Should I Buy An Asset-Centric Solution or Build It?

It takes twice as long, at twice the cost and you will only get half of the expected functionality.” Many times, we have heard this proverbial phrase. And even if it is true, does it automatically mean you will go for the buy-variant? We’ve learned that decision-making consists of weighing many pros and cons. In this blog, we’ll provide you with a set of arguments to take into consideration.

More than just the financials (The Mindset Matters)

In our experience, a build-versus-buy decision is both multi-faceted and multi-stakeholder. To give you an example: A business leader will typically look for business process support and time to value. An IT leader may have a preference to stay on the same platform and exert control through the deployment of internal IT resources. Procurement will weigh the risk profile and continuity of the vendor base. The security officer may focus on secure, compliant transfer and storage of the business data. And finance? From finance, we expect that they will compare the cost of build versus buy in relation to the budgeting cycle.

What you have here is a mix of different personas, each with different priorities and objectives. So, how to tackle this, how to move forward? You can start to untangle this Gordian knot by genuinely trying to understand and acknowledge each stakeholder’s position.

One word of caution. However accurate the numbers are that you come up with. As you are zooming in on the pros and cons with the goal of creating a viable comparison, you need to do your homework and not only gather the facts but also be aware that each stakeholder has a different motivation.

As a business leader from Bosch said so eloquently:

“I don’t care about the make and model of the tool. I’ve got a business to run” – business leader at Bosch

We started this blog by outlining the various personas that each have their own priorities, but at the end of the day, there is one common goal: keeping the business running—today and tomorrow. And to do this, you need a solution that can either be built or bought.

What are the hidden and obvious costs?

Let’s start with the most rational comparison: the financial axis. For sure the first and foremost thing finance wants to do is compare the cost of build versus buy. The purchasing cost is easy to identify. It’s the figure at the bottom of the vendor’s quotation. What is on the build side of the equation is more elusive. If building software is not your core business, it is difficult to grasp what effort goes into creating and maintaining a business application. When we see stakeholders evaluating the financials of build versus buy, typically only a fraction of the build costs turn up in the comparison. The reputed tip of the iceberg.

Together with a number of prospects, we created a model to help identify and uncover how far the iceberg extends under the waterline, in other words—to make the hidden cost elements visible. While building the model, we had to face difficult questions such as:

  • How much effort does it take to retrieve the data points?
  • Is it even possible to obtain an insight into the below-sea-level items?
  • To what extent will a complete view of the build cost influence the decision-making?

In close collaboration, we discovered two findings:

  1. Apart from any numeric comparison, getting a complete picture of all cost elements proved to be extremely insightful and changed how both scenarios are evaluated.
  2. Appraising the ‘submerged’ cost elements is essential in defining the tipping point.

Evaluating build versus buy

When making a build-versus-buy decision business leaders strive to get a complete picture of the cost aspects and understand the impact on the business as a whole. But how do they know that? This is where the iceberg comes into play.

When working with prospects and customers to uncover the true cost for them, we found the iceberg to be an educational exercise and a great conversational framework to understand all aspects of business application creation and usage. Different areas in the framework have different owners and they don’t all have the same agenda, e.g. the cost for software developers falls within the IT department, whereas cloud-subscription fees come out of the line of business budget.

Our framework requires input from all areas that DIY touches on. By doing so, it also reveals the mindset and priorities of the different stakeholders and provides insight into the evaluation criteria of the build-versus-buy decision. As such it will be an eye-opener and helps to align all stakeholders.

Conscious Competence Learning Matrix

‘Hidden’ costs impact the tipping point

The hidden or underwater costs play a significant role in determining the tipping point. It’s a matter of simple mathematics. The more you can exclude hidden costs from the equation, the more your decision will lean towards build. This conclusion led us to investigate why one would exclude hidden costs. We found:

  • The effort to retrieve the hidden cost is too high.

What to do about it: This is fairly easy to mitigate. To find your way out of this impasse, think about using estimates and guesstimates as an alternative to actuals. As long as your data is ‘good enough’, you can still use it to make good decisions. Thus, not creating an exact cost comparison, but a probable comparison.

  • We don’t want to include hidden costs.

What to do about it: This finding is more of a political and commercial nature. Here it matters who you are talking to. You can imagine that a sales rep who is trying to sell the buy-scenario has an avid interest in having as many costs associated with the build-scenario and vice versa. To overcome this potential conflict of interest, we co-developed the cost comparison model. As a result, we know that all cost elements in the model are relevant to the decision-making. When we encounter a persona saying that a particular cost element is non-retrievable, we have solid arguments to go into challenger mode.

A blend of arguments

We started this blog by explaining that a build-versus-buy decision spans multiple departments and stakeholders, and we gave the financial aspect the most weight when it comes to making the choice. There are certainly other factors that play a role in the decision, such as time to value, feature richness and risk, but ultimately, all of these aspects affect the total cost to build.

For several of our prospects, the co-developed framework has been instrumental in finding an answer when faced with the question Do I Build or Do I Buy?

build costs

If you want to find out what other aspects are influencing the build-versus-buy decision, check out our Build-Versus-Buy Guide here.

This article is published in ServiceMax Field Service Digital on June 22nd, 2021

Maximize Virtual Round Tables – behind the scenes

For more than a year now we’ve been having these virtual meetings. We don’t know about you, but virtual triggers mixed feelings within us. On the one hand it is convenient and efficient. On the other hand, we really miss the live interaction and the ability to continue the conversation beyond the scope of a session. So, the biggest ‘reward’ you’ve given us at this year’s Maximize is your level of participation and engagement both during and post sessions. Thank you!

Get up early, stay up late

On the Maximize agenda we offered set of 12 round tables spanning a range from covid implications to asset centric business models. From technician skill profiles to commercial maturity. Yes, we were aware that some of these sessions may have occurred at an early or late time. We noticed that the value of the topic has not held you back to set your alarm clock or delay a meal or two.

In the ‘old days’ we may have continued the conversation over a drink or en-route to a next session. This year you found us on LinkedIn, via your account manager or direct message. The conversation will continue! For those that want to browse topics beyond the 12 round table sessions, do have a look at our blog repository: Field Service Digital.

The reward of preparation

In the days leading up to the round tables we look at the registrations. There’s always an element of hope and surprise. We’ve put a lot of thought in the 12 topics and of course we hope to receive confirmation about our choice. We saw counters going up, quickly, and way beyond numbers we would have during live events. This encourages us and confirms our service ‘compass’.

T minus 15 minutes. We launch our session applications and do a last check. Slides, poll, camera, microphone. Putting a ‘do not disturb’ sign on the door to inform house mates.

Fun fact: I had my son (11 years) colour a sign for me. On the one side it says, ‘knock on the other ‘do not disturb’. Because he created the sign, he felt involved in the new house rules. Few are the occasions when he barges in when I’m in call.

We’re live. Automatically my eye goes to the number of participants. How many people are showing up? Over the course of Covid we’ve seen the percentages varying. Today is a good day. I feel good.

Touching base

In preparation of the roundtable, we’ve created content. More than we can cover in the allotted time. We’ve prepared a dialogue structure. But no matter how much we prepare, we don’t know where participants will direct the conversation. We do anticipate though.

It’s our intention to provide both value and engagement. We do have an expectation, so the first thing we do is touching base. Who is in the call? Knowing that is important, because we understand that value is defined in the eyes of the beholder.

In a world of physical gatherings, I would have done a round of introductions to get a bearing of the group. In a virtual world I resort to a poll, knowing it is harder to put each participant on the spot. Comfort level and technical setup do play a role. The poll is easy and safe.

Engagement

When we chose the topic for the round table, we believe it is an important topic. Registrations and actual participation confirm (or shatter) that belief. The real litmus test is getting engagement.

W ask the first question: “why is commercial maturity important for your organisation and what is its impact?” Those first seconds are ‘killing’. What if nobody responds? What if everybody wants to speak at the same time? How do we give every participant a fair share of attention when we can only see a subset of participants? We wish we could see you all in person. We wish we could see your body language.

We feel a big relief when the flow of the conversation starts going. The discussion becomes a show of examples. We’ve prepared a few to ‘fuel’ the conversation. Ultimately your own examples are the best. Those examples add to the value and practicality. 

Value

In the conversation we elevate to 30,000 feet for a broader perspective, only to descend rapidly. We’d like to give you handles you can use tomorrow. The best praise we can get is when you say you have learnt something new and/or you are able to put those handles to use.

Let me give you one example from the Commercial Maturity roundtable. In the poll we asked the participants to assess their current commercial maturity on a scale from low to high. Later we provided a practical handle to compare current service revenue against the maximum obtainable service revenue. The gap between the two may inspire you to re-assess your maturity … or even more powerful, to use the gap to define your compelling reason to act (more about the gap in my next blog ‘Mind the Gap’).

Call to action

Why do we host roundtables? Why do you participate in roundtables? We do hope we can mutually agree that it is because we want to action business issues and challenges. The roundtable is an instrument. 

We can imagine that we’ve given you food for thought. We recognise you need to digest. We understand you want to get more information, to compare and involve additional stakeholders. Feel free to reach out and make use of our resources and expertise.

Lief niet zo stoer

Mijn zoon van acht maanden groeit als kool. Vier weken geleden hebben wij voor hem een ‘Stoer’ sweater besteld van leverancier Lief. Behorende tot de standaardcollectie zou deze binnen drie dagen kunnen worden geleverd. Wachtend op een teken van leven van de supply chain of de customer service, heeft mij zoon de volgende maat al weer nodig. Lief is niet zo Stoer.

Wat is hier aan de hand? Het is bekend dat in kledingland de aansturing van de supply chain hoofdzakelijk op een push manier gebeurt: de winkels krijgen eenmalig een vastgesteld assortiment toegestuurd en daar moeten de winkelier en de koper het mee doen.

Wanneer fabrikant en winkelier als extra service nabestellingen van de ‘vaste collecties’ willen aanbieden, dan stuit dit onverhoopt op administratieve en logistieke hobbels. Niet omdat deze zo moeilijk zijn te realiseren, maar omdat er een andere houding nodig is.

Nu verschuilt de winkelier zich achter het (vermeende) onvermogen van de fabrikant om de supply chain te organiseren en wijst de fabrikant naar de winkelier als het gaat om het doen van (vermeende) beloftes aan de klant. Hoe je het ook wendt of keert: de standaard levertijd van x dagen is als afspraak tussen fabrikant en winkelier onvoldoende en transparantie via track & trace van het bestel- en leverproces is niet adequaat.

Vandaag heb ik aan de winkelier gevraagd of de sweater toch maar een maat groter kan zijn. ‘Natuurlijk, geen probleem. Regelen we voor u’, antwoordde de winkelier. ‘Maar ik houd wel een slag om de arm.’

Mijn zoon heeft geen weet van deze perikelen. Zijn vertrouwen in zijn ouders is momenteel oneindig. Konden de ouders dat ook maar zeggen van de winkelier en leverancier. Het is dat de sweater zo Stoer is, de customer service en supply chain vinden wij niet meer zo Lief. Met grote interesse kijk ik uit naar wat er wordt geleverd en wanneer. Ga ik de winkelier en fabrikant betalen voor deze customer service en supply chain prestatie?

Gepubliceerd op SCM Online op 3 juni 2010

An introduction to service management

 

Introductie in Service management

Wat wordt er onder Service Management verstaan? Hoe kijken klanten en leveranciers aan tegen service? Welke ontwerpbeslissingen kunnen en moeten er gemaakt worden bij de inrichting van de supply chain? Hoe positioneer je de service portfolio in de markt? Welke “key performance indicators” komen er om de hoek kijken?

Deze introductie Servce Management is interessant voor iedereen die wil weten welke wereld er schuil gaat achter het woordje “Service”. Van student tot medewerker, van marketeer tot logisticus.

Deze introductie kunt u downloaden in kleur of zwart/ wit.