Buy or Build?

Buy or Build?

There comes a time in every young man’s life (and I’m sure it happens to you too, young women), where you’ve asked yourself the age-old question, “Josh, should I buy myself a new Gulfstream G550… or just build it?

Now that may seem like a ridiculous question to some of you… but it’s not.

It’s a very undiculous question.

Clearly, a Gulfstream G550 is too expensive to buy. So, that kind of narrows it down!

Of course it’d be cheaper for you to build your own, right? I mean, I assume these guys aren’t just making private jets as a way to burn through their trust funds. They must be charging more than it costs them to make… so let’s save some money and build one ourselves! I’m so sure we could build one measly jet for less than $60,000,000!

Buy or Build?

Now, where do we start?

I guess, we call up a, um, wing store? And maybe a propellor factory? Some kind of fuselage shop? A hot tub manufacturer?

Then, we hire some cheap Chinese/Indian/Mexican/Canadian labor to piece it all together, and whammo, we should have our very own ultra-lux jet for quarters on the dollar!

But quarters on the dollar is not enough! Somebody, somewhere, is clearly still making profit off of us!

Couldn’t we be even cheaper, and build our own wings, too? And our own fuselage? Our own hot tub?

I bet we could! And that’d be even cheaper!

And we could mine our own iron too! And drill for our own oil! And, er, sand our own silicon! And desalinate our own water! And, and, and…

Okay, enough of that. Everybody knows you gotta buy some stuff, sometime… division of labor, specialization, economies of scale, and all that. If it always made sense to build things yourself, why does my wife go shopping so much?

In fact, when you’re just a measly consumer, it pretty much never makes sense to build your own of anything! There’s a reason we’re not called producers.

Buy or Build?

The average consumer has no capital to spend, no expertise to use, and probably only needs one or two of the item in the first place… which all adds up to a pretty heavy bias towards “buy”.

For a company though, the decision is a little harder. Clearly, there are tons of things you need to produce your product or service that just don’t make sense to build. They’re just too difficult to build, or require too big an investment of money/time for how much of them you need.

For example, we don’t build our own servers, we don’t write our own operating system, we don’t run our own international fiber-optic network, we don’t run our own domain registry, we don’t own our own data center, we don’t run our own office building, we don’t handle our own medical insurance, we don’t bake our own pizzas, and we don’t even clean our own toilets.

In fact, even for companies, most of the time you aren’t going to build things yourself. Generally, your whole business is based around providing just one added value. And generally, it works best if you just focus on making that one added value the most efficient, highest quality, and I guess valuable… you can.

If you get distracted by how crappy your vendors are and start thinking “we could do what stupid Xmlyz Corp does, only soooo much better”, you might just find your company turning into a jack-of-all-trades, master-of-none. And nobody goes with the company that does lots of things poorly.. they use the company that does just what they need… the best!

When you buy something, you can always get it cheaper, faster, and better than building it yourself. So, it always makes a lot more sense to buy.

Buy or Build?

Except not always!

There are insidious hidden downsides to buying, ones that will now no longer be so as I illuminate them!

For one, the more you buy, the less you control. If it’s a core part of your business, you probably need to be building it!

You don’t want to be lying asleep at night dreaming, “Hmm, that Ventimaxilator 3000 we bought doesn’t quite work as well as I was expecting. I sure hope I can convince Acme Ventimaxilator, LLC to fix it in the 4000!”

And sure, that software license might be cheap today, but once you’re running your whole business on it, who’s to say the price won’t go up, up, and away next year? NOT YOU.

For two, if you can buy it, your competitors can buy it too, brainiac! What’s your advantage then? Having more money? Spending more on advertising?

Well, your competitors can get loans and spend more on advertising too, baby-genius!

I’m pretty sure these downsides to buying are one of the big reasons open-source software is getting ever more popular, especiallyOSS has the cheaper, faster, and better advantages of buying along with the control and differentiation advantages of building!

But wait, how does it have the differentiation advantage? Can’t your competitors use the same open-source software you use?

Buy or Build?

Yah, yah, yah. True dat.

But at least with open-source you can make your own changes to it. Not to mention, if you have any sort of software expertise, you have a big advantage over other companies trying to use OSS since, unlike much commercial software, OSS is hard to use and has little professional support available!

That’s right. Open-source software’s biggest failings for the consumer market may just be the reason it’s succeeding in business!

I know I at least consider the fact that we use all open-source software, plus our own custom billing, provisioning, and management software one of our greatest advantages through the years.

Oh yeah, and this awesome blog.

About the author

Josh Jones