Build vs Buy - A Freight Rate Management Solution

September 22, 2021

When faced with the necessity to implement technology or software solutions to thrive in an increasingly complicated and dynamic industry, freight forwarding companies of all sizes are challenged to decide between two approaches: buy or develop.

The first option is to purchase software or technology from a third-party provider and customize it to the company’s needs. The second alternative entails developing this tool in-house, reflecting its personality, and responding precisely to its requirements.

So, which is the better option: buying or developing? Both options are valid in principle; each company determines the most appropriate one. But let’s assess which factors must be considered.


The following infographic by CI Advantage gives an overview of the complete build vs buy software cycles.

Implementation time

Most third-party software solutions can be integrated as an application in a matter of minutes, with little or no technical knowledge. On the other hand, a solution developed in-house could take months to develop with a specialist staff. In 2014, an average-sized technology project took five months to execute, according to a poll of VMWare IT managers, while more significant initiatives took seven to eight months, according to 17% of respondents.

It is already common knowledge that significant self-developed technology initiatives take longer than projected to make matters even more complicated. According to a report from the Apigee Institute, at least 27% of application development deadlines were missed. According to additional McKinsey research, 7% of large IT projects are delivered late. None of these estimates accounts for the 19% of initiatives deemed a failure that never made it to market. According to the Standish Group CHAOS Report 2015, 52% of projects were over budget or sacrificed functionality. This study discovered that the greater the project, the less likely it is to succeed.

Total cost of the project

Pricing is rarely predictable when it comes to in-house designed solutions. According to the McKinsey report, large technology initiatives go over budget 45% of the time and generate 56% less value than expected. Also, 17% of projects fail so badly that they "threaten the company's very existence." These high-impact overruns, sometimes known as "black swans," result in 200-400% budget overruns, culminating with the project's complete abandonment or even bankruptcy. A prior Harvard Business Review study found that one out of every six significant IT projects fell into the "black swan" category.

Consider opportunity costs as well: how much money should a business set aside if they use existing resources to construct and maintain this software? Where are they cutting on resources? Because solutions built by the same firms often require a specialist team, companies either have to repurpose developer talent from other projects or acquire extra help.

Features and functionality

Any organization can build a product that satisfies their needs if they develop their own solutions. However, as the study mentioned above shows, this advantage can be unsatisfactory. 66% of large technology initiatives fail to reach their original goals and are deployed with lesser quality and value than anticipated (McKinsey). The intricacy of the characteristics has an inverse relationship with project success rates, with 19% of ventures never reaching the market (Standish Group).

Customization may be limited with third-party software solutions. But customers are, however free to buy and compare competitor products based on their features and functionality to select the one that best matches their requirements. Companies can usually test the software without risk using demos, tests, and proofs of concept.

Knowledge and experience

An organization gets both the technology and the knowledge with third-party applications. Many company plans include a dedicated customer support professional who can assist the client in getting the most out of their software.

On the other hand, the technological solution might be provided by the software developed in-house by the company. However, they continue to receive inferior outcomes since they lack the necessary experience in the field unless the product is directly related to their primary business.

Fundamental field of competence

Finally, let’s consider whether a company's core competency is aligned with developing a fantastic software solution so that building the tool themselves would be faster, cheaper, or more effective. If the answer is yes, the organization will have a significant edge if it develops the software it requires. However, if not sure, delegating the business function that the software will solve to a third party can save time and money in the long run. Buying or developing isn't a sign of weakness or defeat; it's a matter of allocating resources. Once a business has decided to conserve its limited resources - time, money, and, most importantly, talent -, they can be invested in the areas of your application that will pay off the most: the key functions.


Conclusion

Building a custom platform can be a wise investment, but only if a company has the time and money to develop. They must also have a strategy in place to secure their connectivity to external apps and user interfaces that are accessible and intuitive for everyday use.

When time is of the essence, and leading digital transformation is a top concern, investing in a comprehensive platform can reduce costs and improve performance more than any other on-premises option. It also assures a specific solution that can be refined over time by a dedicated partner who supports your IT team to do their best rather than diverting them from vital business duties.