Past 5 Solutions Inc.

Make better technology decisions

Buy vs Build and Hire vs Outsource

Your core competencies are your differentiator and drive your buy vs build decisions. For instance, if you build an elaborate website that gives users many customization options, you want to build it yourself. As you gain customers and grow, you need to be the best in the world at churning out the front-end features fast. You want to build that skillset within your organization to be competitive and succeed.

One of the biggest mistakes companies can make is outsourcing their core development function. In such a case, you grow your contractors while missing an opportunity to develop your team. You might end up in a situation where you won't be able to churn out features as fast as you need to to keep up with your competition.

At the same time, you should consider buying any non-core components of your business. Let's say you want to increase cybersecurity in your organization. Unless you deal with sensitive customer data, such as banking information, you are likely better off buying off-the-shelf products rather than hiring your security team. The same goes for other parts of your business that do not deal directly with revenue, such as accounting, operations, and legal. You are likely better off engaging with third parties until your organization grows to a point where you can hire your team.

The exception to this rule are areas where you lack an in-house skillset or want to build the first version of your product without knowing whether the product will succeed. In such a case, engaging software consultants for the project's duration will enable you to avoid longer-term capital expenditures.

Buy / Outsource

  • The non-revenue generating functions of your company, such as legal, accounting, and operations

  • Functionality that would be prohibitively expensive to build yourself, such as GPT-3 language model

  • Hard-to-find domain experts in areas where you lack the skills

  • Your temporary projects, where you are building the first version to validate your concept

Build / Hire

  • Your core competencies, such as data engineers and scientists if you are a data company, or full-stack engineers if you are a web company

  • Your revenue-generating products and services, which are your differentiators

  • Your force multipliers, such as your company’s leaders