When considering building a custom software solution versus buying from a vendor, there is no one silver bullet. What is appropriate for one firm may not work for another. Company size, internal skill set, bandwidth, and time restraints are just some of the key considerations when making a decision. Having built software solutions in the financial services and insurance markets since 1994, I have experienced both failures and successes in building enterprise solutions and utilizing marketplace products. As a vendor, I have lost deals to internal build decisions, only to be brought back in to solve the internal failures or limitations. Here are the two scenarios I have seen play out in the Building vs. Buying Technology Conundrum:
Scenario 1 - Building Your Own Experience
Creating from a mutually agreed upon vision and customizing to meet your company’s needs can be extremely impactful. Consider the obstacles that can be hidden within the details. It is all big fun until the work starts.
Brainstorming and blue-sky sessions with the internal team allow everyone to participate in building a dream state.
New ideas continue to percolate with every team meeting, creating adjustments and new features that expand the timeline and budget.
As is the case with any lengthy process, unexpected things occur, such as personnel changes, that can directly impact the vision, budget, or staffing.
As time goes on, partners update their data security requirements, requiring new data security protocols along with user authentication infrastructure.
Project fatigue can set in with other projects taking priority, or budget adjustments requiring a scaling back of scope.
Once in production, there can be a multitude of challenges from onboarding and training of users to continuously updating the solution to meet user demand and market changes.
It is never one and done in order to achieve full product status. Years of full scale development will be required.
Scenario 2 - Can buying or partnering provide a happier ending?
When hearing the horror stories of creating proprietary technology, and facing the reality of limited budgets, expertise, and time, partnering with a vendor can be attractive. The interviewing process can be a positive dating game with all the vendors putting their best foot forward, showing responsiveness and offering creative solutions along with a quick turn-around.
With the price sounding right and the ROI perfectly aligned, this relationship appears to be the perfect match.
Make sure it is still good after the honeymoon
During a sales cycle a vendor rarely says, “no” to any client requests. Making sure they still are on the same page with you after the contract is signed does require some due diligence. Some things to consider:
Read the disclaimers - Just because it is in the powerpoint or the demo doesn’t mean they have included it in the agreement.
All the actions and products are clearly listed - Sure they can do what you want, but if it's not listed in the agreement, it will be extra.
Written mutual expectations - Never assume that they understood what you meant. While the heads are shaking in agreement, put your wishes in writing.
Devil in the details - It all sounds great, but make sure you are taking the time to understand the details.
Overcome language barriers - If different languages exist between the tech team and the client either through spoken language or unknown jargon, require a vendor representative to translate.
Too busy to babysit - When hiring out, you don’t expect to have to babysit. If you are too busy to project manage, consider assigning the management to someone else on staff.
Tips for partnering success
Align financial motivations with your partner. If you need user adoption to be successful, pay your partner based on the number of active users.
Pay your partners well to keep them motivated for a successful project. Firms who beat their vendor partners into money losing scenarios will ultimately pay a huge price in responsiveness, quality of work, and service.
Create milestone payments that are tied to accomplishments of short-term milestones.
Establish executive steering committee meetings with executives from both firms in attendance. These sessions should be frequent and always include a review of the deliverables.
Ensure you have good communication between the organizations. You want to feel comfortable being able to call their executives when you need them.
Go into the partnership with a flexible mindset. Every project encounters issues that will require compromise and working together to find solutions. Forcing misunderstood requirements can cost dearly in the long-run.
Be careful of the ‘bait and switch.’ Unfortunately some vendors will rope you in with a seemingly great deal and have plans to gouge you for fees once you are so far along that you can't turn back. It is critical to have mutual expectations in writing prior to starting.
Create a shared environment where all discussions are recorded and communications are maintained for everyone on the project to review.
Finding the right software solutions starts with clear introspection of your needs, your team’s skill set, time constraints, budget, and ability to ask good questions upfront.
For more information on technology and how different software can work together in the financial services and insurance industry ecosystem, check out the NIC Resource Center.