The Build vs Buy Debate

This article is sponsored by Cisco, Equinix and Fujitsu.

In the previous article, we briefly introduced ourselves – what the ecosystem is about, why the three of us came together, what makes us like-minded organizations. We also tackled how businesses can map out technology needs according to business outcomes.

This article takes a deeper look at how the Power of 3 fits into the needs of the enterprise and how, exactly, the Power of 3 ecosystem can meet the demand for end-to-end digital transformation.

To build or to buy? Many IT leaders are in a predicament, stumped by this seemingly intractable problem. To help businesses decide, we’re reframing this question to focus on managed services, which in some sense provides the best of both worlds.

Keeping the technology stack fresh

For an enterprise, shift in the spend of share is absolutely imperative today. Enterprises are often compelled to go from a capital expenditures (CAPEX) model to an operating expenses (OPEX) model, in line with driving business outcomes.

When building in-house, companies are forced to invest in technology, and then make sure they have proper maintenance contracts in place and the capability to operate the technology. Plus, they must check that the technology stays fresh.

When outsourcing, enterprises pay for an outcome instead of a technology. Understanding the underlying technology, or worrying about whether it stays relevant or not, is secondary. All the enterprise has to ensure is that the service provider is able to continuously guarantee the outcome promised.

Additionally, when building in-house, there is always the issue of trying to mix and match. Technologies across different platforms have to be compatible, and unless an enterprise has the skills to do this, they will face the added responsibility of finding a partner to check that these technologies are able to inter-operate.

From a managed services standpoint, there is no need to worry about things such as interoperability. Enterprises only have to set Key performance indicators (KPIs) for the service provider, whose responsibility it is to meet the outcome. Such KPIs may include availability and incident response speed, or even capacity planning to ensure that the infrastructure is able to grow in tandem with the business. Related to this is the option for a pay-per-use model, which gives businesses the flexibility to scale up and down according to immediate needs.

Core competencies must be the focus

Whether a business is a start-up, medium-sized enterprise, or a multinational corporation, it must assess its core competencies. Then, it must ask itself whether a particular technology or infrastructure defines the company’s valuation or destiny.

No organization would acquire another company because of a great email system, or a perfect SD-WAN, or anything else to do with technology deployment. Rather, it is always the core competency that is under consideration. Therefore, although these peripherals in the form of IT stacks are what turns ideas into a reality, teams should spend more effort focusing on key differentiators. One way to do this is to outsource peripheral technologies to free up more resources and energy.

Building requires companies to undergo research, discovery, understanding, trials, errors, and failures to reach a steady-state which is often a long way off. Buying, meanwhile, provides a faster time to market, allowing enterprises to purchase the outcome and have the cost of innovation outsourced. Businesses can reap the benefits of what managed services providers have already done for several years or quarters before, and merely consume the outcome and pay the fee.

Also, the landscape of buying today is not as restrictive as building, eliminating the need for high upfront investment that can sometimes lock in options to explore other opportunities. The consumption model that managed services has evolved into today means that there is always an easy way out. Companies can start by buying and, when they gain more visibility and understand exactly how things work, can potentially transfer into a new way of consumption. Buying also leaves the option of building open, allowing enterprises more time to take that step.

It might be that they discover a new layer of services that they did not see before until they walked down that path and now they will probably continue to outsource that layer of services while they start building their true core competency. Put simply, buying provides that flexibility for enterprises to decide whatever next move they want to do with less baggage.

To foster a trust between an enterprise and a managed service provider, it is important for a Service-Level Agreement (SLA) to be cemented, hand-in-hand with a focus on outcomes. In some industries, compliance to the SLA is especially important.

Avoiding the sunk-cost fallacy

If a company is building and has made a huge investment, they are likely to fall into the sunk cost fallacy. This is when money is thrown at a problem, rather than questioning the initial decision to build. Given the shifts that have ensued due to the pandemic, particularly in terms of priority and budget, falling into this trap is dangerous and can be avoided by exploring new approaches.

With buying, a managed services provider also serves as a trusted advisor who will take the transformation journey along with the business. As an advisor, the service provider can guide an enterprise to pivot when necessary, help make strategic changes, and make an enterprise aware of the different phases of the transformation journey.