One of the main procurement decisions that you’ll have to make on your projects is: Do we make it or do we buy it? Making something means using your internal resources to construct a deliverable, for example using your in-house developers to design some code for your new piece of software. Buying something means instructing a third party contractor or vendor to do it for you. There are advantages and disadvantages to both approaches and on your projects you’ll probably have a mixture of things you buy and things you make. Let’s take a look at some of the pros and cons of each option to help you come to the right decision on your project.
Option 1: Make
The advantages of making a deliverable – taking responsibility for delivering it yourself – include:
Avoiding procurement costs: If you make something in-house you obviously don’t have any of the procurement charges that go with buying it, so you save money.
Avoiding legal contracts: There’s no need to set up legal contracts with departments in your own business, so you can get started more quickly as you don’t have to wait for the legal teams to negotiate terms.
Upskilling your team: Making can often provide a great learning opportunity for your project team members. They may have to attend a training course or do some on-the-job learning but you are giving them valuable new skills if they haven’t done this particular thing before.
The disadvantages of making a deliverable sometimes mean it is not the best option, however. Consider these points:
Tying up resources: Choosing to deliver something in-house means your project resources are tied up doing those activities. That might be OK, but it might mean that they have to let other work slip in order to make the time to complete those tasks.
Lower quality: If this deliverable is not something that your company does often and it is not your team’s core skill set then you could find that the quality isn’t up to much. Again, that might not be a problem – it depends on the task and how critical it is.
Slower: People who do not have lots of experience in doing something are generally slower than people who do that task all day, every day. A ‘make’ decision might mean that it takes your in-house team longer to do the task than you had originally planned as they are likely to be slower than experts.
Overall, the decision to make something is often much cheaper as you are using in-house resources that tend not to cost you as much as specialist resources from an outsourcing provider. But that is offset by the fact that it might take a lot longer, so if speed of delivery is a concern then you should definitely take that into consideration.
Option 2: Buy
The advantages of buying something in from an external supplier include:
Speed: Typically the expert third party will be able to do whatever it is you need doing faster than you can, because they have lots of experience in it and probably do that task far more regularly than you.
Ease: You can’t quibble that it is easier to ask someone to do it and then let them get on with it!
Project Management: Normally a supplier will also provide some project management services as well, so you don’t even have to project manage the work. There will probably be an overhead in your bill for this service though.
However, you should also consider the disadvantages of buying services in, such as:
Lack of control: It might concern you to lose control over this element of the project. You can mitigate this by working closely with the supplier but at the end of the day, you can’t control their work as you could control your own team’s work.
Lose the opportunity to train team: If upskilling your team is important to you then you miss the opportunity to do so if you buy in the service/deliverable. You’ll have to find another way to improve their skills, such as work shadowing the vendor.
Ongoing support: If the supplier is providing you with something that needs ongoing support, such as software code, then unless you have a knowledge transfer plan and intend for your own team to learn how to support it you could be tied to the supplier for the foreseeable future. They will have to provide support if your own team can’t (or don’t have the skills to yet).
Requirement for contracts: Setting up contracts takes time. If you have a standard agreement it might not take much time, but you’ll still want to give yourself enough time to get those contracts reviewed by your legal team and in force before too much (or any!) work is done.
The decision to buy in service or deliverable is often based on the advantages you get in terms of speed and quality (and sometimes price). You benefit from their specialist skills and experience in this area, but you also pay for it too, both in the short term and potentially as part of a locked-in long term support deal.