Make versus Buy, a business strategy for Enterprise Architect in IT Management

1. MAKE / BUY
Decision Making for Information Technology

2. INFLUENCER
Capability
Criticality
Adaptability
Top three influencer for decision
making
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3. CAPABILITY
 Expertise
 Technical
 Functional/Domain knowledge
 Time to acquire or produce
 Availability of supplier and product
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4. CRITICALITY
 Business Criticality
 Customer Experience
 Quality Control
 Proprietary Knowledge
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5. ADAPTABILITY
 Political Environment
 Marriage of convenience
 Silence is golden
 Integration with existing product/component
 Cost to integrate with existing product line
 Internal support to maintain buy product
 Business change
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6. ANATOMY OF DECISION
Make
 Requires proprietary know-how
 High quality standard
 Critical product or component
 Idle capacity
 Less expensive to buy
Buy
 Lack of in-house domain knowledge
 Technical
 Functional
 Time to produce
 Supplier availability
 Less expensive to make
 Political Environment
 Cross – Functional cooperation requirement
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7. NUMBERS
 Cost to Manufacture = Fixed Cost + (Variable
Cost * Volume)
 Cost to Buy = Variable Cost * Volume
 Pitfall Cost
 Cost to adapt / integrate the product to make it
usable for required purpose
 Royalty or license fee for maintenance of supply
line
 Training cost for after buy support
In manufacturing, cost to buy and cost
to manufacture is good for decision
making. But in IT, other numbers also
play important role to determine cost
to buy.
Umesh Bajaj
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