned below. At first, it may take a long period of time for design and completion. Another problem is that the cost may become unaffordable. Besides, there is also a question that whether the user community has enough capacity to build the system.
Hi Zhu, I like your ideas of these pros and cons and I basically agree with you. And one thing I noticed our differences is that I think the additional purchase of ES package would cost the company a huge amount of money than the building in pieces because of we need to take the license into the consideration.
When considering the decision of building vs buying an enterprise system there are many pros and cons to take into account. When faced with the option to buy an ES the cons range from the 1) substantial upfront cost, 2) limited functionality, and 3) limited compatibility with the existing systems. However, the pros are 1) faster implementation, 2) support from the provider, and 3) universal software.
With the building of custom software the pros are that 1) custom to the business, 2) can be more scalable, and 3) differentiate from the competitors. And the cons are the 1) time to build, 2) also carries upfront cost, and 3) the software may have failures along the way.
The decision to build to buy an ES is situational. There is no right answer for what an organization should always do. Some options “off the shelf” will work and others will not. On the flip side, an organization may not have the capabilities to build there on ES, therefore buying would be the way to go.
I completely agree with you. There is never one right answer. The decision to buy or build is always tailored based on each company’s specific situation. At the end of the day, there are pros and cons for each, but it all depends on how much each of those pros and cons weighs on your specific company.
Benefits of buying ES package
• Purchased ES package was built in standard mode, and will be widely used after repeated debugging, the quality will be guaranteed, which will accelerate the development progress of the information system.
• The purchased packages would be easier to use.
Risks of buying ES package
• The additional purchase of ES package would cost the company a huge amount of money.
Benefits of building ES package
• The company could customize functions based on the company’s own needs and easy to add any additional functions when need.
• Core data and architecture are not tied down to other businesses and are easy to integrate. All architectures are designed by themselves and integration is relatively easy.
• To avoid any unnecessary costs.
Risks of building ES package
• The standards of human need are high. The company has to hire more experts who understand management, understand the logic of the business itself, understand the IT architecture, understand the software architecture, and understand the design.
• The concerns of the system stability, reliability, and scalability would increase.
• The projects could also tend to be delayed because IT team members in the company are not expertise in the design phase.
Hi Yuqing, I agree with you that the purchased packages would be easier to use. Since Mudra doesn’t need to design the ES from the beginning, they just need to customize their system and make it suitable for their advertising business. Although, this option is more expensive compared with the other options.
Benefit of buying:
-Time – Employees are not overworked and the company can begin transitioning to the new system immediately.
-Functionality – Typically, software designed for a specific purpose is more efficient and can be managed with updates and patches provided by the vendor.
Risk of buying:
-Cost – Off-the-shelf packages typically cost considerably more money than models built-in-house, largely due to licensing fees.
-Losing Foundation – Mudra evolved from a 15-person company to one of the largest ad agencies in the country, priding itself on community relations and a “mom-and-pop” foundation. Purchasing an ES that was not created by its own workers could cause employees and/or consumers to view this as transitioning into a “corporate giant” more concerned with revenue rather than clients.
Benefit of building:
-Customization – The ES will contain functions that are based wholly on current and future needs of the company.
-Initial Cost – As there is no licensing fee to pay, implementation and maintenance costs would be less of a financial burden for the company.
Risk of building:
-Employee Burnout – Having only 7 in-house IT employees means that long hours working on the software cannot be more easily dispersed, which could lead to excess stress on a small team during development.
-Planning – Joseph made an error misinterpreting the project initially. With that in mind, there is a possibility that the building process may take longer than anticipated due to another mishap.
Hello,
If I may start by looking at the organization of the post as a whole, I appreciate that you looked at both buying and building in two separate sections and used simple titles followed by explanations to provide additional details to the reader. I also liked how you used evidence directly from the case study to better support the cons of both building and buying. The part of your response that stood out to me the most was the perspective you took when describing how buying a solution could potentially jeopardize Mudra’s brand image.
Hi Sarah, I like you mentioned the losing foundation as one of the risks of buying. It is really interesting that buying might change the thoughts of Mudra’s employees. I definitely agree that it could potentially change the views of its’ employees. Buying is convenient and fast but also very costly while designing their own might take quite a while and the time it costs might not worth it.
The benefits of the off-the-shelf packages are Mudra does not have to spend time building its own ES. The web-based architecture could eliminate the hassle of transmitting data through tapes and floppy disks, and also transmit the data immediately. Moreover, it could more focus on the advertising business and spend less time on IT. However, the ES package is expensive, 65 per cent of the cost of the package as an add-on. Since the advertising business is different from both the manufacturing sector and the service sector in general. For build the ES, Mudra would be more flexible since it could design its own ES and it is much cheaper than buying the package. The downside of build ES is Murda does not have experience in building an ERP system. Even it outsources to contractors, they lack the advertising domain knowledge and not able to map user requirements.
Hi Ryu, I agree with your opinion about the spending in time and money. Since building its own ES, Mudea has to spend more time on IT, and ES package is expensive on the add-on.
The Pros of buying are:
-Convenient, Mudra would not need to worry too much about the system after buying due to the provider would do most of the ES package.
-The managerial level would need to worry less because after buying the support team of the ES package would handle the system thus making the managerial level potentially save some money.
The Cons of buying are:
-The cost could be expensive
-It takes some time for the system to implement to a way the company wanted it to be.
The Pros of Building:
-It would be a lot cheaper compared to buying because of licensing fees, customization, annual maintenance. Mudra could design a system the exact way they wanted it to be
The Pros of Building:
-It could take a long time to implement the self-designed system.
-The planning of building can be complicated and often time companies could find themselves under-estimated the budget of the building.
Hi, Yuchong
I like your point of companies often times under-estimated the budget of building the system in-house, which is what my posting is missing. This case study only included the cost table and ROI table instead of an actual cost-benefit analysis table which would be really helpful in terms of decision making. In the cost table, like what you mentioned, they probably under-estimated the budget of building the new system which would lead to the wrong direction. I would suggest that they improve the decision-making process and do a cost-benefit analysis.
With the capability, scalability, and customization of proprietary software solutions come the added benefit of faster and better results. When business software is tailored to include all the functionality the company needs in the ways its need the most, The business can run like a well-oiled machine. Software that is customized to the company’s workflow and optimized for today’s connected world can push production and profitability through the roof, and lead to exponentially faster business growth.
The pros of buying an ES system is that you don’t have to handle the maintenance of the system. Mudra is an advertising agency, this gives them the opportunity to focus more on what they specialize in. You can let the software company focus on the software, and you can focus on advertising. Also, there is a lower risk in failing in the implementation because you are under the assumption that experts will be handling it.
The cons of buying an ES system is, of course, it will come at a premium. Ideally, you will be paying for what you get, but that could be too expensive. In some cases, you will want to build in-house because the cost-savings outweigh any potential shortcomings. More specifically, there was no industry precedent for Mudra. Every other system was being used in other industries, so it would be the first of its kind. Typically, you don’t build something in-house because it would be a waste to create something that already exists. For example, “Don’t recreate the wheel.” In this case, there is a wheel, but there is no axle. You have the body(existing program), but you don’t have the engine(over 65% customization required).
When considering between buying or building an enterprise systems package, organizations need to reevaluate and take into account the core competencies and benefits they currently have and what resources they lack for the implementation of each approach. For Mudra Communications, buying an enterprise systems package comes with the advantages of specialized development leading to quicker deployment, and most of the program maintenance and upkeep being handled by the company that developed the solution. The disadvantages associated with buying an enterprise systems package include additional regular billing in the form of licensing and maintenance, as well as an increased risk of features being implemented into the program that were not included in the original requirements. For building an enterprise systems package, the benefits include a reduced risk of receiving unnecessary features, easier accessibility to further development, and reduced costs associated with licensing and maintenance. The disadvantages, however, include significant resources and capital needing to be allocated to development which can get quite pricey, and increased time needed for the enterprise systems package to reach completion.
In my opinion, there are several differences between buying and building companies’ own ES system. If the company is small business with limited budget, The costs that are associated with building custom software may be one of the first and most logical reasons for a business to avoid choosing this option. It should buy third party software instead of creating its own, because canned solutions are cheaper and therefore can make much more financial sense for a company with a smaller budget. In addition, If a company have a strong enough software team with the necessary skills to build out this custom software, it would be wise to pass on the opportunity until you do have such a team in place. If you cannot hold your software developers accountable for such a project, it will be tough to create great products. Building proprietary software takes a great deal of time to complete successfully. Businesses that do not have this time available should not immediately pursue it. However, building amazing technology would unlikely be a factor that sets the company apart from its competition, nor would it likely be something that would help the company provide a higher quality service or product at a lower cost and make consumers want to choose its store over others.
BUY
PROS:
It’ll be more convenient because the company doesn’t have to start from scratch and already have a good foundation of working products. All that will be needed is maintenance and implementation to fit the company. It’ll also be less risky because there will be fewer chances of complete termination/failure. It’ll be convenient for companys that don’t require a specific security framework and can use a general framework.
Cons of buy:
It might not be specific enough for the needs of the company. Also, buying a product might be a big investment for a startup company. You might need to alter it entirely to fit the framework for the specific company, and a lot of training is required for your own security team.
BUILD
PROS:
It’ll be specifically designed for the company and people in the company would have more hands-on experience to fully understand the capabilities and constraints of the product.
CONS:
It’ll probably cost more to start over entirely from scratch. There are higher chances of failure because there need to be additional testing steps required.
Mei, the pros and cons you have mentioned for buy/build are all significant. To add to your analysis, a pro for building their own ES package is the quality of the ES package. Since it is built in-house, the overall quality would be better than if it was outsourced. If an issue came about, the in-house team could resolve the issue and monitor the progress in real time.
When it goes to buy the ES package, the benefit is convenient and much easier to set up. the risk is that 65% of the cost of the package as an add-on that causes it expensive. When it goes to build the ES package, the benefit is it could be more designated and built to fit the business goal. The risk is that it takes more time for planning and implementation.
Nice wrap up, you addressed that pros of buying the ES package includes convenience and easy setting up, Also, since it has been improved and experimented already, also, when the problems or vulnerabilities come out, the time to fix the problems will be saved. In other hand, building ES package can benefit from suitability.
The question of build or buy faced by most organizations and institutions at some point of time, this challenge a high level of rational analysis. buying an existing enterprise system seems like a safe bet, it has been improved and experimented already, also, when the problems or vulnerabilities come out, the time to fix the problems will be saved. the price of buying an existing enterprise system will be lower than building an enterprise. overall, the off-shelf-product provides required functionalities and save a lots of time and money.
However, buying an enterprise system may not fulfill the ever changing needs of a growing and dynamic organization, existing enterprise system comes with common functionalities and features, every organizations may need an unique business model.
Feng Gao says
The debate about buy or make decisions are accompanied by pros and cons when the firm has to buy the materials as well as parts from vendors at the expense of making them internally. A buy or make a decision that applies to Mudra at its point of development might not be relevant in the long term, thus obsolete. Therefore, Mudra has to consider various options. Some of the pros that the firm is likely to face that are associated with the decision are costs, quality, and change. Vendor solutions to Mudra are likely to be cheaper, in case of a widely used software the quality is likely better, and the firm will find it easier to transfer to newer options in the future. On the contrary, there are cons associated with the decision. For instance, the vendor might financially unsound and thus unable to provide the software or provide an immature product. Also, there are additional customizations that are required to meet specific business needs, a process that might be expensive altogether. As a result, the buy or make a decision on the enterprise system package requires the firm to significant changes in the existing business processes among other factors.
Alexander Reichart-Anderson says
Hi Feng Gao, I like how you brought in the perspective of Mudra from the case study. The cost of materials, labor, and other expenses are usually the most important factor for a firm when considering whether to buy or build. Therefore, the option to buy the services of another firm are the best option in this situation. Especially when the scope of the project may be outside the capabilities of his company. Before he buys in, Mudra should look into other projects that the firm has done to see how their track record suits them.
Shuyue Ding says
BUY:
Pros: Mudra would not have to handle the maintenance of the system and information security themselves, and they could focus on the core business. At the same time, Mudra also does not need that much IT headcount that they already have, which would be cost saving.
Cons: The ES package they need requires higher customization, and it is expensive because about 65% of the cost of the package as an add-on.
Build:
Pros: It would be a lot cheaper compared with buying in terms of licensing, customization, IT infrastructure, Implementation, annual maintenance. Mudra could have its own system that goes through the process of design and development, which would help the business a lot.
Cons: The previous develop in-house information systems were not communicated to each other, which cause inconvenience in terms of information needed for decision making. Therefore, Mudra’s IT team does not have such experience for development that ES package. At the same time, no agency was able to build its system in-house successfully. It would be difficult to build the system in-house because of the above reasons.
Deepa Kuppuswamy says
Good points Ding. I appreciate the way how you tied the case study to this question. In this case study, Joseph made a good decision to outsource the ES development to third party initially. However, it failed due to lack of enterprise knowledge as this was still an emerging technology in India at those times. These decisions of whether to outsource or to build the application in-house depends on cost, time, resources, effeciency and quality.
Yuchong Wang says
Hi Shuyue, I agree with your pros and cons of a buy vs build ES package. It is very convenient to buy but also very expensive as you said that 65% of the cost is for add-ons that are not really needed. To build the ES package itself, on the other hand, saves money but can take quite some time to implement and test.
Deepa Kuppuswamy says
Often times, buying or building becomes a challenging decision for any organization especially when considering applications like Enterprise Management System which comprises of important modules for the business units to run. However, both has its own advantages and disadvantages:
Benefits of using Building your own ES package:
> It is easy to customize the software to meet the business needs as the employees and management will have better understanding of the business requirements and domain knowledge. This is one of the key reasons why Joseph had changed from outsourcing model to staffing model after the outsourcing contracts failure.
> One of the primary advantage is – it reduces upfront cost.
> Biggest advantage is that there will be no licensing cost involved.
> It is easily scalable. If the management wants to add-in additional functionality, it could be easily achieved if its built in-house.
Risks of Building your own ES:
> Implementation cost to design, develop, test and train the employees is very expensive.
> Existing resources might not have enterprise software development skills as it is not their core competency.
> Time taken to build the software is lengthier (at least around 5 years depending on complexity of projects). This time could have been invested in meeting business goals.
Advantages of Buying enterprise system:
> Deployment of the application is much faster, saves time to get users on the app
> Smaller amount of internal support is required
> Design, development and testing is done by vendor and necessary services, patches and upgrades would be provided by vendor itself (depending on the service you opt like SAAS)
Disadvantages of buying enterprise software services:
> Buying an off-the-shelf application increases the upfront cost
> Huge amount of licensing and maintenance cost is involved every year.
> Some features and benefits may not be relevant to the organization and this results in waste of investment for that particular module.
Feng Gao says
Good answer. Ongoing support costs on a monthly or annual basis. Some products will charge you based on a flat monthly or annual fee, while others are will charge you on a per-seat basis, meaning the larger your company, the more you’ll pay to use the software.
Penghui Ai says
Buy:
Penghui Ai says
Pros of buy:
It is faster and convenience because the company does not spend time on the design and planning phases.
It is less risky because the company does not take the risks of testing failures.
It is easier for a small company or a company that does not have a support team because they do not have to hire adequate employees to execute the maintenance and upgrades.
Cons of buy:
It is a big investment which needs a large amount of money in the starting time.
It usually not fully fit the requirements of the company.
Pros of build:
It meets company requirements. and easily to meet more requirements in the future by updating.
It has less amount of cost in the starting time.
Cons of build:
It usually takes more time to build it.
The company takes risks of failures.
Zhu Li says
The risks of buy decision are the irreconcilable difference between contractors and user communities, since it may be difficult for the user communities, especially for those operated rather traditionally, to describe its demands exactly. The benefit of a built decision contains the factor that is the feedback can be collected in time for improvement.
Yuchong Wang says
Hi Penghui, I agree that it is easier to just buy the ES package since the package is being tested again and again for many times while designing their own software could take a very long time and might not perform as intended. The downside for buying is that it could be very expensive since the company does not need all the features from the ES package they bought.
Adam J Wolf says
Benefits of Buy:
No development or maintenance of the system required
Faster time to use
Less risk of system-breaking bugs or functional failure
Risks of Buy:
Significant upfront costs
System may not be adaptable to changing needs
Extraneous features are not ideal
Benefits of Build:
A successful solution would better align with Mudra’s needs
Solution can be adapted for future needs
Ownership of the system gives Mudra better control of the system
Can save money if built properly, no licensing cost
Risks of Build:
IT Project failure/sunk costs (failures are costly)
Longer implementation timeline
Does not currently have expertise for a build
Budgeting is more complicated
Sarah Puffen says
Nice call out on the budgeting aspect for building the ES in house. While the case proposes that building would be considerably less expensive than buying, we should note that those numbers are based on the absolute ideal situation where nothing goes wrong during the process.
Mei X Wang says
I agree with all your points, it definitely varies case by case with what exactly the company needs the system for.
Xinye Yang says
I like your comment, it’s very clear and concise. And I also learn a couple points from your comment. “Ownership of the system gives Mudra better control of the system” is a good point, the potential future ownership conflicts will be avoided.
Zhu Li says
Pros and risk of buy:
¬ The benefits of a buy decision include several factors. Firstly, relatively low cost, since the basic incentive that Joseph would prefer outsourcing is closely related to the cost. Secondly, one could pay for a package almost completed and then make customization on the basis of the system purchased, through which one could acquire flexibility during improvement and composition.
¬ The risks of a buy decision are listed below. Primarily, the ability of contractors may not be competent to accomplish the task, which may lead to ineffectiveness of communication and completion (e.g. technical bottlenecks may result in mistakes, confusion, and failure).
Pros and risk of build:
¬ The benefits of a built decision contain the following factors. Firstly, the design, completion and, testing can all be carried on internally, which will satisfy the multiple demands of the user as detailed as possible. Secondly, it saves the opportunity cost of communication.
¬ The risks of a built decision are as mentioned below. At first, it may take a long period of time for design and completion. Another problem is that the cost may become unaffordable. Besides, there is also a question that whether the user community has enough capacity to build the system.
Yuqing Tang says
Hi Zhu, I like your ideas of these pros and cons and I basically agree with you. And one thing I noticed our differences is that I think the additional purchase of ES package would cost the company a huge amount of money than the building in pieces because of we need to take the license into the consideration.
Alexander Reichart-Anderson says
When considering the decision of building vs buying an enterprise system there are many pros and cons to take into account. When faced with the option to buy an ES the cons range from the 1) substantial upfront cost, 2) limited functionality, and 3) limited compatibility with the existing systems. However, the pros are 1) faster implementation, 2) support from the provider, and 3) universal software.
With the building of custom software the pros are that 1) custom to the business, 2) can be more scalable, and 3) differentiate from the competitors. And the cons are the 1) time to build, 2) also carries upfront cost, and 3) the software may have failures along the way.
The decision to build to buy an ES is situational. There is no right answer for what an organization should always do. Some options “off the shelf” will work and others will not. On the flip side, an organization may not have the capabilities to build there on ES, therefore buying would be the way to go.
Panayiotis Laskaridis says
Hello Alex,
I completely agree with you. There is never one right answer. The decision to buy or build is always tailored based on each company’s specific situation. At the end of the day, there are pros and cons for each, but it all depends on how much each of those pros and cons weighs on your specific company.
Yuqing Tang says
Benefits of buying ES package
• Purchased ES package was built in standard mode, and will be widely used after repeated debugging, the quality will be guaranteed, which will accelerate the development progress of the information system.
• The purchased packages would be easier to use.
Risks of buying ES package
• The additional purchase of ES package would cost the company a huge amount of money.
Benefits of building ES package
• The company could customize functions based on the company’s own needs and easy to add any additional functions when need.
• Core data and architecture are not tied down to other businesses and are easy to integrate. All architectures are designed by themselves and integration is relatively easy.
• To avoid any unnecessary costs.
Risks of building ES package
• The standards of human need are high. The company has to hire more experts who understand management, understand the logic of the business itself, understand the IT architecture, understand the software architecture, and understand the design.
• The concerns of the system stability, reliability, and scalability would increase.
• The projects could also tend to be delayed because IT team members in the company are not expertise in the design phase.
Ryu Takatsuki says
Hi Yuqing, I agree with you that the purchased packages would be easier to use. Since Mudra doesn’t need to design the ES from the beginning, they just need to customize their system and make it suitable for their advertising business. Although, this option is more expensive compared with the other options.
Sarah Puffen says
Benefit of buying:
-Time – Employees are not overworked and the company can begin transitioning to the new system immediately.
-Functionality – Typically, software designed for a specific purpose is more efficient and can be managed with updates and patches provided by the vendor.
Risk of buying:
-Cost – Off-the-shelf packages typically cost considerably more money than models built-in-house, largely due to licensing fees.
-Losing Foundation – Mudra evolved from a 15-person company to one of the largest ad agencies in the country, priding itself on community relations and a “mom-and-pop” foundation. Purchasing an ES that was not created by its own workers could cause employees and/or consumers to view this as transitioning into a “corporate giant” more concerned with revenue rather than clients.
Benefit of building:
-Customization – The ES will contain functions that are based wholly on current and future needs of the company.
-Initial Cost – As there is no licensing fee to pay, implementation and maintenance costs would be less of a financial burden for the company.
Risk of building:
-Employee Burnout – Having only 7 in-house IT employees means that long hours working on the software cannot be more easily dispersed, which could lead to excess stress on a small team during development.
-Planning – Joseph made an error misinterpreting the project initially. With that in mind, there is a possibility that the building process may take longer than anticipated due to another mishap.
Imran Jordan Kharabsheh says
Hello,
If I may start by looking at the organization of the post as a whole, I appreciate that you looked at both buying and building in two separate sections and used simple titles followed by explanations to provide additional details to the reader. I also liked how you used evidence directly from the case study to better support the cons of both building and buying. The part of your response that stood out to me the most was the perspective you took when describing how buying a solution could potentially jeopardize Mudra’s brand image.
Yuchong Wang says
Hi Sarah, I like you mentioned the losing foundation as one of the risks of buying. It is really interesting that buying might change the thoughts of Mudra’s employees. I definitely agree that it could potentially change the views of its’ employees. Buying is convenient and fast but also very costly while designing their own might take quite a while and the time it costs might not worth it.
Ryu Takatsuki says
The benefits of the off-the-shelf packages are Mudra does not have to spend time building its own ES. The web-based architecture could eliminate the hassle of transmitting data through tapes and floppy disks, and also transmit the data immediately. Moreover, it could more focus on the advertising business and spend less time on IT. However, the ES package is expensive, 65 per cent of the cost of the package as an add-on. Since the advertising business is different from both the manufacturing sector and the service sector in general. For build the ES, Mudra would be more flexible since it could design its own ES and it is much cheaper than buying the package. The downside of build ES is Murda does not have experience in building an ERP system. Even it outsources to contractors, they lack the advertising domain knowledge and not able to map user requirements.
Penghui Ai says
Hi Ryu, I agree with your opinion about the spending in time and money. Since building its own ES, Mudea has to spend more time on IT, and ES package is expensive on the add-on.
Yuchong Wang says
The Pros of buying are:
-Convenient, Mudra would not need to worry too much about the system after buying due to the provider would do most of the ES package.
-The managerial level would need to worry less because after buying the support team of the ES package would handle the system thus making the managerial level potentially save some money.
The Cons of buying are:
-The cost could be expensive
-It takes some time for the system to implement to a way the company wanted it to be.
The Pros of Building:
-It would be a lot cheaper compared to buying because of licensing fees, customization, annual maintenance. Mudra could design a system the exact way they wanted it to be
The Pros of Building:
-It could take a long time to implement the self-designed system.
-The planning of building can be complicated and often time companies could find themselves under-estimated the budget of the building.
Shuyue Ding says
Hi, Yuchong
I like your point of companies often times under-estimated the budget of building the system in-house, which is what my posting is missing. This case study only included the cost table and ROI table instead of an actual cost-benefit analysis table which would be really helpful in terms of decision making. In the cost table, like what you mentioned, they probably under-estimated the budget of building the new system which would lead to the wrong direction. I would suggest that they improve the decision-making process and do a cost-benefit analysis.
Yuan Liu says
With the capability, scalability, and customization of proprietary software solutions come the added benefit of faster and better results. When business software is tailored to include all the functionality the company needs in the ways its need the most, The business can run like a well-oiled machine. Software that is customized to the company’s workflow and optimized for today’s connected world can push production and profitability through the roof, and lead to exponentially faster business growth.
Panayiotis Laskaridis says
The pros of buying an ES system is that you don’t have to handle the maintenance of the system. Mudra is an advertising agency, this gives them the opportunity to focus more on what they specialize in. You can let the software company focus on the software, and you can focus on advertising. Also, there is a lower risk in failing in the implementation because you are under the assumption that experts will be handling it.
The cons of buying an ES system is, of course, it will come at a premium. Ideally, you will be paying for what you get, but that could be too expensive. In some cases, you will want to build in-house because the cost-savings outweigh any potential shortcomings. More specifically, there was no industry precedent for Mudra. Every other system was being used in other industries, so it would be the first of its kind. Typically, you don’t build something in-house because it would be a waste to create something that already exists. For example, “Don’t recreate the wheel.” In this case, there is a wheel, but there is no axle. You have the body(existing program), but you don’t have the engine(over 65% customization required).
Imran Jordan Kharabsheh says
When considering between buying or building an enterprise systems package, organizations need to reevaluate and take into account the core competencies and benefits they currently have and what resources they lack for the implementation of each approach. For Mudra Communications, buying an enterprise systems package comes with the advantages of specialized development leading to quicker deployment, and most of the program maintenance and upkeep being handled by the company that developed the solution. The disadvantages associated with buying an enterprise systems package include additional regular billing in the form of licensing and maintenance, as well as an increased risk of features being implemented into the program that were not included in the original requirements. For building an enterprise systems package, the benefits include a reduced risk of receiving unnecessary features, easier accessibility to further development, and reduced costs associated with licensing and maintenance. The disadvantages, however, include significant resources and capital needing to be allocated to development which can get quite pricey, and increased time needed for the enterprise systems package to reach completion.
Yuan Liu says
In my opinion, there are several differences between buying and building companies’ own ES system. If the company is small business with limited budget, The costs that are associated with building custom software may be one of the first and most logical reasons for a business to avoid choosing this option. It should buy third party software instead of creating its own, because canned solutions are cheaper and therefore can make much more financial sense for a company with a smaller budget. In addition, If a company have a strong enough software team with the necessary skills to build out this custom software, it would be wise to pass on the opportunity until you do have such a team in place. If you cannot hold your software developers accountable for such a project, it will be tough to create great products. Building proprietary software takes a great deal of time to complete successfully. Businesses that do not have this time available should not immediately pursue it. However, building amazing technology would unlikely be a factor that sets the company apart from its competition, nor would it likely be something that would help the company provide a higher quality service or product at a lower cost and make consumers want to choose its store over others.
Mei X Wang says
BUY
PROS:
It’ll be more convenient because the company doesn’t have to start from scratch and already have a good foundation of working products. All that will be needed is maintenance and implementation to fit the company. It’ll also be less risky because there will be fewer chances of complete termination/failure. It’ll be convenient for companys that don’t require a specific security framework and can use a general framework.
Cons of buy:
It might not be specific enough for the needs of the company. Also, buying a product might be a big investment for a startup company. You might need to alter it entirely to fit the framework for the specific company, and a lot of training is required for your own security team.
BUILD
PROS:
It’ll be specifically designed for the company and people in the company would have more hands-on experience to fully understand the capabilities and constraints of the product.
CONS:
It’ll probably cost more to start over entirely from scratch. There are higher chances of failure because there need to be additional testing steps required.
Raisa Ahmed says
Mei, the pros and cons you have mentioned for buy/build are all significant. To add to your analysis, a pro for building their own ES package is the quality of the ES package. Since it is built in-house, the overall quality would be better than if it was outsourced. If an issue came about, the in-house team could resolve the issue and monitor the progress in real time.
Raisa Ahmed says
Buy the ES Package:
Benefits
a) Time-saving
b) Implementation and maintenance will be the responsibility of the vendor; less burden on IT personnel at Mudra
Risks
a) Annual costs
b) Limited functionality; the purchased package may not be compatible with all systems
Build the ES Package:
Benefits
c) Unique and made to support business needs/goals entirely
d) Flexibility
Risks
c) Implementation, testing, and maintenance is a tedious task
d) Limited availability of IT personnel at Mudra
Haixin Sun says
When it goes to buy the ES package, the benefit is convenient and much easier to set up. the risk is that 65% of the cost of the package as an add-on that causes it expensive. When it goes to build the ES package, the benefit is it could be more designated and built to fit the business goal. The risk is that it takes more time for planning and implementation.
Xinye Yang says
Hey Haixin
Nice wrap up, you addressed that pros of buying the ES package includes convenience and easy setting up, Also, since it has been improved and experimented already, also, when the problems or vulnerabilities come out, the time to fix the problems will be saved. In other hand, building ES package can benefit from suitability.
Xinye Yang says
The question of build or buy faced by most organizations and institutions at some point of time, this challenge a high level of rational analysis. buying an existing enterprise system seems like a safe bet, it has been improved and experimented already, also, when the problems or vulnerabilities come out, the time to fix the problems will be saved. the price of buying an existing enterprise system will be lower than building an enterprise. overall, the off-shelf-product provides required functionalities and save a lots of time and money.
However, buying an enterprise system may not fulfill the ever changing needs of a growing and dynamic organization, existing enterprise system comes with common functionalities and features, every organizations may need an unique business model.