The Nature of the Firm #5

The Nature of the Firm says nothing about the make or buy decision in regard to computer software. However, I suspect it arises quite often in today’s world, and it did during my own work career. Both ways have their advantages and disadvantages.

The following observations are based on my work experience. Developing one’s own software gives maximum control, but it may be slower and cost more. Buying software from a vendor may be quicker and cheaper, but it provides less control. When the buyer later wants changes to the software – which is nearly always true in a workplace – the buyer is subject to the vendor’s and its other customers’ priorities, not merely its own.

On second thought, there is a third option, which I will call hire.  That is, hire a consulting firm or independent contractor that specializes in the kind of software needed.  This way seems to blend characteristics of make and buy. The hirer has a strong degree of control as long as the hired is under contract. Once the contract period is over, the situation for the hirer is much like having bought the software. That is, until the hirer wants changes, a very likely occurrence.  Then it’s probably hire again.