Off the Shelf or Custom… That Is the Question with Jerrik Arango

0:00Season three of the Built Right Podcast is right around the corner, but we've got one big change coming your way. The Built Right Podcast is now the Talking AI Podcast, and we've got a lot to talk about in AI. In the Talking AI Podcast, we'll be having in-depth conversations with both AI experts and early adopters of AI. That way you can understand how the technology works and how early adopters are beginning to implement and, more importantly, get value from AI. Our guests range from AI research scientists to founders of AI products to industry leaders putting AI to work in their business. While you're waiting for season three, go ahead and subscribe on your favorite podcast platform so you don't miss an episode.

0:41And make sure to leave us a comment about the AI topics that you want to hear about. So get ready to talk some AI in the new Talking AI Podcast, coming your way August 6th.

0:58Welcome to Built Right, a podcast by Hatchworks where we help you learn to build the right digital product the right way. In each episode, we'll deconstruct the layers of successful product development, break down popular trends, and offer real advice to help make sure your product is built right. We may not have all the answers, but we've built a lot of digital products across a lot of industries, and we've seen a thing or two. Let's get into it.

1:33Hey, everybody. Welcome to the show. Excited you've decided to join me today, considering you got many other things you could be doing with your time. I appreciate it. And today we're going into a topic that is the thing of nightmares for many. Just thinking about it can cause sweaty palms, shortness of breath, and even panic attacks. And I'm talking about the decision to build or buy when it comes to software. And it shouldn't be that scary though. Today we're going to help you make this decision easy with a little framework we like to use. And we're going to get into the main things to consider when making this decision, a framework to reduce the stress because it shouldn't be that stressful.

2:13And we'll give you some examples along the way. And to help me break this down, I'm joined by Jerick Arango, one of Hatchwork's principal software engineers. He's got over 18 years of experience with a wide range of technology expertise from e-commerce to sporting events, even presidential elections. I may want to learn some more about that as we go in. Jerick, I'm curious now. But you've worked at brands like PGA, PGA Tour, Cartoon Network, and Fanatics. But welcome to the show, Jarek. Yeah, thanks, Matt. I'm glad to be here. Awesome to have you. So Jarek's been through this fun Build vs. Buy adventure many times with clients internally.

2:55So he's got some war stories along the way. But Jarek set this up. At the core, what should people be thinking about when they're thinking Build vs. Buy? Yeah. So, you know, you're doing this, you're at this point because for a reason, right? You've got something that you want to deliver, you want to bring to the world. And that's, you know, lots of times we hear that's your secret sauce, right? Right. There's something unique about you and that product that you want to bring forward. So you really want to consider that. And right. A lot of times, you know, you can buy software that will help you.

3:37But that software normally is a common denominator. Right. That is something that will help you standardize. You might, you know, your secret sauce might be might not be the payroll, you know, for your employees. And so you potentially, you might want to go into having a payroll software or maybe internal messaging. You use something like Slack. Yeah, and we've seen this before, too. We've had clients come to us. They have this great idea for this product. And what they're describing is like a CRM or an ERP. And we're like, you know, people have perfected this. You know, maybe it shouldn't be the best thing to build.

4:19But you hit on a core point. At the core of it, if you're deciding to build, it should be because it's your secret sauce. It needs to be tailored to your needs. You have a deep expertise in this domain. But for buying, buy to standardize. If something exists, it's already out there. It's not part of your core differentiator. Just buy it. It's at the core. That's some of the big factors in there. And we got a little framework that we like to use. It kind of goes through nine different criteria and we'll kind of pop through each one. Some we'll go deeper into than others. Some I'm sure Jarek will have some examples we can jump into.

4:59I probably got a few as well. But to hit the list, I'll kind of hit the list and then Jarek, we can start to step through them. But like if you think of the evaluation criteria for this decision, the first one is competitive differentiation and its cost and scale and complexity, maturity and commoditization, time frame, internal expertise, team capacity, support structure, and data and security. And it seems like a lot of different factors, but they're not scary things. These are things that are going to help make this decision a lot easier. But let's jump into the first one, competitive differentiation.

5:37What is this factor? What questions should you be asking? And ultimately, Like, you know, what factors into that decision with this criteria of like build and buy? Yeah. So, you know, as I kind of mentioned, right, is it that secret sauce of yours, right? Is it a core process of your business? You know, you want to ask and challenge that with that question. Also, right, as you mentioned, differentiation. Will this set you apart, right? Will this make you different? Or like you mentioned, CRM or you have something out of the box that's at the forefront. What makes you different from everyone else?

6:24Another question you could think of is, with the resources that you have, do you have the skill sets to support that? right? Do you have that deep knowledge and understanding for this piece of your product or your business? Do you have it to be able to deliver on that? Also, right, do you, the roadmap, sometimes, you know, you might be a startup, you might be, you might want to test this product with a small group of customers or users. And so, right, you want to know that roadmap and how much time do you have to invest, right? Quick break in the pod. If you're listening to this podcast, chances are you've been thinking about how to actually use AI inside your business.

7:20And that's exactly why we built the AI Opportunity Finder. It's a free tool that helps you uncover high impact tailored AI use cases based on your business, your goals, your pain points, and your industry. No fluff, no generic use cases, just real ideas that fit your business and the ranked by ROI potential. It takes about three minutes to run and it's like having your own personal AI strategist for free. If you want to try it for free, check out the link in the show notes or go to hatchworks.com backslash AI dash opportunity dash finder. I think the roadmap's an interesting one too, because, and we've seen this with clients and it's a, you know, it's a big part of the decision because if you go and buy a solution, you're kind of just, you know, allowing somebody else to own the roadmap.

8:07And ideally, you know, a partner that you're buying from, they have a vision for the roadmap. You maybe can give some recommendations, but you really don't have autonomy to really influence that roadmap as much. So that's a big piece of it, right? And if you're trying to build something that is going to be differentiated that you do want to have control over, I think that's one of those big ones that you really got to think through. Like, is it okay that you're not going to have a ton of influence on new features, new functionality and all of that? Yeah. And, you know, diving deeper into the roadmap, there's all kinds of opportunities and decisions you can make, right?

8:46If you want to get out fast to like more of a proof of concept, right? It makes even more sense to, you know, what can I have off the shelf that I can use to kind of get the idea across? But then you, right, you don't want to build your secret sauce, your product on top of a POC. And that's where, you know, then you might take a different approach. This is what we're going to build custom. This is what our product, right, rests on. and how is that foundation? You want to build on something solid. So that might be using a third party and off the shelf or going more custom, right? And if we're talking about uniqueness, most of the time that will fall a little more on the custom side.

9:34Yeah, and you bring up an interesting point. This may be worth getting into later, but like you talk about proof of concept, like maybe it is good to use something off the shelf just to prove it out. And if it has legs, then maybe you do truly build it custom. And then you get into the whole world of no code, low code, and all of that, which allows you to move faster, but it could have some restrictions down the road as well, right? Right. Yeah, no, I think you – I remember watching one of the previous episodes from the Bill Wright podcast, and I think episode four, you've got Joseph there that, you know, he touched on great points about the MVP and that process.

10:14that you can, that's a whole other thing that you can look into when you're in that stage. Yeah, that's a great call out. The discussion with Joseph, we talked about MVP versus like MVR when you're modernizing. Awesome, awesome content there. All right. So that's the first one, competitive differentiation. I think, you know, it's first for a reason. I think that's probably one of the biggest decision criteria. And also think about waiting too. Like if you're truly kind of running through this in a structured way, I would give some more weight to competitive differentiation. But the next one for us is cost.

10:48So cost is always a factor when you're making a business decision, but take us through how it relates to like a build versus buy type of decision. What type of cost exists? Yeah. So there's, right. If you're going custom, There's implementation costs. There's also that focus opportunity cost as far as it's going to take time to build it. You're going to have resources focused on that now. Is this your main product or is this something supporting or something on the side? But you're going to have a good amount of focus distracted or it might be aligned. Right. There's ongoing costs as well. You know, normally we can get something out, you know, a good application product sophisticated, you know, in about six months.

11:43But that product is always going to be ongoing. Right. There's maintenance. There's, you know, you might have feature development to a certain point, but there's an ongoing cost. even from infrastructure. And as I mentioned, there's opportunity costs. If I'm focusing, looking into this, maybe to vet the idea, which hopefully we've already done some legwork there, that it's worth now taking the next step to invest in. There's definitely opportunity cost. If you're doing this, what else could you have been doing? Yeah. And I think opportunity cost, that's one that often gets neglected. So if we focus to build this thing, we're putting resources towards that.

12:27So they're not going to be able to do something else. I think that's one that a lot of people forget, but you really need to think through that. And it's, you know, a lot of times with build versus buy, I don't know if you see this, but I see a lot of people compare with the buy decision. It's like the software licensing, all of that. And when they think of build, they just think about building it to get it to market. And they don't think about like all the ongoing, you know, cost of maintaining and enhancing and all of that. It's not just a one-time cost. You got to maintain the thing after you've built it as well.

13:00Yeah. And, you know, up front, you might want to go with the third party where you'll have a lower cost up front. But in the long term, the custom will give you a better return on investment. It might, you know, take a little longer. You might have to invest more up front. But in the end, you can save more on your investment and you have more control for the future. You know, I was in a situation not too long ago where it wasn't necessarily that secret sauce, but that secret sauce depended on this. And so, you know, they were looking for different third parties that we can use. And while that was happening, I was working on developing a custom solution in the end, right?

13:47And it has to do with the roadmap. You know, do you need, you know, this was more of a startup. Do you need, right? How soon do you need to get to market to help support your startup, your, you know, this product that's coming to fruition? And so, you know, this custom solution was built. Now, right, the chain is only as strong as the weakest link, right? And sometimes going with the third-party solution, you also want to take into account how stable. If your product is sitting on top of this, you want that third-party or this software to be stable. You want to have control over it because that could even – you might have a great idea, you might have a great product, but if it's not dependable, you're going to use users quick.

14:38And so, right, this custom solution in this example, it ended up being a fraction of the cost of any of the third-party offerings. You had a lot more control, and the business really depended, or the secret sauce really depended on this software. So the custom solution here ended up winning and proving itself, right? There was doubters in the organization. And there was challenges with this service. And there was a try. There was, let's test it out. Let's see it. And the custom solution always won. Yeah, that's really interesting. I never thought about that in terms of the dependency. It may not be your secret sauce.

15:23But if your secret sauce depends on this thing, then it does become important. You have autonomy over it. You own the roadmap and all of that. So that's a great example to think through. All right. So let's go to the third one, scale and complexity. Talk us through this one, how you should think about scale and complexity of either custom or a bot solution. Yeah. So if your solution is pretty simple, then you might want to go more on the build. I think it comes down to like, it's like almost this matrix view, right? Because if it's not complex, but super strategic, it's like, well, obviously, let's go build that.

16:04But if it's not strategic, but very complex, it's like, don't touch it with a 10-foot pole, right? So it's like that marrying of those two criteria together kind of factor in. And kind of how I touched at the beginning of that expertise, that knowledge that you have, right? That's going to be part of the reason, right? Or your secret sauce. And so you want to focus on what you're bringing that's unique, right? What's unique about you, about the product? And so you might want to buy when it's something that's supporting you that you need, right? But that isn't your lane. And so you can leverage a company that's 100 % dedicated to building out that side.

16:54They've got experts. They're working 24-7 on that. And so you can leverage their expertise into your product, right into your business. yeah i love that i gotta pause for a second for those on video you'll see this but those just listen you won't be able to i keep seeing like something swimming out to the side is that like an eel you have in an aquarium over to the behind you there yeah so usually i'll blur out my background but um uh it might get distracting i've got yeah those are called dojo loaches they grow about a foot long wow that's is it an eel do you have other stuff in there is it just the eel.

17:32No, I've got all kinds of fish in there. Yeah. Nice. Okay, cool. I got to see that before we get done recording. All right. Next one up, maturity and commoditization. What is this factor, this criteria all about? Yeah. So just kind of as we were touching on the maturity, right? If you're building this product or if you're buying this, solution that's going to help you out, right? It will most likely be, it will be a lot more mature than you starting off building something. And so you can leverage that maturity, again, based on your roadmap, on your timelines. But as, right, if you're going custom, it'll be less mature, but you'll be able to enhance it, to customize it, right?

18:26It'll be unique to yourself. So, you know, you really want to weigh that roadmap and that time. Yeah, so more time to evolve it. I think too, it's like it gets back to the commoditization of the industry as well. Like I think we talked about ERP and CRM, highly commoditized, been proven and done before. And I think that's where it's so important to start out with the competitive landscape of whatever you're trying to build. Like what exists out there? You got to check that first before you go in or thinking about building. Now, if you're building, if you're trying to disrupt like the CRM game and you get some new unique way to do it and that's what you're selling, different story.

19:10If this is just a function within your business, then yeah, that's a different way to think about it. Yeah, right. You want to focus on that uniqueness. What is what's the reason? Right. What's the purpose of, you know, why you're starting on this journey? Even nowadays, you know, you consumers want choices and sometimes. Right. You can have this, but someone does it better. Right. There's the quality aspect. You know, you mentioned CRM, you know, there's CRMs out there, but the quality might not be there for the niche that you're in or that, you know, that you want to do. It might be a CRM for a specific industry, and it doesn't quite have the bells and whistles or the customization that you want.

19:58So can you build something on top of that? Do you build custom to support that and make you different from the rest? Yeah, that's a great point. Sometimes off the shelf is built for most, but not the few. It's kind of that 80-20 rule. And if you're in that 20%, there are cases where custom makes sense. Timeframe. So this is the next one. And we've talked a little bit about this, but when you're factoring in the time it takes to build something, how do you make this consideration set or factoring it with build versus buy? I think build obviously gets the right or wrong, the connotation that it takes very long to do relative to a buy.

20:47I can just buy, it's ready to go off the shelf. But talk us through that because that's not always the case based on your scenario. Yeah, right. If the timeline is tight and the time to market is a higher priority, you definitely want to consider more on the buying side. If you have more runway, right, and you have the available resources, then you probably want to go custom where you have that more control. You can develop it as time goes on. There was another example that I was on. It was a streaming service that we were building. And there was this third party, right? Sometimes it might not be the software, it might not be the whole thing, but it might be components to your solution.

21:36And so there was this third party that was decided to be used, and it brought a lot of challenges. There was also a lot of man hours getting that third party integrated. So there was still work there. And in the end, again, it was that weakest link in our chain. and it kept on failing. And ultimately that project, unfortunately, didn't work out. And the main reason was that choosing of the third party. Now, there might be another third party that would have worked better and we could have gone to market, you know, a lot quicker or, right, the consideration of should we have gone custom? Yeah, that's the biggest thing I'm taking away from this episode is this concept of the chain and where your weakest link is and how to think about that.

22:30That's a great way to think about it. We could get into, you know, there's GDPR and, you know, all this data privacy that came up, right? That's something else that you can consider is, right? This third party, it might be, you know, it has some data. How do you control that, right? Do you own that data? Is this third party owning it, right? Is there a competitive disadvantage or advantage to that? So there's a lot of things that you would want to consider when you're going to buy something is that control, that ownership of the different aspects. Yeah, maybe we diverge a bit there. That's a great point.

23:14And I don't know your perspective here, but you have all the generative AI stuff, the chat GPT, and you're putting your data out there. And it's like, you know, not that it's going to be publicly available to the world, but you're giving it to somebody else. We've heard of like the Samsung breach and all of these things. And that may be an interesting kind of build versus buy decision in the future is, okay, do we take like an open source, you know, Lama or something like that, large language model and try to build our own thing versus going with, you know, an off the shelf type of chat GPT for a use case we're dealing with.

23:52So it's like a whole nother level with this privacy and data comes into play. Yeah. And like we were talking about the expertise, right? You might not be, you might not have the talent or the skill set for thinking about security. And so buying something off the shelf, you will be able to bring in that maturity of maybe, right, security has been taken care of, has been thought of, right? And it's a reputable third party or software that you're going to use. But at the same time, like you mentioned, Samsung, there's a whole bunch of other examples we could name where the company came out as they had a breach.

24:34But when you dig deeper, it ended up being because it could have been a third party that they were using, which a lot of times, right, it's a bummer. That wasn't necessarily you, but the third party you chose, they had a leak. And, you know, I saw that happen many times where you want to protect your brand, you know, your brand identity. And this third party, you know, ends up affecting you. Yeah, that's a great, great consideration. And you actually hit on the next one right there, which is internal expertise. And I think you hit it in a great point. Like, you know, is this expertise the domain knowledge core to your people in your business or do you even want it to be?

25:15that's a good criteria for whether you you build versus buy as well in the next one team capacity uh this is an important one take us into this because like team capacity the obvious thing is do i have the people to build the thing but it's more to that it kind of gets back to that opportunity cost and what else could they be doing that's maybe more important yeah so um right uh again it depends on the different scenarios different stage right the size of your company the maturity. But, you know, if you have, you know, you have fewer resources and you've got this product, right, you're stronger on the product side, you're thinking through this, there's also opportunity where you can augment your team and possibly, right, get the experts in to help you build custom.

26:05So even if you don't have that expertise in-house, you can leverage, you know, a third party and get that expertise to help you build this custom where you'll still have that uniqueness, that custom control to build your product. Or if you don't have, you know, you don't have the assets or the, you know, the time, then you can buy, you know, you can think of buying if they're off the shelf where they do have that, you know, that expertise already comes kind of out of the box, you'll have support. Sometimes you have to pay a fee for that support, but that's something you could consider. Yeah. And you're teeing up the next one right after that support structure.

26:48And that is something that can be a benefit of the buy at times because sometimes they have the operational support behind it. And it is a consideration when you're building, whether it's working with a partner like Hatchworks, do they have, you know, plans and things that can actually support after you've built the solution. Right. But what about support structure? Anything else there to consider? Yeah. So, you know, when you go custom and you build this, you own it. Right. And you have to keep the lights on. There's infrastructure. There's ongoing maintenance. And so, right, you're going to have that cost.

27:31Now, if you buy something off the shelf, they normally want to make a profit. They want to expand. They want to grow their account. And you can also get stuck into this rabbit hole of these services. Price might be increasing. There's these additional things, plugins or widgets that you might need that you want to add on. And without noticing, you'll quickly ramp up on the cost of having that off-the-shelf product. The almighty upsell, right? So that's a really important thing. If you are talking about a buy solution, what does that truly look like? So it's not just the initial buy of the product.

28:13It's implementation cost. It's maintenance. It's all of that. Something to consider as you look at a buy versus bill. because a lot of times the buy looks more attractive on paper, but it's not always the case. And a lot of times you want to make sure that you don't corner yourself for the future. So a lot of times when you get buying off the shelf, as I mentioned, it's usually a common denominator. It's a CRM. It's not a CRM for maybe real estate or it's a CRM for something else. And so it's made to be a common denominator to sell. And going back to that uniqueness, having that, right, you don't want to corner yourself where you're developing these features that make you unique.