Understanding the Opportunities of Buy-Side Economics

As CEOs of our products, we product managers have a lot to do. Traditionally, this has included “build-versus-buy” decisions. The debate often hinged on whether technical tasks were “core” or just “context”. Over the last decade, this has shifted from “build-versus-buy” to “buy-versus-buy” as we balance more kinds of internal and external resources. Here are some thoughts on sizing various “buying” opportunities to keep products shipping and revenue flowing.

The smallest opportunity might be called “the expert quick hitter”, then up to “niche technology provider” and finally a large “please build this for me.” All three are invitations to think about what your team can do for itself, and your own urgency to get revenue products to market.

Small: “The Expert Quick Hitter”

There are some tasks that your team does only once in a while, and never gets good at. For instance, many software products use InstallShield to install files, create icons, link various bits, and do mysterious things to a customer’s system. Even after your company has licensed the InstallShield developer kit, correctly configuring all of the files and settings is a challenge. If your team only ships new software twice a year, then they are always rediscovering InstallShield for the first time. (“I think George did this in March. Can we borrow him back from Project X?”) Likewise, imagine getting a demo to run under VMware, or setting up an open source email system.

The right solution for these occasional but complex tasks: hire (and budget for) an outside expert to get it right. You’ll save time and money by finding an InstallShield wizard or VMware ace or email guru who’s available when needed.

Medium: Niche Technology Provider

Some corners of technology initially look simple, but emerge as special worlds of their own. Consider software license keys (digital rights management).

At one company of mine, we under-scoped the complexity of controlling which customers could use our software. I let a developer cobble together some very simple license keys – strings of meaningless digits that allow customers to install the software. We were novices in an obscure specialty, though, and quickly got ourselves into trouble as our needs grew to include:

• 30-day trial installations, which Sales sometimes extended to 90 days
• Optional features that were enabled by certain license keys
• Pirates who posted a valid license key online
• A desire to end-of-life old product versions
• Customers who needed to install on multiple machines, or without Internet access

In hindsight, we should have incorporated a solution from Aladdin or another DRM specialty vendor. These DRM folks spend their days (and nights and weekends) solving obscure license management issues so that you don’t have to. Similarly, your team may not appreciate the unique problems around data warehouse performance or tax-rate computations or query optimization. A good product manager tries to focus his/her scarce development resources on core product content.

Large: “Please Build This For Me”

Sometimes, our existing technical teams are insufficient to meet market needs. At a wholesale level, products aren’t getting shipped. You may need to add one or more entire development teams to supplement existing staff and skills. Breaking this into two cases:

• Out of capacity and missing the market. If your current development organization is overloaded enough, you may know in your heart that critical new products will never be built. The backlog is growing, must-do projects are years away, and customers are defecting to your competitors. In this case, you need to add entire development teams to make progress.
• Limited software expertise. Some of our clients are from hardware or low-tech services businesses and don’t have the core software experience to hire and manage software folks (who present special challenges). These clients recognize that growing a professional software organization from scratch is slow, expensive, and risky. Partnering for software development lets them focus more energy on their markets strategic differentiation. Is your company prepared to compete against software professionals?

In both cases, “build this for me” companies need more than scatter-shot contractors: they need whole-product development partners able to conceive and execute and maintain commercial-grade software on aggressive timelines. Able to turn product vision into shippable bits.

What do these three sizes of build-versus-buy have in common? As product managers, we anticipate where our teams may get into trouble. On small items and major initiatives. We’re also well positioned to sell the business rationale for build/buy choices. Finally, we can help engineering teams identify their own limits. (“Sara can whip up a license key in an hour. How hard can it be?”)

Sound Byte

Watch for ways to help your team meet its overall product goals: small and large opportunities to apply money instead of time. This helps to focus your limited resources on strategic competence rather than pure task completion.