Unit 4.3: How Software is Acquired: Build vs. Buy | IT 231 Slides

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Unit 4.3

How Software is Acquired: Build vs. Buy

IT 231: IT and Application

Learning Objectives

By the end of this chapter, you will be able to:

  • ✅ Describe the different methods of acquiring software.
  • ✅ Explain the pros and cons of buying (COTS) vs. building (custom) software.
  • ✅ Define open-source software and SaaS.

The Core Decision: Build vs. Buy

When an organization needs new software, it faces a fundamental choice:

BUILD 🛠️

Create a custom solution from scratch.

BUY 🛒

Purchase a ready-made product.

This decision impacts cost, time, and how well the software meets your specific needs.

Option 1: Buy It 🛒

Commercial Off-the-Shelf (COTS)

Definition: Pre-existing software purchased from a commercial vendor, designed for a general audience.

Think of it like buying a car from a showroom. You choose from existing models.

Examples: Microsoft Office, Adobe Photoshop, SAP ERP.

Spot the COTS! Quick Quiz

Click all COTS (Commercial Off-the-Shelf) software, then check your answers:

COTS: Advantages vs. Disadvantages

Advantages 👍

  • Lower Upfront Cost: Cheaper than building.
  • Faster Implementation: Ready to deploy quickly. ⚡
  • Reliability: Well-tested by many users.

Disadvantages 👎

  • Imperfect Fit: May not meet all specific needs.
  • Lack of Control: Dependent on the vendor for updates and support.

Option 2: Build It 🛠️

Custom Development

Definition: Creating a new software application from scratch, tailored to an organization's exact specifications.

This is like hiring an architect to design and build a custom house just for you.

Custom: Advantages vs. Disadvantages

Advantages 👍

  • Perfect Fit: Designed for your exact needs. 🎯
  • Total Control: You own the code and can make any changes.
  • Flexibility: Can evolve with your business.

Disadvantages 👎

  • High Cost: Very expensive upfront.
  • Time-Consuming: Can take months or years.
  • High Risk: Projects can fail or go over budget.

Build vs. Buy Decision Calculator

Adjust sliders to describe your organization's situation and get a tailored recommendation:

Budget Available: Medium
1 = Low    2 = Medium    3 = High
Uniqueness of Requirements: Standard
1 = Standard    2 = Somewhat Unique    3 = Highly Unique
Deployment Urgency: Moderate
1 = Not Urgent    2 = Moderate    3 = Very Urgent

📊 Build vs. Buy: At a Glance

Factor

Cost

Time

Fit

Control

Buy (COTS)

Low

Fast

General

Low

Build (Custom)

High

Slow

Perfect

High

Key Trade-off: You are usually trading perfect fit & control for lower cost & faster speed.

3-Question Decision Guide

Answer 3 quick questions to find the right acquisition strategy:

Q1. How large is your budget?
Small / Limited Substantial / Large
Q2. How unique are your requirements?
Standard / Generic Very Specific / Unique
Q3. How fast do you need it?
Can wait months/years Need it quickly

Beyond Build vs. Buy

The choice isn't always black and white. Two other popular models have emerged:

Open-Source Software

The "community-built" option.

Software as a Service (SaaS)

The "rental" or subscription option.

🔍 Other Methods: Open-Source Software

Definition: Software whose source code is freely available for anyone to use, inspect, modify, and distribute.

  • The software itself is free, but you might pay for support, customization, or implementation.
  • Examples: Linux OS, Apache Web Server, Firefox Browser, WordPress.

🔍 Other Methods: Software as a Service (SaaS)

Definition: A subscription-based model where software is hosted by a vendor and accessed over the internet.

  • You don't own the software; you "rent" it.
  • Usually a monthly or annual fee.
  • Examples: Google Workspace, Salesforce, Microsoft 365, Dropbox.

Software Type Sorter

Click a software name, then click the correct category bucket to place it:

COTS

Custom Build

Open-Source

SaaS

Practical Application: Scenario

Case Study: A Trekking Company in Pokhara, Nepal

A new trekking agency needs software to manage bookings, guides, and customer information. What should they choose?

  • Buy (COTS): Purchase a generic tour operator software. (Fast and cheap, but might not handle unique Nepali trekking permits well.)
  • Build (Custom): Hire a Kathmandu-based dev team to build a perfect system. (Ideal fit, but very expensive for a new company.)
  • SaaS: Subscribe to a cloud-based booking system like FareHarbor. (Low upfront cost, but ongoing fees and less control.)
  • Open-Source: Adapt a free open-source CRM like Odoo. (Free software, but requires technical skill to set up and maintain.)

Nepal Business Scenario Quiz

Question 1 of 4

Key Takeaways

  • The "Build vs. Buy" decision is a fundamental choice in IT strategy.
  • COTS (Buy) is fast and cheap but offers less flexibility.
  • Custom (Build) provides a perfect fit but is expensive, slow, and risky.
  • Open-Source and SaaS are popular alternatives that offer different models of cost and ownership.

Exam Practice: Short Answer

  1. What is COTS software? Give two examples.
  2. Differentiate between open-source software and freeware.
  3. What is total cost of ownership?

Exam Practice: Long Answer

  1. Explain the different methods of acquiring software with their advantages and disadvantages.
  2. What factors should an organization consider in the build vs. buy decision? Illustrate with an example.

Revise the chapter note before writing these answers.

Thank You!

Any questions?

Back to Course Notes

Read the full note: How Software is Acquired: Build vs. Buy

Next deck: Unit 4.4: An Introduction to Programming Languages