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Buy vs Build Decision Tree

        posted by , April 27, 2011

A decision tree is a good way to apply consistent and transparent criteria to your buy vs build choices.

buy vs build

a. Commercial Off the Shelf (COTS) available?

Are there fit for purpose products in the marketplace? Ideally there should be 3 or 4 competing products in the space.

b. Area of competitive advantage?

Competitive Advantage (CA) is a widely overused term. True CA means that you can do something better than any of your competitors.

It is common to see competitive advantage mentioned in the business case for COTS investments. However, it is not really CA when you are implementing the same tool everyone else is using.

In core business areas you may want to build — if you believe you can do it better than anyone else. For example, large investment banks often implement their own algorithmic trading systems in an effort to beat the competition.

c. COTS too expensive?

Some architects take a COTS at any price approach — this is a mistake. COTS products can be expensive. If you can build similar functionality at a lower cost — go for it.

d. COTS customization > 8%

There is no point investing in COTS if the customization effort is significant. If your total customization effort is >8% it is likely easier to build.

Due Diligence

The decision tree is just a starting point — investment in a COTS tool warrants significant due diligence.


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