Sourcing – Make/Buy Decisions

In this day and age it is key that a business spends its precious resources on things that add significant value to the product. In software developments it is all too easy to assume that you need to develop all of the components from scratch and with it the opportunity cost of those components.

There are often many alternative sources for those components, some come with a licensing cost, or at least restrictions, some with the cost of using a more suitably qualified partner… and almost all come with an overhead of assessing the relationship you will need with the supplier or an assurance of the quality of the acquired product to support your business.

The decision on ‘do it yourself’ or find some other source, should not be overly emotive. There are simple, and very visual, techniques that will help you through the ‘postioning’ and ‘value’ judgements that are useful with both technical and senior management audiences. Such techniques are more fully described here.

The Make/Buy decisions will be swayed by the strategic intentions of the company, its expectation about what knowledge it needs to nurture and grow, or what is ‘commodity’ experience that is openly and cheaply available.. and a pragmatic understanding of current capability and ability to immediately embark on some endeavours without more expert support.

In software, there are many specialist field which may not be matched by own capability e.g. the deeply embedded skills that have an electronic bias and register-level competence with the devices, hardware programmable devices and real-time performance; the application programmers who work to a well-defined API and rarely have to worry about the platform; the user-interface specialists, who understand the ergonomics, physiology and responses to fatigue of repetition, error-prone operation due to layout or colour use. It is rare that individual engineers are able to be highly skilled in more than one of these areas, although it may be perfectly possible for them to create solutions!

Once you have made the decision to acquire software (whether as a commodity purchase, or as a commissioned component or product) you could do worse than look at these checklists.

These can help you set out an objective set of questions so that all suppliers can be assessed equably. This can be of significant importance once such as ‘selection’ process is passed off to a commercial or purchasing team, as it enable an appropriate focus to be placed that will still need appropriate technical judgement of the answers to differentiate the most appropriate supplier… whilst keeping the engineers at arms length from the ‘price’ negotiation, or individual supplier bias… attractive in many large commercial organisations.

Whatever your selections, the necessity of assessing current skills, must be a combination of judgement of historic capability and the intention to support skill development with necessary training, the selection of highly productive tools, the protection of the value and intellectual property that is created and a clear connection to the business of market position, the technical and commercial offerings that match sales opportunities.

These attributes must be clear for both your internal team, but also the measures by which your designated suppliers and partners have to be judged as successful.


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