Master of Business Administration (MBA)

MANAGEMENT INFORMATION SYSTEM (MBA531)

Assignment 2 - Research on Buy vs Build and Information System:

SUBMITED BY:

Mikiyas Mussie Mohammed

SUBMITED TO:

Dr. Fikre Y. Wondimu

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1. Describe Buy vs Build specific to Customers Relations
Management System.
The better a business can manage the relationships it has with its customers the more
successful it will become. Therefore, IT systems that specifically address the problems of
dealing with customers on a day-to-day basis are growing in popularity.
Customer relationship management (CRM) is not just the application of technology but is a
strategy to learn more about customers' needs and behaviors in order to develop stronger
relationships with them. As such it is more of a business philosophy than a technical solution
to assist in dealing with customers effectively and efficiently. Nevertheless, successful CRM
relies on the use of technology.
When developing an information system, organisations are faced with a fundamental choice:
to buy a pre-developed package (potentially customise it or redesign/reengineer the business
processes of the company concerned to fit the package), or to build the system in-house. Past
literature has indicated the importance of the buy vs build decision to the organisation even
suggesting that correctly managing the choice could be the key to managing information
technology.
This research aims to identify the factors that an organisation should consider when making
an information system buy vs build decision.
We found that several core factors – strategy, commodity and competitive advantage,
maturity, cost, and requirements fit – critically affect buy vs build, while peripheral factors –
risk, time and timing, political factors, and ongoing support – are secondary considerations.
The build vs. buy decision should not come down to the flip of a coin. Although there is still
a 50% chance you will make the right decision, we want to increase those odds even further
given your unique situation.
The following are the most important considerations when first deciding whether to build or
buy. We then compare and contrast the pros and cons.
 The Problem: The first thing to consider is the problem you are attempting to solve. Is
this a common problem or a unique one facing your company specifically in related to
CRM?

 The Budget: The next concern is budget. Most companies do not have a big budget for
building enterprise-level software. This is why it can often be easier to justify a monthly
recurring payment or even an annual expense for a third party product.
 The TimeLine: The next consideration is the time horizon. Is your problem a threat to
the very livelihood of your company or just a nagging annoyance that could be improved?
You must consider whether or not the problem will compromise the health of the
business.

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2. Describe the pros and cons – Buy vs Buid.
Pros of Building
Customization and Scale: One of the biggest pros of building your own custom software
solution is that it will include all the functionality you need to operate in exactly the ways you
need it to. The software you end up with will be tailored to your unique business model and
challenges. Total control over the development also allows you to add any new features when
needed so that your business can continue to run like a well-oiled machine. You can start
with a prototype and grow the software as your revenues grow. Additionally, your employees
will be able to give their feedback on what features are essential to streamline their
workflows.
Greater control: As the sole owner of the solution, you will have full control over user
options, security measures, and system updates. Plus, complete ownership gives you the
option to market the product, itself, offering your software as a service down the line.
Competitive edge: With a custom software solution, you can gain a competitive advantage
by leveraging the most efficient, connected, and scalable technology, helping your business
get ahead of the game in your industry. Your software can differentiate your business from
others in the crowded marketplace.
Guaranteed integration: Building your own solution means you can ensure seamless
integration with any existing software, tools, and processes already in use.

Cons of Building
Significant upfront cost: Like anything that is customized, a custom solution will cost more
than an off-the-shelf product. However, off-the-shelf solutions may not always be the most
economically feasible route in the long run. Over time, the use of pre-built software can
create a loss of revenue due to the lack of scalability or critically essential functionality.
Software that is specifically created and customized to your workflow can push production
and profitability through the roof and lead to exponentially faster business growth.
Time to build: It takes time to identify your organization’s workflow processes and develop
the software that optimizes them. You have to be prepared to spend time gathering this
information so that a custom solution will be appropriate and powerful for your business.

Pros of Buying
Lower upfront cost: If cost is a major concern and you have limited resources to launch,
pre-built software may be your best option since it is typically cheaper to buy and implement.
Rapid deployment: Ready-made programs should be good to go as soon as you pay for them
and load them onto your system. If an existing solution perfectly meets most of your needs,

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there may be little point investing time and money in developing a version of something that
is already out there.
Updates, new features, and ongoing maintenance: Third-party providers will want to stay
competitive. As well as keeping up with maintenance, a third-party solution will often be
updated regularly with new features and functionality.

Cons of Buying
Less customization: While many third-party software solutions enable some customization,
the solution won’t be custom built for you.
Less control: The vendor controls the solution’s updates, volume capacity, and
functionalities. All the key decisions on the software’s features and future are out of your
hands.
Compatibility and connectivity issues: Pre-built software may not be compatible with other
programs, devices, or products that you are using today — or with solutions you may need to
implement in the future.
Long-term Cost: Although ready-made software may be cheaper to buy initially, its costs
may grow over time. Subscriptions and licenses tend to be time-limited, so you'll have to
reinvest whenever they run out. What is more, if your company grows significantly, you will
have to add more licenses for new employees.
There are a lot of factors to consider when deciding whether to buy off-the-shelf software or
develop a custom software solution from scratch to meet all your unique business needs. If
you decide to go with a third-party system, be sure to take the time to weigh the different
vendors and solutions available. If you choose to build a custom software platform, recognize
the time, effort, and costs it will incur, along with the long-term benefits.

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3. Summarize your outcome.
In today’s business world, a software component is critical for any business looking to gain
efficiencies. Software systems that automate back office processes — from customer
relationship management to billing to reporting — empower businesses to leverage
technology and free up their finite labor resources for other, high-order work.
When it comes to software solutions, it can be quite difficult to decide whether to choose the
flexibility of building your own software or the speed of buying a tried-and-tested third-party
option off the shelf. Many businesses today face that dilemma, and it’s not just a question of
cost. It’s also important to consider a solution’s efficiency, effectiveness and fit with your
company’s long-term goals.
Prior to making a decision about whether to build or buy, consider the following points:
 What are the issues you’re trying to solve with software, and how unique are they?
If, for example, you need a rather straightforward customer management system with
some basic functionality, there will likely be many off-the-shelf solutions to choose
from. But if you’re looking for complex functionality or you’re solving a problem
specific to your company or industry, you may have trouble finding a workable
solution on the market.
 Do you have the funds you need to see this project through to completion?
Building custom software costs more upfront than purchasing pre-built software.
Depending on the size and profitability of your business, this can be a deal-breaker.
 What are the time constraints for implementing a software solution?
There are process models in software development that allow for generating working
software modules quickly but launching a fully loaded custom software solution takes
time, which the business may or may not have.

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