Template
Build vs Buy Decision
Framework: Total-cost + strategic-fit sourcing decision
Use for: Deciding whether to build a capability in-house or buy/license it
Time required: 1–2 hours, with input from engineering and finance
How to use this template
- Cost out BOTH options fully, including the hidden costs. The visible price is the smallest part of the decision.
- The deciding question is strategic, not financial: is this capability a differentiator or a commodity? Build what makes you different. Buy what everyone needs.
- Be honest about opportunity cost. Engineering time spent building a commodity is engineering time not spent on the product that wins.
- Price the exit. Vendor lock-in and the cost of switching later are real and routinely ignored.
- Revisit the decision when scale changes. "Buy" at 10 customers and "build" at 10,000 can both be right.
Header
| Field |
Detail |
| Capability under decision |
[What] |
| Owner |
[Name] |
| Date |
[Date] |
| Decision deadline |
[Date] |
Strategic fit — answer this first
| Question |
Answer |
| Is this a core differentiator or a commodity? |
[Differentiator / Commodity] |
| Does owning it build a moat, or just create maintenance? |
[Moat / Maintenance] |
| How fast is the off-the-shelf market moving? |
[Faster than us / Slower than us] |
If it's a commodity and the market is moving fast, the bar for "build" should be very high.
Build — full cost
| Cost (visible and hidden) |
Estimate |
| Engineering to build (FTE-months × loaded cost) |
[$] |
| Ongoing maintenance (annual) |
[$] |
| Opportunity cost — what this team will NOT build instead |
[What / $] |
| Knowledge-concentration risk (bus factor) |
[Low / Med / High] |
| Time to a first working version |
[Weeks] |
Buy — full cost
| Cost (visible and hidden) |
Estimate |
| License / subscription (annual) |
[$] |
| Integration engineering (one-time) |
[$] |
| Ongoing integration maintenance |
[$] |
| Vendor lock-in / switching cost later |
[Low / Med / High] |
| Time to live |
[Weeks] |
Decision
| Field |
Detail |
| Decision |
[Build / Buy / Buy now, revisit at scale] |
| Primary reason |
[Strategic fit / Cost / Speed] |
| Biggest risk in this choice |
[What] |
| Trigger to revisit |
[Scale / cost / market event] |
Build what differentiates you. Buy what doesn't. More on build-vs-buy and unit economics at biztechprimer.com.