Build, Buy Or Build To Buy

by Ryan Gerhardy, CEO of Pitchly

I gave a presentation at a legal technology conference last week. Afterward, I met the CIO from one of our law firm clients who was in the audience. He wanted to thank me for the work that we have done with his firm over the past two years, which I greatly appreciated. He also shared that, initially, he was leaning toward building an experience management solution in-house, and that it was only at the insistence of the firm’s CMO that he relented and engaged our firm. He expressed that he was happy that the CMO persisted and that he was looking forward to expanding the engagement with our team.

Well I couldn’t ask for a better conversation to kick off a conference. Entrepreneurs are understandably gratified to hear customer success stories. Our conversation also had me thinking about our other clients, potential clients and the firms that decided to go a different direction.  One of the reasons that we won this firm’s business was our willingness to work with their team to add features to our platform and devote resources to ensure that it met their current expectations, while soliciting their feedback for further product enhancements.

When I got back to the office, I reviewed some of the other accounts that we were currently working with, and I noticed some patterns emerge.  We weren’t winning or losing business to other developers, rather it generally came down to three options:

1. Buy – the client saw the value in our platform and they subscribed to our cloud.
2. Build their own – the firm had substantial internal development resources and decided that if our solution couldn’t address most or all of their needs, they would custom build their own solution.
3. Get by – the need for managing staff experience had not reached an inflection point, so they would keep using generic content management & personal productivity applications for the near term.

The decision on whether to purchase or develop the innovative applications that your firm needs to compete has changed dramatically with cloud solutions. Law firm principals are often faced with a critical decision when it comes to technology: should we purchase an “off the shelf” application or should we use in-house resources to develop a custom application that meets our exact needs.  There are sound arguments to be made for both approaches.

The develop in-house side would point to the existing investment in staff talent. For sure, no one understands the pressing needs more than the people who work within an organization every day. If in-house development resources have the bandwidth, why not assign them the important task of creating a new platform or application?

The buy side will point to the firm focusing on what it does best. Even if developer talent exists within the firm, odds are the resources are, limited, distracted by day-to-day projects, and may only have some of the knowledge required to complete the project. For example, creating an experience management platform requires subject matter expertise, programmers, quality assurance, implementation specialists, professional services engineers, and a roadmap of future functionality requests.

What is instructive about my recent experience, is that the build versus buy versus just get by decision has changed from a pure A, B or C selection. There are two significant paradigm shifts in software development which have altered the equation.

First, the acceleration and acceptance of cloud-based services have allowed more entries into the market for core platform development.  The ability to subscribe to a service rather than make an “all in” commitment to a platform. We are all familiar with protracted and costly professional services engagements associated with ERP, CRM and other core enterprise solutions.  Firm executives often find themselves in a position similar to families that undertake a major house remodel: it cost more and took much longer than expected, while several unforeseen obstacles changed the project scope. The cloud services model requires the developer to continually meet the changing needs of the client, or they are free to move on.

Second, and equally as important, cloud services platforms are increasing offered with web service APIs that allow the client, vendor or even a third-party integrator to easily customize the solution to meet the exact needs of the firm, without requiring proprietary knowledge of the vendor. This flexibility provides the client with the best of both worlds: the immediacy and cost-effectiveness of commercial software with customization of a home-grown solution.

Relating these two qualities to the encounter I had with our client CIO, it points to the benefits of a hybrid build/buy decision.  This client saw that our platform could meet many of their knowledge management needs, in addition to allowing them to custom design tombstones for proposals. The cloud platform could replace the existing relational database and office productivity applications that were serving as a piecemeal solution.  But the compelling factor was our willingness to adapt our product to accommodate the workflow and data management needs for the firm’s transactional practices. No doubt that given time, the firm could develop a working program in-house to address these needs, but the ability to leverage our platform cut months, reduce complexity and save hundreds of thousands of dollars from the project.

As you consider your own build versus buy decision, consider the benefits of a hybrid approach where you work with a vendor to identify your priorities, assess product feature development and staff skill sets, and aligning of firm and vendor goals and incentives. With the right partnership in both platform functionality and allied business models, you may find that “buying to build” may produce the winning combination.

 

Ryan Gerhardy is the co-founder and CEO of Pitchly, the leading cloud-based content service platform for M&A professionals to organize and activate their proprietary client experience. For the past four years Ryan has been a senior associate with late-stage venture capital firm Next Level Ventures. He has extensive professional experience as an investment banker and venture capitalist and has provided valuable strategic and operational guidance to nine fast-growing SaaS companies including Iowa-based Dwolla and BirdDogHR.

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