By Demetrios Skalkotos, Global Head of Ledger Vault
With a myriad of software solutions available to fix problems organizations face everyday, the age-old conundrum of whether to build in-house technology or to buy it from third-party specialists leaves many executives bewildered as to how to make the best decision for their organization, its stakeholders and clients. The reality is there is no one size fits all answer for most businesses.
Even in the nascent blockchain industry, the ease of buying a product that allows for custom enhancements versus building a homemade solution is something CEOs, CTOs, CISOs and COOs at major financial institutions are grappling with as digital assets become a part of institutional and individual investors portfolios. When observing the blockchain industry, where there exists a race to acquire customers for retail focused platforms and grow capital for digital asset-focused family offices and funds, the question of to buy or to build is a difficult decision to make. Nonetheless, there are several things executives should consider when contemplating whether to build an enterprise software solution from scratch or to buy it from a reputable specialist.
The first question leaders need to ask themselves is: is it in the company’s core principles to be customer-centric and client driven or to become a technology company? If the mission is to focus on the customer then buying technology and security from a specialist is a reality. If a company’s aspirations are to become a full-fledged technology company then building a product is more critical for the foundation of the company.
Another question leaders need to contemplate is: is it more efficient to spend countless hours having your best minds -- or hiring new talent -- build a solution that already exists and is proven in the marketplace? Typically, third-party vendors have already solved the problems troubling enterprises, and have tested and updated protocols hundreds of times before introducing the solution to the world. From this point, it would seem like going with the vendor product would be wise; however, it’s more complicated than solely that point.
The larger and more traditional the business, the higher the likelihood they will want to control their own solutions with the mindset of it will be easier to deploy and integrate into existing initiatives rather than overlay outside protocols. Taking this point into account poses a different question to consider: are there advanced solutions able to seamlessly integrate into the complexities of the organization’s internal workflows? This exploratory question will typically kick-off the due diligence process when more times than not executives will lean towards the solution that is customizable to native processes while also allowing the company’s core business to scale.
With the cryptocurrency revolution well underway, sacrificing components like risk management and regulatory compliance for the sake of building your own solutions from the ground up seems irresponsible to clients. Investors partner with institutions because they should -- already -- be providing an integrated service comprising the security features, compliance principles and insurance policies to keep their assets out of harm's way. When an organization takes time to build, test and deploy an in-house solution, the organization is risking its clients investments, time and overall peace of mind.
Alternatively, performing the due diligence of finding a solution engineered to meet the needs of clients may take some time but will ultimately be a more efficient option for institutions looking to do what they do best, grow clients’ investments and scale their practices.
Executives in search of risk management solutions need to be asking third-parties to look under the hood to see their end-to-end security infrastructures in action to better understand how their clients' assets will be safeguarded but also instantly accessible for trading activities. With digital assets being extremely vulnerable, security protocols and governance schemes need to be inspected front-to-back to ensure there are no single points of failure once the software is in action and people are interacting with it.
Another aspect to consider while weighing the buy or build decision will be how much the internal developments plus ongoing maintenance are projected to cost. The costs to hire, train and retain expert talent to build a solution from scratch and the continued cost burden of product development and maintenance will have to be evaluated and weighed against the organizations’ roadmaps and objectives. Executives need to keep in mind that risk management solutions, especially for complex assets like cryptocurrencies, will require frequent upgrades, and will usually require years of ongoing development and investment beyond the project’s initial scope ultimately making the buy decision more cost-effective and productive in the long-run.
Factors like customer success pledges are sometimes what sets solutions apart from the rest and should not be overlooked in the due diligence process. The value benefit of buying a software product versus another sometimes comes down to whether or not executives feel like they have an astute support team to help deploy the solution, manage the maintenance and troubleshoot issues at any given time.
In many business situations, it is ultimately a better decision to buy rather than build a software product. But there are some instances that may influence the decision to build in-house rather than buy, and it will come down to whether the organization has the time, money, talent and client patience to embark on the long journey to build a product that most likely already exists.
Buying a solution, whether it’s commercial or enterprise, can more quickly and cost-effectively get an organization solving problems and securing clients’ wealth without wasting limited time and resources. Each organization has its own preferences, so it’s crucial to assess all aspects of the buy and build process before making a final decision for your organization.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.