Build vs. Buy: When to Build Yourself, When to Buy?
One of the most common questions in tech teams: "Should we build this ourselves or buy a ready solution?" The answer is rarely simple – but with the right framework, it becomes systematic.
Understanding the True Costs
Hidden Build Costs
What many forget when evaluating "Build":
| Cost Factor | Typical Underestimation |
|---|---|
| Initial Development | 2-3× the first estimate |
| Maintenance | 15-20% of development costs/year |
| Infrastructure | Scaling, monitoring, security |
| Opportunity Cost | What else could the team build? |
| Onboarding | Every new dev must be trained |
| Documentation | Often forgotten, always needed |
Hidden Buy Costs
What many forget when evaluating "Buy":
| Cost Factor | Typical Underestimation |
|---|---|
| Integration | 2-6 weeks per system |
| Customization | Often more expensive than expected |
| Migration (later) | Lock-in can be expensive |
| Training | Team must learn new tool |
| Vendor Risk | What if provider shuts down? |
| Compromises | Not everything fits 100% |
The Build-vs-Buy Decision Framework
Step 1: Identify Core Competency
Question: Is this functionality central to our business model?
| Core Competency | Recommendation |
|---|---|
| Yes, differentiates us from competition | Tendency: Build |
| No, standard functionality | Tendency: Buy |
Examples:
| Feature | For E-Commerce | For Media Company |
|---|---|---|
| Payment Processing | Buy | Buy |
| Content Management | Buy | Build (possibly) |
| Recommendation Engine | Build (possibly) | Build |
| User Authentication | Buy | Buy |
Step 2: Check Availability
Question: Is there a solution that meets 80%+ of our requirements?
If yes:
- Evaluate integration
- Check customization options
- Calculate total cost of ownership
If no:
- Are there open-source alternatives?
- Can we build on existing solutions?
- Is everything really that special?
Step 3: Calculate Costs
Build Cost Calculation
Development Costs (one-time):
Developers × Hourly rate × Estimated hours × 2.5 (uncertainty factor)
Maintenance Costs (annually):
Development costs × 0.2
Infrastructure Costs (annually):
Server + Tools + Monitoring
5-Year TCO:
Development + (5 × Maintenance) + (5 × Infrastructure)
Example Build Calculation:
- Development: 2 Devs × €100/h × 400h × 2.5 = €200,000
- Maintenance/Year: €40,000
- Infrastructure/Year: €12,000
- 5-Year TCO: €460,000
Buy Cost Calculation
License Costs (annually):
Price per user × Number of users
Integration Costs (one-time):
Developers × Hourly rate × Estimated hours
Customization (one-time + ongoing):
Depending on requirements
5-Year TCO:
Integration + Customization + (5 × License)
Example Buy Calculation:
- License: €500/month × 12 = €6,000/year
- Integration: 1 Dev × €100/h × 80h = €8,000
- Customization: €15,000
- 5-Year TCO: €53,000
Step 4: Evaluate Risks
Build Risks
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| Scope Creep | High | Medium | Clear specs |
| Key Person Risk | Medium | High | Documentation |
| Tech Debt | High | Medium | Reviews |
| Time Delay | High | Medium | Plan buffer |
Buy Risks
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| Vendor Lock-in | Medium | High | Exit strategy |
| Price Increase | Medium | Medium | Contract negotiation |
| Feature Gap | Medium | Medium | Evaluation |
| Vendor Exit | Low | High | Know alternatives |
Step 5: Decision Matrix
| Criterion | Weight | Build (1-5) | Buy (1-5) |
|---|---|---|---|
| Core Competency | 25% | ||
| Costs (5Y-TCO) | 20% | ||
| Time-to-Market | 15% | ||
| Flexibility | 15% | ||
| Risk | 15% | ||
| Team Competency | 10% |
Calculation: Score = Σ (Weight × Rating)
When Build Is the Right Choice
Clear Build Indicators
1. Competitive Advantage
- Feature differentiates you from market
- Competitors can't easily copy
- Direct impact on revenue
2. Specific Requirements
- No solution meets >70% of requirements
- Integration would be more expensive than Build
- Many long-term adjustments needed
3. Control Critical
- Data sensitivity (health, finance)
- Regulatory requirements
- Performance-critical
4. Resources Available
- Team has capacity and competency
- Long-term maintenance secured
- Budget for uncertainties
When Buy Is the Right Choice
Clear Buy Indicators
1. Commodity Functionality
- Standard problem, solved hundreds of times
- No competitive advantage from custom development
- Best practices already established
2. Fast Time-to-Market
- Feature needed yesterday
- Learning by doing more important than perfection
- Validation before investment
3. Resources Limited
- Small team, many priorities
- No maintenance capacity
- Focus on core product
4. Expertise Missing
- Special domain knowledge needed
- Building more expensive than buying
- Not a strategic skill
Hybrid Strategies
Build on Buy
Existing solution as base, own extensions on top:
[Bought Base] → [Own API Layer] → [Own Features]
Example:
- Shopify as e-commerce base
- Own fulfillment integration
- Own recommendation engine
Buy and Extend
Ready solution with custom integration:
[SaaS Tool] → [Custom Webhooks] → [Own Automation]
Example:
- HubSpot CRM
- Custom scoring algorithm
- Automatic lead routing
Build to Replace
Start with Buy, later Build:
Phase 1: [Bought Solution] → Validation
Phase 2: [Custom Development] → After validation
Example:
- Year 1: Notion for Knowledge Base
- Year 2+: Custom Wiki (when requirements are clear)
Case Studies
Case 1: CRM System
Situation:
- 50-person sales team
- Complex B2B sales cycle
- ERP integration needed
Build Calculation:
- Development: €400,000
- 5Y Maintenance: €200,000
- Total: €600,000
Buy Calculation (Salesforce):
- License: €180,000/year × 5 = €900,000
- Integration: €50,000
- Total: €950,000
Buy Calculation (HubSpot):
- License: €60,000/year × 5 = €300,000
- Integration: €30,000
- Total: €330,000
Decision: Buy (HubSpot) Reasoning: CRM is not core competency, HubSpot covers 85%, quick start.
Case 2: Recommendation Engine
Situation:
- E-commerce with 100,000 products
- Personalization as differentiation
- Own customer data available
Build Calculation:
- Development: €150,000
- ML Infrastructure: €24,000/year
- 5Y Total: €270,000
Buy Calculation:
- SaaS solution: €48,000/year × 5 = €240,000
- Integration: €40,000
- No data sovereignty
- Total: €280,000 + strategic disadvantage
Decision: Build Reasoning: Competitive advantage, data control, cheaper long-term.
Case 3: Auth System
Situation:
- B2B SaaS product
- SSO requirements
- SOC2 compliance needed
Build Calculation:
- Development: €100,000
- Security audits: €30,000/year
- Maintenance: €20,000/year
- 5Y Total: €350,000
Buy Calculation (Auth0):
- License: €36,000/year × 5 = €180,000
- Integration: €15,000
- SOC2-compliant out-of-the-box
- Total: €195,000
Decision: Buy (Auth0) Reasoning: Security too critical for DIY, compliance already available.
Checklist Before Decision
Build Checklist
- Do we have the competency in the team?
- Is long-term maintenance secured?
- Is it really differentiating?
- Do we have enough buffer (time + budget)?
- Are requirements clear enough?
- Is there really no alternative?
Buy Checklist
- Does it meet 80%+ of requirements?
- What's the vendor track record?
- Is there an exit strategy?
- Is pricing sustainable?
- How good is integration?
- What do other customers say?
Conclusion
Build vs. Buy is not an emotional decision ("We can do it better!") and not a dogmatic one ("Never build what you can buy"). It's a business decision based on:
- Strategic Relevance – Core competency or commodity?
- Total Cost of Ownership – All costs over 5 years
- Risk Assessment – What can go wrong?
- Resource Reality – What can we really do?
The best decision is often not "Build" or "Buy", but an intelligent combination of both approaches.
Want to automate processes and wondering if n8n, Make or Zapier is right? Our tool comparison helps with the decision. See also: Conway's Law and Make vs. Buy Software.
