‘Build’ vs. ‘Buy’: Is That Still A Question?
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A dear friend of mine is a true aficionado of pedal steel guitars. If you don’t know what those are, they are instruments used primarily in country music that produce often beautiful (and occasionally whiny) sustaining lines in the arrangements. Pedal steel guitars are complicated contraptions that use knee and foot levers to raise or lower the pitch of the strings. Look at how they work, and you’d swear you were seeing the carborator system of a classic Jaguar V12 engine. Small wonder, since the lever systems were invented in 1948 by a motorcycle mechanic. As you might imagine, a pedal steel guitar requires lots of tinkering and replacement parts are hard to find. My friend actually handtools replacement parts for players around the world, in addition to keeping his own instruments in tiptop shape. He worries that when the current generation of players rides off into the sunset, expertise in the instrument will go with them.
In contrast, another good friend (who incidentally is a retail IT guy) is a well known blues player on the U.S. East Coast, and he has an endorsement deal with a big offshore guitar manufacturer. I recently asked him what modifications he has to make to keep his guitars in playable shape. His response was, “I don’t do anything. They’re all the same. I just call my rep, and he sends me another one.”
Both players are in popular touring bands, and their fans love ‘em.
‘Build vs. Buy’ Is A False Choice
What does this have to do with the neverending debate in retail about whether companies should develop their own software or use commercially available solutions? Plenty. Friend #1 is definitely old-school, and he spends more time maintaining his instruments than he does making music that people enjoy. He’s definitely a “build” guy. Friend #2 is a modern “buy” guy – he just wants to find the shortest, most direct path to his ultimate goal, to play music for his fans.
There’s still a lot of old-school thinking in retail when it comes to IT, and the “build vs. buy” argument continues on inside of many companies’ headquarters. But the fact is that the existing application portfolio in most retail shops is rigid and out of date, expensive to maintain, and – in the end – only differentiating in a negative way. In other words, retailer performance lags because systems are holding them back. For years, RSR’s benchmarks have consistently identified proprietary and/or highly modified best-of-breed applications as the #1 or #2 top inhibitors in addressing any business challenge that we examine.
The continuing and rapid adoption by consumers of technology-based solutions has had a profound effect on the retail industry. Increasingly, companies’ adoption roadmaps are driven not by corporate strategic plans, but by consumer expectations. Retailers are no longer necessarily rewarded for being technologically enabled, but they certainly are penalized when they are not. Simply put, retailers need to push the “go faster” button, and the IT shop needs to “lead, follow, or get out of the way”.
But IT backlogs continue to grow, and companies struggle to devote more of their technology-related spending to value-adding capabilities rather than to maintenance of their existing solutions. RSR’s research has shown that the high cost of maintaining in-house developed software applications and a deep-seated bias towards in-house software development are at odds with retailers’ need to “go faster” in order to remain competitive.
When it comes to implementing new business applications, arguments about “build vs. buy” are out of step with today’s realities. Many (if not most) core retail business processes are found in every company. Retailers get no credit for managing them well, but they do lose points for managing them poorly. Decision makers should ask themselves, “Which business processes create truly differentiating value that consumers will benefit from and give us credit for?” They then need to prioritize inefficient operational processes for which new technology solutions are readily available and commit to finding the commercially available offerings that best suits business needs.
While some retailers dither about “build or buy”, they need to understand that the competition is moving fast, and companies that aren’t, aren’t keeping up. They are strategically disadvantaged. So a follow-up question should be “what is the best, fastest way to mitigate strategic disadvantage?” In this case, the answer is to select and implement a commercial solution – not to build one. The good news is that today’s business solutions work; unlike the last generation of solutions (which were really frameworks more than complete solutions), modern applications are functionally rich and agile enough to be able to conform to retailers’ internal business processes.
The Flip Side
Retailer decision makers need to be ruthless in differentiating between what’s important vs. what’s merely interesting. Pushing past a “not invented here” mindset is critical to being able to take advantage of what state of the art business solutions have to offer.
But while commercial (and increasingly cloud-based)solutions can really accelerate modernization of a company’s IT capabilities, don’t be fooled by promises of an “IT-less” future.Finding the right commercial solutions still takes work. Some are built using capabilities that make the solution able to easily integrate with legacy portfolios; it is important to get an assessment from the internal IT group about the effort that will be required to integrate the chosen solution with the production portfolio.
To get the best out of commercial solutions, business process re-engineering is an important challenge to be addressed. Retailers should examine core business processes with an eye towards how they can be streamlined with the chosen solution. For example; by eliminating process bottlenecks, reducing cycle times, or automating exception handling.
Proprietary solutions still play an important role! Retailers need to commit to use precious IT development resources for things that help the company deliver truly differentiating value to consumers.
Finally, it’s important to remember that Rome wasn’t built in a day. Many retailers have a significant backlog of work to do to bring their IT portfolios and the processes they support up to date. They should expect to live in “dual mode” for years to come. The good news is that that’s do-able, and an important task for the business to focus on.
EDITOR NOTE: RSR’s July 2020 Executive Perspectives article, Solution Adoption In Retail: Why ‘Buy vs. Build’ Is A False Choice, is sponsored by Revionics and free to download on RSR’s website at https://www.rsrresearch.com/research/solution-adoption-in-retail-why-buy-vs-build-is-a-false-choice.
 The phrase “Lead, follow, or get out of the way” is attributed to Thomas Paine (1737-1809), a popular thought leader at the time of the American Revolution.