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Consideration of…
Build Versus Buy
Decision-Making
Challenges
September 17, 2009




References:
Corporate Executive Board
Forrester Research
Experture Research
NBC/NYTimes/CNBC
Build Versus Buy Decision-Making Challenges

   Build Ave vs. Buy Street ?
      When faced with the decision of building
   When considering a build vs. buy decision,
   IT Leaders are faced with solutions, IT Leaders
      vs. buying software several common
   decision points, each with their own set of
      are faced with several decision factors:
   consequences.




  Sound familiar ?
  •Total Cost of Ownership over Lifecycle

  •Features & Functionality

  •Maintainability & Control

  •Competitive Advantage, if any ?
Build Versus Buy Decision-Making Challenges
 Strategic Considerations

              Project Impact vs. Complexity                                   Market Maturity vs. Competitiveness

          High                                                                       High
                                                                                                   Decision
                                                                                                   based on             Most likely
                          Most likely          Ambitious                                             other               to buy
                           to build             projects
                                                                                                    factors
 Strategic                                                                Market
 Impact of                                                                Maturity
Application                                                                                                              Decision
                                                                                                  Most likely            based on
                         Low impact             Most likely
                                                                                                   to build                other
                          projects               to buy
                                                                                                                          factors

          Low                                                                        Low
                    Low                                        High                          Low                                       High
                            Application Complexity                                                   Market Competitiveness
              Application complexity is a factor in the decision, as IT                 Mature markets are more likely to offer sufficient,
              organizations are more unlikely to build highly complex                      industry-specific functionality than newer
              applications. However, several financial services firms                                 less mature markets.
                build wealth-management software in-house, few                       Competitive markets are more likely to offer low software
              organizations develop proprietary Enterprise Resource                       pricing than markets dominated by vendors.
                             Planning (ERP) Systems.
Build Versus Buy Decision-Making Challenges
TCO Calculation Scorecard

 A simple method of evaluating the Total Cost of Ownership is to align Lifecycle
 Milestones side-by-side.

 Where: TCO = Capital Costs (one-time) + Operating Costs (annual)



 Build Cost Factors                         Cost($)   Buy Cost Factors                         Cost($)
 Software Development Resources             $ -        Software Licensing                      $ -
 Software Quality Control & Testing         $ -        Software Implementation & Integration   $ -
 Software Configuration & Deployment        $ -        Application Customization               $ -
 End-User Training                          $ -        End-User Training                       $ -
 Ongoing Maintenance & Enhancements (RTS)   $ -        Ongoing Maintenance & Support Fees      $ -
 Software End of Life                       $ -        Software End of Life                    $ -
Build Versus Buy Decision-Making Challenges
Common Build vs. Buy Decision Making Mistakes
Need for an Eval Process:          Ad-hoc processes create inefficiencies and fail to provide scalable data to inform future build versus buy decisions
                                   Project-to-project evaluation processes generate operational inefficiency

Variable Maturity                  Mature markets may not offer adequate functionality; competitive markets may not offer lower costs than building

Incomplete TCO                     Inaccurate decision based on incomplete TCO which don’t capture the full costs and benefits / build and buy options

Misinformed Requirements           Ad-hoc processes do not adequately inform product negotiations with software vendors or development requirements
                                   i.e. “Do my requirements match your product offering ?”
                                         “I’ve purchased a solution I thought met my requirements, but actually does not “


Process Recommendations
                                                           Establish a Team
                                       Software Architect          Project Manager            Stakeholder



                    Reuse                                             Buy                                              Build
            •Does current in-house                         •Does packaged software                           •Are required applications
            applications address business                  address 70% of business                           features missing from
            requirements ?                                 requirements?                                     the packaged software ?

   yes      •Can developers customize         yes          •Does packaged software             yes           •Can internal resources build
            existing application to                        allow customization or                            or integrate to business
            address these requirements ?                   integration w/ third party                        requirements ?
                                                           services ?
                                               no                                                no
                                                  Total Cost of Ownership (TCO) Analysis
Build Versus Buy Decision-Making Challenges
                                                                                     = Buy         = Build
CNBC Global Data System
  The Next Generation Data (GDS) will provide a standardized platform to retrieve, store and disseminate
  information, news and market data across all global applications and digital platforms (ex: On-Air Apps
  such as Ticker, Charting, Web and Mobile).


                 Application Middleware

                            Symbology/
                           Reference Data



                       Monitoring Admin
                                                                    Legacy
          History dB                                                System
             Caching Layer
                    Messaging Layer
                       Feed Handlers
Build Versus Buy Decision-Making Challenges
New York Times Video Production and Distribution Systems

  The Video Production Systems will redesign workflow to eliminate redundancy in
  production, automate approvals and publishing processes and prepare the newsroom
  for multiplatform distribution of video content.



  Benefits

    Bring encoding and transcoding in house to eliminate time
    and bandwidth intensive file transfers.
    Secure corporate assets ensuring backup and disaster recovery
    procedures.
    Improve metadata workflow and asset tagging for improved
    cataloging.
    Support exponential growth in syndication businesses.
Creation                 Collection                 Distribution                       Display

                          o What outside sources      o How many distribution       o What are the various
o Where are your                                        channels do you have?         devices and players you
editors?                     contribute video?
                                                                                       publish to?
                            (UGC, syndicated,etc)
                                                      o How many codecs and
o What metadata must                                    bitrates do you need?       o Do you want instant
they input?               o What metadata
                                                                                      streaming or downloads?
                            format do you ingest?
                                                      o How fast should the files
o How fast does the                                     go live?                    o Do you want/have
network need to connect   o How fast does
                                                                                      resources to maintain
to storage?                 the ingest of content
                            need to happen?           o How do you want to            your own player?
                                                        integrate your CMS with
o How much do they                                      video playback and          o What ad units do you
share projects and        o What approval mech-
                            anisms do you need?         play lists?                   require?
assets?

                          o What search cap-          o Do you have a CDN           o How interactive or
o What is your approval                                 preference?                   passive do you want the
process?                    abilitites do you need?
                                                                                      user experience?
                          o Do you need image         o Do you need MXML
                            recognition?                feeds?                      o What display metrics do
                                                                                      you require?
                          o What are your rules       o What are your commerce
                            for storing collected       needs?
                            assets?
                                                      o What reporting/ tracking
                                                        do you require?

                                                      o Where is your rights data
                                                        stored?
Build vs Buy Strategy
Build vs Buy Strategy

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Build vs Buy Strategy

  • 1. Consideration of… Build Versus Buy Decision-Making Challenges September 17, 2009 References: Corporate Executive Board Forrester Research Experture Research NBC/NYTimes/CNBC
  • 2. Build Versus Buy Decision-Making Challenges Build Ave vs. Buy Street ? When faced with the decision of building When considering a build vs. buy decision, IT Leaders are faced with solutions, IT Leaders vs. buying software several common decision points, each with their own set of are faced with several decision factors: consequences. Sound familiar ? •Total Cost of Ownership over Lifecycle •Features & Functionality •Maintainability & Control •Competitive Advantage, if any ?
  • 3. Build Versus Buy Decision-Making Challenges Strategic Considerations Project Impact vs. Complexity Market Maturity vs. Competitiveness High High Decision based on Most likely Most likely Ambitious other to buy to build projects factors Strategic Market Impact of Maturity Application Decision Most likely based on Low impact Most likely to build other projects to buy factors Low Low Low High Low High Application Complexity Market Competitiveness Application complexity is a factor in the decision, as IT Mature markets are more likely to offer sufficient, organizations are more unlikely to build highly complex industry-specific functionality than newer applications. However, several financial services firms less mature markets. build wealth-management software in-house, few Competitive markets are more likely to offer low software organizations develop proprietary Enterprise Resource pricing than markets dominated by vendors. Planning (ERP) Systems.
  • 4. Build Versus Buy Decision-Making Challenges TCO Calculation Scorecard A simple method of evaluating the Total Cost of Ownership is to align Lifecycle Milestones side-by-side. Where: TCO = Capital Costs (one-time) + Operating Costs (annual) Build Cost Factors Cost($) Buy Cost Factors Cost($) Software Development Resources $ - Software Licensing $ - Software Quality Control & Testing $ - Software Implementation & Integration $ - Software Configuration & Deployment $ - Application Customization $ - End-User Training $ - End-User Training $ - Ongoing Maintenance & Enhancements (RTS) $ - Ongoing Maintenance & Support Fees $ - Software End of Life $ - Software End of Life $ -
  • 5. Build Versus Buy Decision-Making Challenges Common Build vs. Buy Decision Making Mistakes Need for an Eval Process: Ad-hoc processes create inefficiencies and fail to provide scalable data to inform future build versus buy decisions Project-to-project evaluation processes generate operational inefficiency Variable Maturity Mature markets may not offer adequate functionality; competitive markets may not offer lower costs than building Incomplete TCO Inaccurate decision based on incomplete TCO which don’t capture the full costs and benefits / build and buy options Misinformed Requirements Ad-hoc processes do not adequately inform product negotiations with software vendors or development requirements i.e. “Do my requirements match your product offering ?” “I’ve purchased a solution I thought met my requirements, but actually does not “ Process Recommendations Establish a Team Software Architect Project Manager Stakeholder Reuse Buy Build •Does current in-house •Does packaged software •Are required applications applications address business address 70% of business features missing from requirements ? requirements? the packaged software ? yes •Can developers customize yes •Does packaged software yes •Can internal resources build existing application to allow customization or or integrate to business address these requirements ? integration w/ third party requirements ? services ? no no Total Cost of Ownership (TCO) Analysis
  • 6. Build Versus Buy Decision-Making Challenges = Buy = Build CNBC Global Data System The Next Generation Data (GDS) will provide a standardized platform to retrieve, store and disseminate information, news and market data across all global applications and digital platforms (ex: On-Air Apps such as Ticker, Charting, Web and Mobile). Application Middleware Symbology/ Reference Data Monitoring Admin Legacy History dB System Caching Layer Messaging Layer Feed Handlers
  • 7. Build Versus Buy Decision-Making Challenges New York Times Video Production and Distribution Systems The Video Production Systems will redesign workflow to eliminate redundancy in production, automate approvals and publishing processes and prepare the newsroom for multiplatform distribution of video content. Benefits Bring encoding and transcoding in house to eliminate time and bandwidth intensive file transfers. Secure corporate assets ensuring backup and disaster recovery procedures. Improve metadata workflow and asset tagging for improved cataloging. Support exponential growth in syndication businesses.
  • 8. Creation Collection Distribution Display o What outside sources o How many distribution o What are the various o Where are your channels do you have? devices and players you editors? contribute video? publish to? (UGC, syndicated,etc) o How many codecs and o What metadata must bitrates do you need? o Do you want instant they input? o What metadata streaming or downloads? format do you ingest? o How fast should the files o How fast does the go live? o Do you want/have network need to connect o How fast does resources to maintain to storage? the ingest of content need to happen? o How do you want to your own player? integrate your CMS with o How much do they video playback and o What ad units do you share projects and o What approval mech- anisms do you need? play lists? require? assets? o What search cap- o Do you have a CDN o How interactive or o What is your approval preference? passive do you want the process? abilitites do you need? user experience? o Do you need image o Do you need MXML recognition? feeds? o What display metrics do you require? o What are your rules o What are your commerce for storing collected needs? assets? o What reporting/ tracking do you require? o Where is your rights data stored?