AKF Partners

Abbott, Keeven & Fisher Partners Partners in Technology

Growth Blog

Scalability and Technology Consulting Advice for SaaS and Technology Companies

Build v. Buy

April 3, 2017  |  Posted By: AKF

In many of our engagements, we find ourselves helping our clients understand when it’s appropriate to build and when they should buy.

If you perform a simple web search for “build v. buy” you will find hundreds of articles, process flows and decision trees on when to build and when to buy. Many of these are costcentric decisions including discounted cash flows for maintenance of internal development and others are focused on strategy. Some of the articles blend the two.

Here is a simple set of questions that we often ask our customers to help them with the build v. buy decision:

1. Does this “thing” (product / architectural component / function) create strategic differentiation in our business?

Here we are talking about whether you are creating switching costs, lowering barriers to exit, increasing barriers to entry, etc that would give you a competitive advantage relative to your competition. See Porter’s Five Forces for more information about this topic. If the answer to this question is “No – it does not create competitive differentiation” then 99% of the time you should just stop there and attempt to find a packaged product, open source solution, or outsourcing vendor to build what you need. If the answer is “Yes”, proceed to question 2.

2. Are we the best company to create this “thing”?

This question helps inform whether you can effectively build it and achieve the value you need. This is a “core v. context” question; it asks both whether your business model supports building the item in question and also if you have the appropriate skills to build it better than anyone else. For instance, if you are a social networking site, you *probably* don’t have any business building relational databases for your own use. Go to question number (3) if you can answer “Yes” to this question and stop here and find an outside solution if the answer is “No”. And please, don’t fool yourselves – if you answer “Yes” because you believe you have the smartest people in the world (and you may), do you really need to dilute their efforts by focusing on more than just the things that will guarantee your success?

3. Are there few or no competing products to this “thing” that you want to create?

We know the question is awkwardly worded – but the intent is to be able to exit these four questions by answering “yes” everywhere in order to get to a “build” decision. If there are many providers of the “thing” to be created, it is a potential indication that the space might become a commodity. Commodity products differ little in feature sets over time and ultimately compete on price which in turn also lowers over time. As a result, a “build” decision today will look bad tomorrow as features converge and pricing declines. If you answer “Yes” (i.e. “Yes, there are few or no competing products”), proceed to question (4).

4. Can we build this “thing” cost effectively?

Is it cheaper to build than buy when considering the total lifecycle (implementation through endoflife)
of the “thing” in question? Many companies use cost as a justification, but all too often they miss the key points of how much it costs to maintain a proprietary “thing”, “widget”, “function”, etc. If your business REALLY grows and is extremely successful, do you really want to be continuing to support internally developed load balancers, databases, etc. through the life of your product? Don’t fool yourself into answering this affirmatively just because you want to work on something neat. Your job is to create shareholder value – not work on “neat things” – unless your “neat thing” creates shareholder value.

There are many more complex questions that can be asked and may justify the building rather than purchasing of your “thing”, but we feel these four questions are sufficient for most cases.

A “build” decision is indicated when the answers to all 4 questions are “Yes”.

We suggest seriously considering buying or outsourcing (with appropriate contractual protection when intellectual property is a
concern) anytime you answer “No” to any question above.

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AKF Turns 10 – And It’s Still Not About the Tech

March 23, 2017  |  Posted By: AKF

The caller ID was blocked but Marty had been expecting the call.  Three “highly connected” people – donors, political advisers and “inner circle” people –  had suggested AKF could help. It was October 2013 and Healthcare.gov had launched only to crash when users tried to sign up. President Obama appointed Jeffrey Zients to mop up the post launch mess. Once the crisis was over, the Government Accountability Office (GAO) released its postmortem citing inadequate capacity planning, software coding errors, and lack of functionality as root causes. AKF’s analysis was completely different – largely because we think differently than most technologists. While our findings indicated the bottlenecks that kept the site from scaling, we also identified failures in leadership and a dysfunctional organization structure.  These latter, and more important, problems prevented the team from identifying and preventing recurring issues.

We haven’t always thought differently. Our early focus in 2007 was to help companies overcome architectural problems related to scale and availability. We’ve helped our clients solve some of the largest and challenging problems ever encountered – cyber Monday ecommerce purchasing, Christmas day gift card redemption, and April 15th tax filings. But shortly after starting our firm, we realized there was something common to our early engagements that created and sometimes turbocharged the technology failures. This realization, that people and processes – NOT TECHNOLOGY–  are the causes of most failures led us to think differently.  Too often we see technology leaders focusing too much on the technology and not enough on leading, growing, and scaling their teams.

We challenge the notion that technology leaders should be selected and promoted based on their technical acumen. We don’t accept that a technical leader should spend most of her time making the biggest technical decisions.  We believe that technical executives, to be successful, must first be a business executive with great technical and business acumen.  We teach teams how to analyze and successfully choose the appropriate architecture, organization, and processes to achieve a business outcome. Product effort is meaningless without a measurable and meaningful business outcome and we always put outcomes, not technical “religion” first.

If we can teach a team the “AKF way” the chance of project and business success increases dramatically. This may sound like marketing crap (did we mention we are also irreverent?), but our clients attest to it.  This is what Terry Chabrowe, CEO eMarketer, said about us:

AKF served as our CTO for about 8 months and helped us make huge improvements in virtually every area related to IT and engineering. Just as important, they helped us identify the people on our team who could move into leadership positions. The entire AKF team was terrific. We’d never have been able to grow our user base tenfold without them.

A recent post claimed that 93% of successful companies abandon their original strategy.  This is certainly true for AKF. Over the past 10 years we’ve massively changed our strategy of how we “help” companies. We’ve also quadrupled our team size, worked with over 350 companies, written three books, and most importantly made some great friendships. Whether you’ve read our books, engaged with our company, or connected with us on social media, thanks for an amazing 10 years. We look forward to the next 10 years, learning, teaching, and changing strategies with you.

 

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